Home > Economics - General, Environment > If I were you, I wouldn’t start from here (or now)

If I were you, I wouldn’t start from here (or now)

June 2nd, 2007

I’ve had a quick look at the report of the PM’s Task Group on Emissions Trading. It gives a pretty good summary of the main issues, constrained by the political requirement that it should not even look at the obvious implication of an argument for participation in an international emissions trading scheme, namely that we should ratify Kyoto forthwith. The choice of 2012 (when Kyoto expires) as the target date neatly avoids the issue, as well as meeting the political imperative of not endorsing what Labor has proposed.

The main implication of the Report is that we should have got started on all this ten years ago (or at least, back in 2003 when Howard killed the idea), and that we’ll now have a more costly adjustment path than if we had acted sooner.

Something of a surprise is that the McKibbin-Wilcoxen hybrid idea didn’t get more than a couple of brief mentions. Some of the leaks I saw suggested that the Task Group might go this way, as did Howard’s rhetoric about an “Australian, practicaL” scheme. As I mentioned a while back, the big problem with this idea is its incompatibility international trading, and this is presumably why the Task Group didn’t go this way.

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  1. June 2nd, 2007 at 07:38 | #1

    too little, too late. is anyone surprised?

    the political structure of australian society precludes effective government in the management sense, although it’s all too effective in the control sense.

    the human race needs democracy, if society is to be managed for the benefit of all. i wish people with education and interest in politics had the combination of character and imagination to see this and say so, often and publicly.

    unfortunately,the only people who participate with effect in australian politics are doing it for a living, and are not about to rock this sinking boat.

  2. Hermit
    June 2nd, 2007 at 08:01 | #2

    There can be no turning back now. From my quick reading of sections of the report there seems to be a resolve not to repeat the generous grandfathering of permits in the European scheme or the absurdly lenient offsets in some voluntary schemes.

    Somewhat disturbing was the use of the term ‘aspirational goals’ the same day it figured prominently in the Bush anti-Kyoto announcement.

    The media seems to want some cross elasticity or rule-of-thumb linking carbon cuts to electricity prices. This may need independent modelling because of the various short and long term substitutions eg using less, uptake of clean gen.
    Less clear is what is the payoff for higher energy prices. However I see little if any respite for energy and water problems under business as usual
    so the public may be looking for a way forward.

  3. June 2nd, 2007 at 09:45 | #3


    You clearly didn’t read it closely enough because the philosophy of this report is 100% McKibbin-Wilcoxen (look at the introduction and compare it to the “Sensible Climate Policy” paper in terms of strategy. Long term goals and short term price control plus a discarding of the Kyoto approach. Coordination of domestic policies rather than a global carbon market etc. The main difference is in implementation. Rather than giving out all long term permits these are trickled out over time at five year steps which leads to more price uncertainty but gives greater political control. They are also 40 year rather than longer term. I prefer my approach but the political reality is that government and industry don’t want to completely tie their hands as much as I would prefer. I would call this approach McKibbin Wilcoxen with an adjustment for the politics of the day. It is a big step in the right direction. I suspect the Kyoto lobby will not like it much.

    Warwick McKibbin

  4. June 2nd, 2007 at 14:28 | #4

    What does the report have to say about the transport sector? I’ve found a few mentions of how it would be desirable to include the transport sector in any emissions trading scheme, but I can’t find any description of how this would work.

    If there was going to be any “adjustment for the politics of the day” then this would be it. I can’t see any government doing something that would raise petrol prices. Its political suicide. I think the electorate has come around to the fact that higher electricity prices are inevitable, but no-one likes to pay more at the pump.

    Oh BTW, how many blogs get comments from an RBA board member?

  5. jstrocch
    June 2nd, 2007 at 17:08 | #5

    Some six months ago Pr Q suggested that Howard’s reputation as a skillful politician could be subjected to critical test by his policy towards carbon emission trading:

    But suppose that Howard…intends to introduce some form of emissions trading as a pre-election rabbit from the hat. If the public servants on the committee push for this, the business reps will find it hard to resist. After all, there is no coherent alternative. And once they signed off, Howard would be insulated against blowback from the sectors they represent.

    If Howard is indeed the Machiavellian genius he is painted as (most notably by Jack Strocchi in the comment threads here) this is the strategy that will ultimately be revealed.

    I take it that this settles the matter in favour of Howard the machiavellian master. This is the interpretation of His Unholiness that I have been pushing all along. Howard is the uncontested master of the shameless policy back-flip, at least when our national and his partial interests coincide.

  6. June 2nd, 2007 at 18:53 | #6

    Warwick, I’m just a lowly computer science postdoc rather than a famous economist, but there seems to be a basic difference in philosophy between the approach advocated in this report and one of the key tenets of your proposals.

    Your papers, as best I can understand them, advocate a system such that the carbon price should be capped and the amount of emission reductions achieved should be determined by what is feasible under that price cap.

    In the main, this report argues that the emissions reductions target should be set, and the market left to find the price – with the caveat that in the early years of the scheme, a maximum price for emissions permits should be set.

    In practice, either is subject to the vagaries of politics, but it is a fundamental difference of philosophy, and for what it’s worth I prefer the primacy of the emissions targets rather than primacy of cost.

  7. June 2nd, 2007 at 19:46 | #7

    I argue that the market should set the long term price but that the short term price should be capped and therefore emissions be allowed to rise above target for the short term if the costs are too large. This is way we run monetary policy. The long term interest rate is set by the market but the short term interest rate is set by the RBA and liquidity is allowed to fluctuate. The key information for long term investment is the long term carbon price – just as the long term interest rate drives investment. There is no advantage of having short term prices fluctuate. Having said all that, it would be better in my view if the long term trajectory for emission reductions was put into the market once and for all so that a high expected future carbon price would drive alternative energy sources. The Taskforce approach of allowing future permits to be issue to change the long term target reduces the effectiveness of the long term price signal.

