Climate change policy resurrected in Australia

Author: Frank Jotzo, ANU

Climate change policy is alive again in Australia. Prime Minister Gillard has committed to introduce a carbon price during the current term of government. A Multi-Party Committee on Climate Change is at work, and an update to the Garnaut Review takes a fresh look at some of the tough issues facing the world and Australia in getting good climate policy off the ground.

Getting carbon pricing off the ground may seem a tall order after the attempt of the previous government under Kevin Rudd  to introduce emissions trading failed among a collapsed deal with the opposition (whose leader Malcolm Turnbull was deposed over the issue), considering that the current government’s needs rely on votes by Independents and the Greens to get any legislation through Parliament, and in the context of setbacks in US climate policy and widespread (if largely misplaced) disappointment with the international climate negotiations.

And yet, this time the stars may come into alignment. Action on climate change is important to the independent members of Parliament who elevated it to a headline issue in their deal to support the government, as well as to the Greens who will be casting the deciding votes in the Senate from the middle of the year. Key sticking points that need to be resolved include

  • how to bridge the gulf between the government and the Greens on Australia’s emissions target;
  • how to design carbon pricing, given the target debate, uncertainty about international emissions trading opportunities, and calls by industry for price certainty;
  • how to square the competing demands for revenue from carbon pricing; and
  • how to comprehensively engage the rural sector.

For the target, the pragmatic solution may turn out to be deferring the decision, although the Copenhagen pledges by major countries suggest a target for Australia that is more ambitious than the government’s current commitment yet less than the Greens’ demand. For carbon pricing design, a fixed-price permit system that allows a later shift to market trading, as suggested by the 2008 Garnaut Review, is receiving increasing support.

A more fundamental question for Australian policymaking over the last two decades has been whether decisive action on climate change is in Australia’s interest, and whether Australia should lead or lag the global effort. Australia is in a unique position, given it is a large exporter of carbon-intensive energy and so stands to lose from global climate action, but is also extremely vulnerable to climate change including extreme weather events that result in flooding or bushfires.

The Garnaut Review’s first Update paper, released this week, reinforces the conclusion from the 2008 Review that strong global climate action is in Australia’s interests, because the benefits from avoided climate change outweigh the costs.

The paper is the curtain raiser for a series of eight topical Update reports to be released over February and March, tackling the issues of the international mitigation framework, global emissions trends after the financial crisis, carbon sequestration in agriculture and forestry, the latest in climate change science, how to reduce Australia’s emissions, the role of innovation, and transformation of the electricity sector.

The papers are written from an Australian perspective, but the issues are relevant elsewhere in the world. They will help inform policy makers in the Asia Pacific region and beyond — as can the actual outcome from Australia’s fresh go at climate policy.

Frank Jotzo is Director of the Centre for Climate Economics and Policy at the Crawford School of Economics and Government at the Australian National University. He advises the Garnaut Review Update.