Above is a detailed interview with Professor Ross Garnaut talking last night to ABC’s The Business on climate change, emmissions trading schemes and carbon taxes. The full transcript is provided below and the original HD video can be viewed here.
ANDREW ROBERTSON, PRESENTER: Here is a story on switching from the carbon tax to an ETS. As man who has provided much guidance to Labor in the area of climate change going back to Labor’s days in opposition is the University of Melbourne’s Professor Ross Garnaut and he joins me now from Melbourne.
Professor Garnaut, welcome to the program.
ROSS GARNAUT, UNIVERSITY OF MELBOURNE: Hello, Andrew.
ANDREW ROBERTSON: Your review of climate change back in 2008 recommended an emissions trading scheme and yet we got the carbon tax. I imagine you’d be quite happy to see the carbon tax go.
ROSS GARNAUT: Well we don’t actually have a carbon tax; what we have is an emissions trading scheme with a fixed price for a first three years. The original CPRS based on my recommendations back in 2008 had a fixed price for a shorter period, but certainly it’s no problem for the system to move more quickly to a floating price. In fact there’s some advantages in that.
ANDREW ROBERTSON: We’ve had the former Climate Change Minister Greg Combet today come out and say that he saw great difficulty in moving to a floating price. You’ve just expressed a different view. Why do you think there won’t be difficulty?
ROSS GARNAUT: Oh, it depends on the timing. I’m no closer to the cabinet discussion than your listeners are, Andrew, so I don’t know what is being discussed at the moment. But what’s been put forward in the newspapers is the possibility of bringing it forward by one year. I think that that – if it’s only one year, then there is time to complete negotiations with the European Union on revision of the treaty under which we’ll trade with them. There’s not a problem of this year’s free permits being issued and possibly sold back to the Government before a fall in price. And there’s time for the climate change authority to recommend on targets, that process of recommending on targets, which you need for the emissions trading scheme, is due to be completed in the first half of next year.
ANDREW ROBERTSON: Is the fixed price, or the carbon tax, as its colloquially know, actually doing the job of encouraging renewable energy and decreasing the use of carbon-generating energy?
ROSS GARNAUT: The combination of policies that we have at the moment, which includes the renewable energy target, as legislated a number of years ago, and the carbon pricing arrangements, are having the combined effect of significantly reducing emissions from those sectors that generate most emissions after many years of quite strong growth in emissions. So there’s been a change in trajectory and that’s all very encouraging.
ANDREW ROBERTSON: It must disappoint you then to hear the talk that we would switch to an emissions trading scheme with a price of about $6 a tonne, which is what the current price in Europe is.
ROSS GARNAUT: Well, it’s disappointing that the price is as low as that in Europe, although what’s disappointing is that the targets are not strong enough. Europe’s committed to reducing emissions by 20 per cent by 2020. And when the economy’s weak, as it is at the moment, that becomes a rather cheap target to meet, a rather easy target to meet. Especially when you think that most European countries – all European countries have a lot of other measures to reduce emissions, feed-in tariffs at quite a high level for renewable energy, carbon taxes, for example in Britain, quite apart from the emissions trading scheme, renewable energy targets. There’s a whole lot of other measures, so a combination of those other measures and the rather easy target of reducing emissions by 20 per cent means that the carbon price doesn’t have to be so high to meet that target. What would be really encouraging is if Europe went to its conditional target of reducing emissions by 30 per cent and then we would have a higher price and we’d be making more progress on global emissions if Europe did that.
ANDREW ROBERTSON: One of the attractions of the floating scheme at the moment is that it would lower the price of carbon for business. I mean, if we did have a price of $6 a tonne, what message would that send to the rest of the world about how serious we are about tackling this issue?
ROSS GARNAUT: Oh, I think that the rest of the world’s acknowledged that Australia’s done something important in putting in place economy-wide carbon pricing. The rest the of the world will look mainly at what’s happening to our emissions. And as I mentioned, they’re coming down after many years of rising strongly. In the energy sector, the electricity sector, in the first nine months of carbon pricing emissions fell eight per cent. Well that’s a very big change in trajectory. That’s what the rest of the world will look at. The question is: will we continue to get that downward movement with a lower carbon price? Well, one very important fact about the floating price linked to Europe is that business will be aware that the European price is not going to stay this low forever. There will be a time when economic growth is stronger in Europe. There’ll be a time when Europe does tighten those targets. And at that time, the carbon price will rise and the carbon price will do more of the lifting. But with a carbon price around $6, in Europe and in Australia, the other measures have to do more of the lifting in reducing emissions.
ANDREW ROBERTSON: I mean, as an economist, putting aside the business arguments and the political arguments, what do you think a fair price for carbon should be?
ROSS GARNAUT: Well, to meet the global targets of reducing emissions by enough to have a reasonable chance of holding global temperature increases to two degrees Celsius, the modelling shows that the world would need carbon pricing in the vicinity of $30 and rising over time. That’s where the world will get, in one way another, if we’re actually dealing with the problem. You don’t have to get all of that way with the carbon price. As I said, it’s – every country is using a mixture of measures. If you use a carbon price, it’s cheaper than, for example, the range of regulatory measures that the United States is using and the ban on exports of gas, which is a very powerful instrument that the US is using to get down emissions, but it actually is a very expensive way of getting down emissions. I wouldn’t recommend that for Australia. So if you rely on the carbon pricing alone or mainly, it’s not gonna cost you as much (inaudible) …
ANDREW ROBERTSON: Professor Garnaut, I’m sorry to interrupt. We are out of time. We really thank you for your time today – tonight. You’ve given business leaders and politicians a lot to think about. Thank you for that.
ROSS GARNAUT: OK. Bye, Andrew