    In summary the primacy of costs should drive the short run (i.e. how quickly cuts are made)but the primacy of a long run goal should drive the emissions trajectory.

  8. SJ
    June 2nd, 2007 at 22:14 | #8

    Froomkin’s column today makes ironic reading:

    “But for critics, Mr Bush’s proposals were simply more of the same — a transparent attempt to create the impression that the US was not dragging its heels.”

    Cornwell’s colleague Andrew Gumbel then launches into a heroic attempt to explain what Bush really meant:

    “From the President’s speech in Washington yesterday:

    “‘In recent years, science has deepened our understanding of climate change and opened new possibilities for confronting it.’

    “Translation: In recent years, my refusal to acknowledge the reality and seriousness of global warming has turned me into a laughing-stock and contributed to my record low poll ratings. So now I have to look interested.

    “‘The United States takes this issue seriously.’

    “Translation: Al Gore takes this issue seriously, his movie was a hit, and it’s causing me no end of grief.

    “‘By the end of next year, America and other nations will set a long-term goal for reducing greenhouse gases.’

    “Translation: By the end of next year, I’ll be weeks away from the end of my presidency and this can be someone else’s problem.

    “‘To develop this goal, the United States will convene a series of meetings of nations that produce the most greenhouse gasses, including nations with rapidly growing economies such as India and China.’

    “Translation: We will look as busy as we can without doing anything.

    “‘The new initiative I am outlining today will contribute to the important dialogue that will take place in Germany.’

    “Translation: The new initiative will put the brakes on the much more robust proposal the Germans are putting forward. As long as dialogue continues, we won’t have to abide by any decisions.”…

    Reuters reports from Brussels: “President George W. Bush’s plan to tackle climate change merely restates U.S. policy which has been ineffective in the past in cutting emissions blamed for global warming, the EU’s environment chief said on Friday.

    “‘The declaration by President Bush basically restates the U.S. classic line on climate change — no mandatory reductions, no carbon trading and vaguely expressed objectives,’ EU Environment Commissioner Stavros Dimas said, according to his spokeswoman.

    “‘The U.S. approach has proven to be ineffective in reducing emissions,’ Dimas added of Bush’s call on Thursday for 15 major countries to agree by 2008 on a long-term goal for cutting emissions.”

    Philip Stephens writes in the Financial Times: “Time and pressure have at last persuaded Mr Bush to admit the problem. Yesterday, the White House finally agreed that the US could no longer sit on the sidelines. . . .

    “The US president, though, will have to forgive those who greet it with more than a touch of scepticism. Many will consider that it is as much spin as substance – calculated as much to avoid US isolation at the summit as to secure a credible international agreement.”

    Looks to me like Howard’s just giving some support to Bush’s attempt to derail any post-Kyoto agreement. The strategy is to do nothing, ever, using whatever bullsh*t argument you think you can get away with.

  9. June 2nd, 2007 at 22:54 | #9

    SJ, Howard is ‘just giving some support to Bush’. Surely even you could not be that one-eyed. Its a pretty good proposal – it is comprehensive – much more so than the European scheme and that proposed by State governments. It covers 55% of all national emissions (80% excluding agriculture).

    Just because Howard endorses a policy proposal does not mean it is automatically wrong or foolish. If you get rid of the politics this is a really historic proposal – probably one of the better schemes yet advocated.

    It also emphasises the case for linking up with international schemes in the future. It states explicitly that an international trading scheme would be better than a national scheme since it would increase the sorts of trades can could be done to reduce adjustment costs.

  10. observa
    June 2nd, 2007 at 23:05 | #10

    OTOH sj, the Kyoto signatories have taken the stance of moral badge wearing and international posturing, whilst it has been business as usual, emissions wise, these last 3 years. Given that truth, who do you think is the biggest obstacle to real emissions reductions, or is mock sincerity somehow of greater import?

  11. observa
    June 2nd, 2007 at 23:29 | #11

    You can see why Howard might be reluctant to jump on board
    That’s the problem with quantity controls rather than a level playing field on price. We really need an internationally agreed carbon taxing regime to avoid another international ‘food for oil’ type debacle.

  12. SJ
    June 2nd, 2007 at 23:50 | #12

    hc Says:

    Just because Howard endorses a policy proposal does not mean it is automatically wrong or foolish.

    I’m looking at it from the other side. It’s a safe assumption that any Bush policy proposal is wrong and/or foolish.

  13. Peter Wood
    June 3rd, 2007 at 00:10 | #13


    I am another a lowly postdoc (applied mathematics at ANU).

    The idea of having a very long term permit is interesting in that it provides a long term price signal, I would be tempted to buy some. My concern is that because it is a property right, if too many are allocated, then they will have to be bought back at great expense. In order to eventually achieve a long term stabilisation target, worldwide emissions will have to eventually be less than or equal to the capacity of the earth to absorb CO2. This absorbance capacity is subject to considerable uncertainty, particularly because it may be affected by climate change. A recent paper in Science suggests that the absorbance capacity of the southern ocean is decreasing because of climate change. Having 40 year instead of 100 year permits will change things somewhat. How many of these long term permits do you think should be introduced? What proportion of the ‘aspirational goal’ do you think should consist of these permits?

