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Carbon plan fuels meltdown
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|by fairfax - Saturday, 20 December 2008
Professor Garnaut has called on the Government to make urgent changes to the policy that the Prime Minister, Kevin Rudd, announced this week.
Writing in today's Herald, Professor Garnaut urges the Government to keep open the option of a more ambitious cut to carbon emissions to keep alive the prospect of averting dangerous climate change.
While Mr Rudd has limited Australia to a maximum cut to emissions of 15 per cent by 2020, Professor Garnaut writes "the Government should keep the 25 per cent option on the table".
He argues: "Australia cannot play a strongly positive role in encouraging the global community towards the best possible outcomes if it has ruled out in advance its own participation in strong outcomes."
The Government could restore this option without unpicking its overall package, he says.
But Professor Garnaut reserves his toughest criticisms for the Government's plan to compensate the biggest polluters.
"There is no public policy justification for $3.9 billion in unconditional payments to [electricity] generators in relation to hypothetical future 'loss of asset value'.
"Never in the history of Australian public finance has so much been given without public policy purpose, by so many, to so few."
The cost to the taxpayer was likely to blow out further over five years, posing "a large risk to public finances", he writes.
Professor Garnaut is even more alarmed at the dangers posed by the Government's decision to issue free carbon permits to industries exposed to international competition, such as steel, chemicals and paper and pulp.
He writes that this is an act of protectionism that threatened to provoke other countries to follow suit.
He likens the potential to the notorious US protectionism that deepened the Great Depression of the 1930s.
Professor Garnaut was an adviser to the former prime minister Bob Hawke and a key voice in arguing an end to protectionism in the 1980s.
Mr Rudd and the premiers commissioned him to write a report on options for responding to climate change - the Garnaut Review. The final version was delivered at the end of September.
Professor Garnaut says the Government had acknowledged there was a principle involved in compensating trade-exposed companies - levelling the playing field to allow them to compete against firms from countries which had no carbon restraint.
But the Government had failed to apply the principle: "The consequences of not having a principled basis for the issue of payments are profound."
The Government, in a green paper in July, initially proposed giving these industries free carbon permits equal to a maximum of 20 per cent of the value of all permits issued.
He endorses these as "reasonable upper limits to principled initial claims".
"By contrast, the white paper's approach would see the proportion of permit value given free to trade-exposed industries rising to 45 per cent on conservative assumptions."
Under some conditions, the share could rise as high as 75 per cent, he calculates.
Fixing this was "an urgent matter for the restoration of global prosperity".
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