Garnaut sets carbon targets, but business groups worried

Australia can no longer wait to act on climate change and must be prepared for increased energy prices in order to sustain long-term economic growth, the final draft of the Garnaut report claims.

Australia can no longer wait to act on climate change and must be prepared for increased energy prices in order to sustain long-term economic growth, the final draft of the Garnaut report claims.

The report, released today after being commissioned nearly 18 months ago, says Australia needs to cut greenhouse emissions 10% by 2020, and 80% by 2050, in order to curb the effects of climate change.

He also supports a fixed carbon price of $20 per tonne between 2010 and 2012, settling at $23 after 2013 and rising 4% annually plus the percentage increase of the consumer price index.

“If this were the outcome, there would be a smooth transition from the fixed permit prices of the transition period, to the floating price,” the report says. It also argues “the overall cost to the Australian economy from tackling climate change is manageable”.

Ross Garnaut, the economist leading the independent commission, also says Australia should commit to these targets even if other nations do not.

Garnaut argues a global emissions scheme needs examples of countries that are willing to set targets for themselves while still maintaining constant economic growth.

“Australia’s established market economy and economic dynamism, with particular skills and natural resources in areas of special importance to the low carbon economy, will be assets in making a successful transition, showing that it can be done,” the report says.

“Whether we like it or not, Australia matters.”

The report also emphasises the need for a global solution. “Australia’s aim should be to work within the international community to secure a global agreement around a firm emissions stabilisation goal.

“There will be no progress towards an effective international agreement if each country lays out all of the special reasons why it is different from others, and why it should be given softer targets.”

Australian Industry Group chief executive Heather Ridout says she supports the principle of reducing emissions but says Australia cannot risk moving “too far ahead of the rest of the world” in terms of reducing emission.

She has also cast doubt on Garnaut’s carbon price.

“The estimated carbon prices presented in today’s report are in the range of between $30 and $52 dollars a tonne by 2020 (in today’s dollars). Cost rises in this range would test the viability of many businesses and would give rise to significant restructuring.”

The Australian Chamber of Commerce and Industry welcomed the report but says it is difficult to make a full assessment until the release later this year of Treasury estimates of the cost of an emissions trading system.

“We are hopeful that this modelling will examine the full distributional impact of climate change measures, on sectors such as trade exposed, smaller enterprises and the household sector,” the ACCI said in a statement.

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