    Robert Merkel has a very good post related to this subject at http://larvatusprodeo.net/2007/03/31/an-emissions-trading-trap/

    I notice that your proposal and the proposal of the task group have a ‘safety valve’ emissions fee to deal with the uncertainty of the cost of emissions. Why not have a minimum cap as well? Could a minimum cap be implemented by having a small ‘carbon tax’ as well as the emissions permits? It seems to me that there is greater uncertainty in minimum of a carbon price distributuion than the maximum, because one can come up with a maximum price estimate by calculating the investment in today’s low emission energy technologies required to decrease the carbon intensity of energy by a certain amount. The actual price would be much lower because the market will choose least cost options such as enrgy efficiency.

    One of my chief concerns with the implementation of emissions trading is that governments will choose emissions trajectories that are too timid, and hence lock in emissions that could be efficiently reduced. This was the case with the first phase of the EU emissions trading scheme, and I believe would have been the case with the the NETT proposal. Fortunately I think the safety valves will provide an incentive for choosing a stronger target. I think the scheme will work best if this is the case and the penalty is at least as high as a reasonable estimate of the social cost of carbon. I fear that a weak emissions reduction trajectory and weak penalty will end up using the environment as a safety valve.

    I think that a hybrid proposal similar to yours would not necessarily contradict an international framework such as Kyoto if a country used it to go beyond its international commitments and have a limited amount of ‘safety valve’ permits.

    Congratulations, it seems that the task group has paid considerable attention to your proposals (certainly more than to mine or Prof Quiggin’s).


  14. BilB
    June 3rd, 2007 at 02:19 | #14


    Further to your comments you will notice that Bush has gone to some trouble to link his targets to a group of countries that have very little scope for reducing their emissions. India’s CO2 emissions per person 1 tonne per year and China’s emissions of 2.3 tonnes per person together make up a third of the world’s population, and can at best attempt to hold their emissions to current levels. Bush can then point to their low performance and say that whatever low reduction the US (currently 20 tonnes CO2 per person) achieves then that is good. The real insult is to Brazil’s 185 million people currently emitting (2002 figures) under 2 tonnes per person due largely to their ethanol production programme, which also provides large amounts of electricity, all from biological sources. This makes Brazil’s national emissions (185 million people or half the US population) just slightly higher than Australia’s national CO2 emissions from just 20 million people. Brazil has already achieved its global commitment, but according to Bush they will have to tighten their CO2 belt. What arrogance. No wonder everybody hates americans.

    Robert Merkel, W McKibbin,

    Can somebody please explain where the $20 per tonne for carbon is going to go, and how is that going to reduce CO2 emissions, and what is going to prevent the carbon accruals from becoming some enormous slush pool for gifted manipulators to wallow in?

  15. Ian Gould
    June 3rd, 2007 at 12:55 | #15

    Not to engage in schadenfreude but at this point, unless a miracle happens or the polls are all wildly, wildly wrong; John Howard’s views on climate change strategy are really only of historical interest.

    Hopefully any incoming Labor government will at least seriously consider the merits of the report.

  16. June 3rd, 2007 at 14:33 | #16

    This seems to be the most contentious statement in the emissions trading report:

    To meet a 20 per cent reduction from 1990 levels by 2020 would require Australia to alter its trajectory from a projected 0.9 per cent per annum increase in the decade 2000 to 2010, to a reduction of 3.2 per cent per year over the period 2010 to 2020. To achieve such a target would require a 38 per cent reduction in emissions (equivalent to 264 million tonnes) from the levels currently projected to prevail in 2020 (see Figure 2.6).

    To illustrate the magnitude involved, this is equivalent to, for example, replacing Australia’s entire existing fossil fuel–fired electricity generation capacity with electricity from nuclear energy while at the same time removing all existing vehicles from our roads.

    See: 2.4 The challenge of reducing emissions

    A few conservative commentators (Bolt, Shanahan et al) have repeated it in print, and I’m pretty sure I heard Shergold read this chapter verbatim in a media grab on Friday.

    Seeing as we have a surfeit of eminent economists on this blog would one of you like to comment on the veracity of this statement?

  17. jquiggin
    June 3rd, 2007 at 14:49 | #17

    It certainly sounds implausible. If you eliminate electricity and transport, I would have thought you would be close to 100 per cent of emissions.

  18. June 3rd, 2007 at 15:00 | #18

    It certainly sounds implausible. If you eliminate electricity and transport, I would have thought you would be close to 100 per cent of emissions.

    That’s what I thought. Perhaps they mean today’s fossil-fired power stations and vehicle fleet represent around 38% of total projected emissions in 2020, so that’s what we’d have to get rid of to meet the 20% reduction on 1990 levels target?

    Regardless, its certainly a very controversial way of putting it! I thought these kinds of reports were supposed to be apolitical.

    Its pretty disappointing to see this kind of spin not only in the report, but also repeated by the lead author for the media’s benefit on the day the report is released.

  19. jquiggin
    June 3rd, 2007 at 15:05 | #19

    Your interpretation looks about right, although there are various other sources to be taken into account.

    But the bigger story here is that having negotiated an 8 per cent increase on 1990 levels under Kyoto (whereas most of the EU agreed to an 8 per cent reduction) we’ve done nothing substantive to constrain emissions growth. So unless we can manage to keep this baseline in future negotiations (by no means guaranteed), we’re in for a painful adjustment.

  20. Paulkelly
    June 3rd, 2007 at 15:44 | #20

    Shergold famously fiddled the results of a report into HECS for then Minister Dr Nelson when he was in the Education department. That’s largely how he got to PM&C.

