Find below a few excerpts from Ross Garnaut’s 2014 John Freebairn Lecture in Public Policy: Resolving Energy Policy Dilemmas in an Age of Carbon Constraints, delivered last night.
Highlights include arguments that:
- Australia is an energy superpower given its role in coal, uranium, gas and aluminium exports
- China is moving swiftly to decrease the energy intensity of its growth and the carbon intensity of its energy
- the unconventional gas revolution will drive global gas price convergence
- in the interim, Australia is in its rights to embrace gas reservation for as long as the US does
- local utility bills can brought down by the above, as well as regulatory reform that shifts away from a focus on rates of return for the transmission sector, by the shift to decentralised and household power and the general real exchange rate adjustment underway
- if carbon pricing were retained it would ensure Australia meets its UN obligations to reduce emissions and fix the Budget. “Senate consideration of the repeal bills is now bound to be caught up in disputation over the Budget. On a quick count, the tax increases and expenditure reductions that do not seem to have the support of either the Greens or Labor and which therefore are at the mercy of the new Senate have a total value of $12-18 billion over the 4 years of the forward estimates. Retention of carbon pricing and rejection of the Government’s Emissions Reduction Fund would reduce the budget deficit by $6-7 billion in 2014-5, and a total of $6-12 billion in the following three years depending on the European Emissions Trading System’s carbon price. By coincidence, retention of carbon pricing would more or less precisely fill the gap from Senate rejection of some Budget measures. To put it another way, Australia can stay within the boundaries of fiscal responsibility over the next four years as defined by the Government in this year’s Budget by retaining carbon pricing rather than the array of changes that are at risk in the Senate.
- if carbon pricing is dumped “we can expect less effort to match the increasing ambition of the rest of the world. This makes a good outcome in the Paris meeting less likely. We can’t be sure about the effect of one country’s free riding on others–just as we cannot be sure that the outcome of World War I would have been different if we had declined to send troops to Gallipoli or the Western Front. Making a full contribution to the global effort on climate change is difficult in every country. We can be sure that a no-show by Australia, or a weak show, would make it harder for others to do as much as they might otherwise do. Besides, Australians expect their country to do its fair share in an international effort in which we have an interest in success.Second, we can expect reversal of the recent tendency for total greenhouse gases in Australia to fall and emissions from the electricity sector to fall rapidly. The Minister for the Environment takes comfort in the downward revision of expectations of future emissions to 2020 in recent forecasts by Government agencies. Those downward revisions reflect the effects of current policies, and in any case point to a large effort to achieve an absolute reduction in emissions. While there will be some forward momentum from established policies, this cannot be expected to last for long. The Minister and the Prime Minister take comfort from large opportunities for carbon sequestration on farms, and have cited my own work as authority for their confidence. Incentives for genuine carbon sequestration in the land—emissions that meet agreed international criteria–will be greatly reduced by the removal of opportunities for sale of credits to entities with carbon pricing liabilities. The proposed Emissions Reduction Fund will influence emissions in the small minority of firms, accounting for a tiny minority of emissions, which win contracts under the Emissions Reduction Fund. The absence of carbon constraints on all other economic entities in the country is much more important.There is no reason to expect that there would be any reduction at all on 2000 emissions under the alternative policies, let alone reduction by 5, 15 or 25 percent.Failure to match the efforts of other countries or to meet even weak targets will have negative consequences in international relations. We will be working strongly against one of if not the foremost of the international diplomatic objectives of the President and Secretary for State of the United States of America.At home, the Government asserts that it will achieve substantial emissions reductions under the alternative policies. Many Australians have taken the Prime Minister and Minister for Environments at their words. It will not be long before their words are tested by unfolding reality, and fail.
The Government will then come under pressure to show that it is returning emissions to a downward path. Opposition parties will propose measures, perhaps with more populist appeal and greater business and economic cost than the Clean Energy Future. It would be surprising and against the usual pattern of Australian politics and policy in the twenty first century if the Government—this Government or a successor—does not respond with arbitrary and costly interventions in particular industries and processes.
Failure in meeting modest expectations of Australian emissions reductions is likely to encourage various community groups to act directly against particular carbon-intensive activities. This has been the tendency in the United States, where community pressure closed the possibility of new coal power generation several years before it was excluded by Federal regulation. Such action will have some effect in reducing emissions, but is divisive, arbitrary, costly, and divisive.
On climate change as on other environmental impacts of resource development, the alternative to disorder and arbitrary outcomes is acceptance of honest science as the starting point for policy development, and from that point, building support in the centre of the polity for development that takes full account of external costs. On climate change policy, this is most likely to be achieved with broadly based carbon pricing. Australia now has the laws and institutions and administrative systems that can do the job effectively and at low cost. Better to keep the laws and gradually to make them more effective.
I suggest you read it all if for no other reason than to reassure yourself that deep policy process is not yet extinct.