    Anything he says or writes needs to be interpreted through the Shergold prism.

  21. Peter Wood
    June 3rd, 2007 at 17:01 | #21

    Yes, according to the 2005 Greenhouse Gas Inventory, emissions from electricity generation were 194.3 Mt CO2-e; transport was 80.4 Mt CO2-e. These add up to 274.7 Mt CO2-e, which is slightly higher than the figure stated in the task group report. So the report is talking about 2005 electricity and transport emission levels and comparing that to at 2020 ‘business as usual’ scenario.

    Present emissions from electricity and transport opnly account for 49% of total emissions. The breakdown is:

    35% – Electricity Generation
    15% – Other Stationary Energy
    5% – Fugitive Emissions
    13% – Transport
    5% – Industrial Processes
    16% – Agriculture
    6% – Land Use
    3% – Waste

    Agriculture is huge. Of the 87.9 Mt in Agricultural emissions, 61.1 Mt are from cattle and sheep.

    Perhaps the simplest way to cover agricultural emissions would be to add some sort of carbon price to the Beef and Lamb that we eat. Another more complicated possibility would be to make reducing stocking levels into an offset, this may be more politically feasible.

    I personally prefer to eat Kangaroo to Beef and Lamb. Studies have shown that Kangaroos have negligible emissions.

  22. June 3rd, 2007 at 17:13 | #22

    Does leaving out the agricultural sector mean they cannot sell offsets? I assumed so since the report recognises the need to price agricultural sector emissions as soon as possible to get farmers to stop land clearing and so on.

    Given that tree planting and so on reduces CO2 levels should not Australia be given credit for the huge biodiversity resources it has. Even though we emit a lot of CO2 per head our population is low and we have a vast area covered with vegetation. Hence our net impact on global carbon emissions is much less than 20 million Japanese or Europeans who have much more restricted biodiversity-based CO2 offsets.

    This last argument is atr least consistent with the Federal Government’s viiew that Australia (almost alone) will meet its 108% Kyoto targets because we have reduced land clearing.

  23. June 3rd, 2007 at 18:48 | #23

    Shergold famously fiddled the results of a report into HECS for then Minister Dr Nelson when he was in the Education department. That’s largely how he got to PM&C.

    So is Shergold the new “Max the Axe”? Sheesh! No wonder he made such a political statement.

    I have to admit I had no idea who he was. I just assumed he was some bureaucrat or scientist handing over impartial advice to the PM … and I’m sure that’s the impression it was meant to convey!

  24. Peter Wood
    June 3rd, 2007 at 18:56 | #24

    Excluded sectors including agriculture will still be eligible for offsets (p 109):

    Excluded sectors are likely to have access to a range of low-cost abatement opportunities. Allowing these sectors to provide certified offsets will reduce the cost of achieving a given scheme cap, and lower the cost of greenhouse gas reductions for the economy as a whole.

    Some projects involving planting trees etc are able to provide offsets under the NSW Government’s Greenhouse Gas Abatement Scheme and the Federal Government’s Greenhouse Friendly Program. I do not doubt that these projects will also be able to provide offsets under a national emmissions trading scheme. Because we have so much capacity for afforestation/reforestation, it is possible that our global warming abatement costs will be lower than most other contries.

    Most positive and negative emissions from “Land Use, Land Use Change and Forestry” (LULUCF) are associated with changes in land use.

    A lot of good work has been done by the CRC in Greenhouse Accounting on sequestering carbon in soils and biomass. Unfortunately this CRC is no longer receiving federal government funding. From what I have read of their research reducing cattle stocking rates would sequester very large amounts of carbon in soils and biomass *. These effects are not included in our greenhouse gas accounting.

    Research by The Australia Institute has raised doubts about the LULUCF figures in Australia’s Greenhouse Accounts


    Of course one of the worst impacts of climate change will be increased species loss. If we are smart about restoring vegetation and habitat, we can provide climate change mitigation and adaptation at the same time. Eligibility for offsets is based on effectiveness, accurate measurement and additionality and don’t take into account environmental cobenefits. If reforestation is done in such a way the locally indigenous species are likely to be used, habitat is provided, and habitat fragmentation is decreased. Perhaps some of the money raised from auctioning permits and/or selling “safety valve” permits should be used for environmental revegation projects which provide habitat for various species and reducing land clearing and deforestation.

    A report by the World Bank** discusses methods of harvesting carbon finance to reduce deforestation. Stern states that this could be done at a price of something like $2 per tonne CO2.

    I think that we should find some sort of way to pay farmers to revegetate their land and restore habitat, as well as providing some sort of incentive to not clear their land further.

    * Baker, B., Barnett, G. and Howden, M. 2000, Carbon sequestration in Australia’s rangelands. Proceedings workshop management options for carbon sequestration in forest, agricultural and rangeland ecosystems, CRC for Greenhouse Accounting, Canberra.

    ** Chomitz, K. Buys, P., De Luca, G., Thomas, T., Wertz-Kanounnikoff, S., At Loggerheads?
    Agricultural Expansion, Poverty Reduction, and Environment in the Tropical Forests, The
    World Bank, October 2006

  25. Brian Bahnisch
    June 3rd, 2007 at 21:50 | #25

    Peter, there’s a small mistake in your calculations above. While the whole amount for transport is 80 MT the number for road transport is 70 Mt, the rest being aeroplanes and ships.

    Shergold’s figures work out like this:

    There was 547mt in 1990.

    Less 20% equals 437mt.

    264mt more than that is 701mt.

    The 2005 (latest) total was 559mt.

    So Shergold is saying that instead of advancing by 25% to 701, we need to lose 264 from the 2020 figure. That is made up of 194 from electricity generation plus 70 from road transport.

    So his figures square off. The national accounts are here and from there you can download the pdf file to get the more detailed figures.

    But you could tell a different story. He could have told us about the 30% energy savings from the National Energy Savings Framework which only the Greens seem to know about. That knocks 117 off the 2005 base for stationary energy. Then the hot rocks bloke said the other day they are planning “one Snowy scheme” of emissions-free energy by 2015 with three more Snowys in the pipeline. Plus we’ll get more from sun and wind. We buy more hybrid cars, the Chinese will soon produce very cheap photovoltaic panels, we can bring LULUCF into balance by planting more trees (33mt) and farming, well we mightn’t do as much of that if the big dry continues. Refurbish railway lines and build more.

    20% off seems pretty modest, don’t you think? And not a nuclear power plant in sight.

  26. BilB
    June 4th, 2007 at 05:58 | #26

    Much of the comment above is because Howards little think tank have obfuscated the global warming picture by including methane emissions. This is highly contentious for a number of reasons. Firstly methane (according to my research scientist associate) does not hang around in the atmosphere. It scavenges ozone to break down into CO2 and water. So it is a migratory gas rather than a perpetual build up as is CO2. Secondly methane emissions can only be prevented by scorching the Earth. All living things give of methane at some point in their existence. Chop down the trees for grass to run cows and they burp methane, get rid of the cows and grow trees and the forest gives off methane from the rotting smaller vegetation. Methane is relatively unavoidable.

    By including methane in the percentages the “task group” have sought to confuse the understanding of the challenge and denegrate existing efforts to cope with global warming.

  27. Brian Bahnisch
    June 4th, 2007 at 07:51 | #27

    BilB, the usual practice now is to talk in terms of CO2 equivalent(CO2e). Hence the current position is that we have about 425ppm CO2e as against 380ppm CO2 (from memory).

    CO2e includes the 6 Kyoto GHGs in terms of there potential impact measured at time of release expressed in terms of CO2 equivalence.

    How this plays out in practice is beyond my expertise, but you do note that methane produces CO2 in the atmosphere which persists. So I’m not sure how much difference it makes.

    But in order to stabilise around a 2C temperature increase we need to limit emissions to 450ppm CO2e, which doesn’t give us much leeway. That is 2C as an approximate of the range 1C-3.8C. 2C above pre-industrial times is the accepted point at which climate change becomes ‘dangerous’.

    A 60% cut by 2050 will stabilise at 550ppm, giving a temperature rise of about 3C. So 60% is not plucked from the air. It is the commonly accepted target because of the political impossibility of telling the truth. But it is also why some more honest politicians like Arnie are going for 80%, which still has one deficiency – it doesn’t fully take into account world equity.

    Please tell me, someone if I’ve got any of that wrong. It’s important.

  28. Paulkelly
    June 4th, 2007 at 08:04 | #28

    Here’s a link to story abhout Shergold’s dodgy behaviour.

  29. Brian Bahnisch
    June 4th, 2007 at 08:10 | #29

    I forgot to mention that the above assumes a planetary absorption capacity of 5gt of C per annum. That is carbon rather than CO2. The latter is 3.67 times larger, so 18.35gt of CO2e. That figure is about 40% of current emissions, including land use (forest clearing etc) and agriculture. Which is where the 60% reduction comes from.

    But there are two factors. First the GHGs we put up into the air as we peak and reduce stay there.

    Second, it is expected that the absorption capacity of the planet will decrease. There was a recent report that the absorption capacity of the Southern Ocean has in fact decreased by 15%. The one who has faced all this squarely and spelled out the implications is George Monbiot, whose Heat went to press before Stern was available, but he was reading the same research. He reckons the developed countries need to reduce by 90% by 2050. He spells out how to do it in Britain, but it’s no cake-walk.

    I think we’ll eventually wake up and realise that we’ll have to actively take CO2 out of the atmosphere.

    Howard’s approach is a farce.

  30. June 4th, 2007 at 08:30 | #30

    Howard repeated the “cars off the road” claim at the Lib council yesterday:

    Mr Howard said Mr Garrett’s proposal to cut emissions by 20per cent of 1990 levels by the year 2020 could only be met by replacing every coal-fired and gas-fired power station with a nuclear plant and removing every car, truck and motorbike from the Australian roads.

    “Can I say that again, removing all vehicles from our roads,” he told conference delegates.

    Faithfully reported as the lead story in the Oz today:
    PM warns of ‘Garrett recession’ over emissions

    One could almost believe the “cars off the road” claim was planted in the emissions trading report so Howard could bang on about it at the Liberal council meeting a few days later.

  31. June 4th, 2007 at 08:48 | #31

    Brian Bahnisch wrote:
    So his figures square off.

    The figures might square off and could be plausibly defended, but its clearly a political message designed to frighten the electorate. The statement could easily be interpreted as meaning we need to reduce today’s emissions by 264MT (i.e. from 559MT to 295MT) and no doubt will be. Howard wants the electorate to imagine a “Garrett recession” with no cars on the road and nukes in every suburb.

    P.S. Heat is an excellent read. I’ve re-read it a couple of times. I’m reading Scorcher ATM.

  32. June 4th, 2007 at 10:14 | #32

    Just reiterating Brian’s point:

    To achieve the 38% reduction by 2020 Howard could have told a different story. A reduction of that order could be achieved relatively easily through energy efficiency, switching from coal-fired electricity to gas-fired electricity, and more renewables. Instead he chose to frighten the bejesus out of the electorate with his “cars off the road” statement.

    ProfQ: How about taking him to task on this point in your next piece in the Fin?

    P.S. You really need to do something about your hosting!

  33. observa
    June 4th, 2007 at 18:49 | #33

    Funny you should mention nuclear power. IMO Rann is getting ready to the huge backflip on nukes for the Saudi Arabia of uranium(after the federal election naturally). http://www.news.com.au/adelaidenow/story/0,22606,21845924-2682,00.html?from=public_rss
    And why not eh? If we can beat Bracksian water burglers and Iemman coal burners at their own game, then why not eh? BHP Billiton need a 520MW power station immediately to fire Olympic Dam expansion, among the other mineral prospects that need more energy and water and we need to be free of the Murray Darling drain once and for all. Nuclear desalination and all those lovely Leigh Creek burnable mud, carbon credits to sell to boot. What better bucket of money could Mr our Pledge ask for eh greenies? SA the greenest state in the driest continent!

  34. Peter Wood
    June 4th, 2007 at 23:23 | #34

    Brian, thanks for the correction.

    John Howard distorted Shergold’s quote today, he said:

    And as my report – that’s the report of the experts, not my report – but the report to me on Friday said that to cut emissions by 20 per cent by 2020 you’d have to replace every coal-fired power station with a nuclear power station by 2020 and you’d have to take all vehicles off the roads.


    This is completely different to Shergold’s statement, which is equivalent to saying that the emissions reduction by 2020 is the same as the present emissions from electricity generation and road transport. Either Howard does not understand what is going on or he is lying again.

  35. Peter Wood
    June 5th, 2007 at 02:32 | #35

    Now things start getting interesting 🙂 Suppose we were to do what Howard suggests and “you’d have to replace every coal-fired power station with a nuclear power station by 2020 and you’d have to take all vehicles off the roadsâ€?. What percentage of the projected 2020 emissions would be cut if we did this? My calculations using the Australian Greenhouse Office projections suggest that it would actually be over 40%.

    The details of the AGO projections are at http://www.greenhouse.gov.au/projections/index.html
    The projections we use are the ‘with measures’ projections, where some existing greenhouse gas reduction measures take place compared to business as usual. These are the projections used in Shergold’s statement. As usual all measurements are in Mt CO2-e.

    The 2020 projected emissions by sector are as follows:

    Electricity Generation 241 34%
    Other Stationary Energy 120 17%
    Fugitive Emissions 55 8%
    Transport 99 14%
    Industrial Processes 50 7%
    Agriculture 96 13%
    Land Use, Land Use Change & Forestry 45 6%
    Waste 11 2%

    Total 717

    The AGO breaks down the 99 Mt from transport into various different vehicles etc. We subtract emissions from aviation, rail and shipping and arrive at 87.5 Mt from “vehicles on the roads”.

    Calculating the emissions reduction by “replacing every coal-fired power station with a nuclear power station by 2020” is a bit more tricky. To simplify things we shall not consider the emissions from mining, milling, and enriching the uranium, or constructing the nuclear power stations. Assume that these processes are powered by hot fractured rocks or something like that. Shergold does not consider these emissions either.

    We need to estimate how much of the emissions from electricity in 2020 are likely to come from burning coal. Using a tool called AEGIS on the AGO website we estimate that in 2005, 178 Mt of emissions for electricity generation were from coal, and 14.6 Mt were from gas. The AGO uses several different models to estimate emissions from electricity generation in 2020. They are ABARE, ACIL Tasman, and MMA-CoPS. ABARE estimates 1.3% less coal, ACIL Tasman estimates about 3% less coal, and MMA-CoPS has about 7% less coal and 2% more renewables. The AGO 2020 estimate is based on the ABARE model, so I estimate that 91.8% of emissions will be from coal instead of 92.4% in 2005, which corresponds to 221.2 Mt.

    So adding these two numbers together we get 308.7 Mt, which is 43% of the projected emissions of 717 Mt.

    Of course Shergold’s statement was designed to be deliberately confusing, most Australians would reasonably assume that almost all greenhouse gas emissions are from electricity and transport, when in fact they only constitute 495 of emissions. Things get even more confusing when comparing 2005 statistics to 2020 statistics. Because projected emissions in 2020 are so much higher than 2005 statistics, of course a large proportion of 2005 emissions would be equivalent to a smaller reduction in projected 2020 emissions.

    I think it is appropriate to finish with another comment from the PM:

    The question I pose to the Australian people, quite directly, is this: who do you trust to take these vital decisions about our future?

  36. Peter Wood
    June 5th, 2007 at 02:34 | #36

    sorry, the first sentence of the second last paragraph should have read:

    Of course Shergold’s statement was designed to be deliberately confusing, most Australians would reasonably assume that almost all greenhouse gas emissions are from electricity and transport, when in fact they only constitute 49% of emissions.

  37. BilB
    June 5th, 2007 at 04:14 | #37

    Brian B,
    Thanks for the enlightenment, I was wondering what the little e meant. We agree in summary. Howards approach is a farce. There, it has been said twice in one day.

    Call it a tax (it would be the carbon useage tax CUT for short), apply it now, give a reviewed exemption to key vulnerable industries (well there is only one – Aluminium smelting), use the tax to promote full scale alternative energy installations, and let’s get on with it. The market can play with its gimmicks once some progress has been made.

  38. June 5th, 2007 at 08:21 | #38

    Peter Wood wrote:
    Of course Shergold’s statement was designed to be deliberately confusing…

    Thanks for doing further investigation into this Peter.

    I believe Shergold’s deliberately confusing statement was deliberately inserted into the document, was deliberately repeated by Shergold on the day of the report’s release, was deliberately repeated by Howard at the Liberal council, and is part of a deliberate strategy by the Howard government to scare the public about the ALP’s policy* on climate change.

    Anyone disagree?

    * Of course the 20% reduction by 2020 isn’t actually Labor policy, but that hasn’t stopped Howard banging on about the “Garrett recession”, cars off the roads, and nukes everywhere.

  39. observa
    June 5th, 2007 at 09:22 | #39

    Gee whiz, Howard wouldn’t be playing the ‘draconian’ Workchoices fear card here now would he? You know-
    ‘Who do you trust to fix global warming without economic cooling folks?’ and suddenly an economy run by rock stars, starts to look a little flaky.

  40. observa
    June 5th, 2007 at 09:43 | #40

    You’ve got to admire the superb timing of the old bull here. He can turn a perceived weakness into a great strength in what seems the blink of an eye. Yet it wasn’t. It was all planned quite some time ago and you have to ask yourselves now, who was the smart one to ignore the early quagmire and smelly taint of Kyoto, to now come up with a unique ‘Australian solution’, as distinct from those ‘Eurocentric Labor suckholes’. And what’s more he’s out there in front of the Yanks now, so even that attack is blunted.
    “Who do you trust to fix global warming without economic cooling?”
    Bloody amazing, but not really, because the old bull never rushes into anything, least of all quagmires for young bulls like radical Kyoto.

  41. observa
    June 5th, 2007 at 09:50 | #41

    And the tax cuts haven’t even begun to bite yet.

  42. BilB
    June 5th, 2007 at 09:50 | #42


    There is a huge difference between workchoices (about our income margins) and global warming (about our survival). The public senses that we are all on a bus here speeding towards a cliff with tour guide Howard through the PA prattling on about the cost of the bus fare.

  43. June 5th, 2007 at 11:08 | #43


    Occasionally your analysis is spot on, particularly when exposing the left’s denial about the true cost of deep cuts to GHG emissions (and I’m talking about the 60-80% cuts on 1990 levels, not the 20-40% cuts which can be achieved relatively painlessly) but you are dead wrong about Howard turning climate change into a strength in the blink of an eye.

    Howard is still perceived as a climate change skeptic and will be for a long time. I don’t think the average punter perceives Kyoto as a “quagmire” or a failure. To the average punter Kyoto equals action on climate change, and they know every country has signed up except Australia and the U.S. The only quagmire Australia is involved with is Iraq, and we followed the U.S. there as well.

    The Galaxy poll was taken before Howard launched his “Garrett recession” attack, so even if you take this poll as a true indication of a move back to the Coalition (which its not), its not because of Howard’s recent climate change attacks.

    The next round of polls will be very, very interesting. I wouldn’t be surprised to see yet another “Rudd bounce”. Of course, what’s really happening is the polls have been bouncing around the 57-43 mark for months now, which is landslide territory.

  44. Andrew
    June 5th, 2007 at 11:08 | #44

    BilB, the public is now certainly convinced about global warming – and people want to see action being taken. But I think the public is also quite skeptical about grand emission cut statements and probably sides with the Howard view that we don’t want our bus tickets to go up too much even if there is a small chance of a cliff up ahead.

    Australians won’t accept drastic cuts to our living standards for a few reasons –
    1) We’re not driving the bus. We can attempt to shift it’s trajectory by shifting our puny weight to the left – but the bus is being driven by the G8.
    2) There might be a cliff up ahead – or there might not. We agree that humans are contributing to global warming – but we don’t agree yet on what this really means. We are prepared to change behaviour just in case – but it is a bit like buying an insurance policy. The premiums can’t be too high.
    3) We can reduce emissions without a drastic cut in living standards – we need to avoid using climate change as a trojan horse for anti-consumerism.

  45. June 5th, 2007 at 11:39 | #45

    3) We can reduce emissions without a drastic cut in living standards – we need to avoid using climate change as a trojan horse for anti-consumerism.

    Of course we can, but that’s not the story Howard is spinning. He’s conjuring up visions of a “Garrett recession”, roads without cars, and a nuke in every suburb.

    If by some miracle Howard wins on a climate change fear campaign what’s his legacy going to be if the effects of climate change are half as bad as the scientists tell us they will be?

    Actually I’ve been really surprised at Turnbull running with the scare campaign, because a) He’s no skeptic and he knows how serious climate change is, and b) his scaremongering today could destroy his leadership ambitions a few years down the track when its plain to all how serious climate change is.

    OTOH I haven’t noticed Costello participating in the scare campaign.

  46. Andrew
    June 5th, 2007 at 11:57 | #46

    You’re right Carbonsink – Howard is using a scare campaign….. and I think it will probably be at least partially effective for the reasons I stated above. Enough far left wingers are using climate change as a trojan horse for anti-consumerism that mainstream Australia is certainly vulnerable to a scare campaign. He’s a pretty clever politician heh?

    Despite that – I think he’s gone come November…. the mood in the electorate is that it is time for a change.

  47. observa
    June 5th, 2007 at 12:04 | #47

    Howard and Sheeds have a lot in common don’t they? There’s always the interminable hard yards of selection, training and motivating the lads to produce the wins/goods, but you have to be mindful of contract renewal time and reinventing yourself a bit to inspire the punters/voters and impress the board/MSM.

  48. Peter Wood
    June 5th, 2007 at 12:16 | #48

    I would like to make the following clarification to my previous statement. The 43% figure is the reduction of projected emissions from adopting Howard’s suggestion. Replacing Australia’s entire existing fossil fuel–fired electricity generation capacity with electricity from nuclear energy and removing all existing vehicles from our roads will reduce 2020 emissions by 308.7 Mt to 408 Mt. This is 28% less than todays emissions of 567 Mt CO2-e.

  49. gordon
    June 5th, 2007 at 17:29 | #49

    On inclusions and exclusions from what I suggest we call the Shergold Plan, I notice that there are brave words about how as much of the economy as possible should be included, except for agriculture and waste. But when it comes to “trade-exposed, energy-intensive� industries, inclusion becomes, effectively, exclusion.

    These industries are nowhere listed in the Shergold Plan, as far as I can see. Appendix L makes an attempt at definition, but I haven’t found any actual list. No doubt Shergold and the Rodent have a private list. These industries are to get special “transitional arrangements� which include their being given free permits every five years sufficient to cover both direct and indirect emissions of existing plant, plus additional free permits to cover the direct emissions of new plant (pp.116-117). “Over time� (undefined), the number of free permits for direct emissions would be adjusted downwards to the number which would be needed if the relevant firms were operating at “world’s best practice low-emissions technologies�. Free permits for indirect emissions would, so far as I can see, be available as long as the “transitional arrangements� were operating.

    These “transitional arrangements� amount to excluding “trade-exposed, energy-intensive� industries from the National permit scheme, and calculating a separate cap for each plant which could be called part of a “trade-exposed, energy-intensive� industry. These local caps would initially be whatever emissions the plant is causing, directly or indirectly. “Over time�, they would be calculated according to whatever a “world’s best practice low-emissions technology� is. If they are not exceeded, fine; the free allocation of permits will always cover the emissions. If the local caps are exceeded, Shergold says permits would need to be purchased in the market (every other industry would have to pay the “fee� for exceeding a cap). However purchase of permits in such a situation seems unlikely because in the next paragraph Shergold says: “…the emissions cap under the [National] scheme could be adjusted upwards to account for emissions as a result of new investments in the trade-exposed, emissions-intensive sector� (p.116). So the National cap would just be adjusted upwards by an amount equivalent to the emissions caused by the new investment.

    The obvious fudges, aside from the pretty monstrous idea of a separate set of caps itself, are the uncertain duration of these “transitional arrangements�, the definition of “world’s best practice low-emissions technology� and the delay before benchmarking of plants against “world’s best practice� would begin. All of these are as indefinite as the length of a piece of string, and are obviously subject to political dealing. I remember that the State Governments’ National Emissions Trading Taskforce (August 2006) plan simply excluded aluminium smelting, cement making, iron/steel making, petroleum refining and ammonia manufacture from initial coverage, and I suspect that Shergold’s private list of “trade-exposed, energy-intensive� industries would include these and perhaps more.

    That’s enough for one day, and I’ve barely scratched the surface.

  50. BilB
    June 6th, 2007 at 06:58 | #50


    You just waded into the ickey pool that forms around a failed philosophy. It all sounds like a bunch of kids playing “tag”, the game quickly develops things that are “bar” and there become endless rules about how quickly one can retag the tagger, on and on and on.

    No one is going to instantly drop using carbon energy, that is impractical. What is needed here is rapid development of alternatives and that takes money. The only robust solution is to apply a universal carbon tax which will work internally to build availability of alternative energy solutions.

    The tax would work exactly the same ast the GST and would have the benefit of being claimed back by exporters (as GST is) thereby not disadvantaging our export trade.

    The endless arguement about permits concessions tradeable emissions, etc is doomed to failure simply because there are too many interested parties. Worse, the argument will stall any action for a long time yet to come.

  51. rs
    June 6th, 2007 at 07:50 | #51

    So, in 1997ish 95+% of the US Senate is against Kyoto, but by 2003 they’re almost half for a domestically controlled similarish system in The Lieberman-McCain Climate Stewardship Act. Yet 4 years after that, nothing like it has been proposed again (or if it has, it hasn’t passed) even with more Democrats in 2006 than in 2003. Perhaps some of the initiatives since 2003 that have been proposed by Bush was sufficient? Or all they all just postering? Some of each, probably.

    Anyway, the bill would have capped 2010 aggregate for 85% of the 2000 US GHG emissions (as defined by the EPA’s Inventory of U.S. Greenhouse Gas Emissions and Sinks) in electricity generation, transportation, industrial, and commercial economic sectors, by having the EPA Administrator promogulate regulations to limit such emissions. It excluded agricultural and residential sectors and allowed the Admisitrator to exempt certain subsectors if he (or in other words the people that work for him at the agency) determined it was not feasible to measure the emissions of those subsectors. The Commerce Dept would have been the one to re-evaluate the levels of allowances to see if they met those of the UN FCCC. Those allowances would have been either grandfathered or auctioned. Some flexibilty mechanisms, penalties and the allowance system are discussed. It would also have established an NSF scholarship program for students of climate change areas and the Commerce Department researching technology transfer and the impact of the Kyoto Protocol on U.S. industrial competitiveness and international scientific cooperation.

    Interesting. Wonder why it didn’t pass. Seems like some good ideas.

    Now that I think about it, that makes the Supreme Court decision to have the EPA relook their non-regulation of the GHGs in the case not make much sense. If Legislative wanted the EPA to do something, they would have passed the bill, and if Executive wanted the EPA to do something, it might have directed them to do so (although conceptually, Executive has decided to decentralize it and let the agency decide it appears). In light of that, I’m very confused how the Judicical could have determined that’s what the Clean Air Act covered. Oh well.



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