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Final Garnaut climate change review: the experts respond

A carbon tax priced at $26 per tonne could raise $11.5 billion in the first year, said economist Ross Garnaut. AAP

Economist Professor Ross Garnaut has released his final report to the government on climate change and the economy.

The report says global warming is expected to continue and estimates that a $26 per tonne carbon tax would raise about $11.5 billion in its first year

He calls for a carbon tax to be introduced at $20 to $30 a tonne, rising by four per cent a year until a market-based emissions trading scheme starts in 2015.

About 55 per cent of the revenue should go to low and middle-income households to offset price increases for the first three years of the carbon tax, with a higher proportion of help going to the poor after the ETS starts operating.

Funding to clean tech should also be boosted, he says.

Here are some expert reactions to the report:

Steven Sherwood, Professor and Co-Director, Climate Change Research Centre, University of NSW

First, Garnaut understands and explains the science very well even though he is not a scientist. He even commissioned some economists to do their own analysis of temperature trends, which proved that global warming has continued unabated as stated repeatedly by scientists, despite the false assertions to the contrary that you increasingly hear from non-experts who are opposed to action. This shows that you don’t need to be a climate scientist to see that the world is warming, you just need to be honest and open to evidence.

Second, the report drew a link between the way that powerful vested interests have subverted public understanding of the science, and the way that they would inevitably try to subvert different types of emissions reduction policy. One of Garnaut’s arguments for a simple tax on carbon is that, compared to regulatory approaches, it will be tougher for special interests to defeat in the back room by lobbying for loopholes. I have heard this argument from other economists, also as an argument against cap and trade.

Finally, and probably the most politically relevant point reiterated in the report, a carbon price is a cheaper way of achieving a given level of emissions reduction than “direct action.” Economic details aside, the numbers demonstrate that in the medium to long term, there is really no substitute for bringing down fossil fuel CO2 emissions, by hook or by crook, if we want to avoid an eventual tripling or quadrupling of the natural CO2 concentrations that have prevailed throughout the rise of civilisation and the massive warming and other harms this would almost certainly bring.

Whatever else we may do, including planting trees, may help at the margins or buy us another couple of years, but won’t address the core problem.

John Passant, Faculty of Law, University of Canberra

Ross Garnaut suggests that a carbon price of $26 per tonne will raise about $11.5 billion in 2012/13.

He says 55 percent of this should be returned through an increase in the tax free threshold from its current $16,000 - taking into account the low income tax offset - to $25,000 and the abolition of that offset.

Increasing the tax free threshold benefits all taxpayers so Garnaut proposes that for taxpayers earning more than $80,000 a year the tax rates be increased to wipe out that tax benefit and leave those taxpayers with no compensation for carbon tax price rises.

For those not working, Garnaut suggests there be increased Government benefits.

Taking a long term view, compensation through the tax system and increased benefits is ephemeral. It erodes over time through bracket creep and can be undone at any time through Government tax and other policy changes.

Certainly, Garnaut takes a long term view when he says:

‘Australian households will ultimately bear the full cost of a carbon price. Returns to capital are determined in international markets and any reduction in them by domestic policy measures is temporary, except to the extent that the policy measures fall on rents from natural resources, monopoly or technology.’

And there’s the rub. The carbon tax is designed in the long term to fall on ordinary working families many of whom are struggling as it is to make ends meet.

Working people are being asked to bear the ultimate costs of the minor economic restructuring that will result from the modest $26 a tonne on carbon proposed.

As the Greens and others have argued, a price less than $40 per tonne won’t produce a shift to gas-fired electricity stations and anything less than $100 won’t encourage a shift to renewable energy.

No Government is going to commit political suicide and impose those sorts of costs on working people.

The technology currently exists to shift to renewable energy in Australia by 2020. The political and economic will to do that doesn’t. The current economic arrangements preclude taking effective action to address climate change and any that are undertaken will ultimately reduce workers living standards. No wonder the tax is on the nose with 60 percent of Australians.

Tinkering with the market though a carbon price won’t solve the problems the market itself creates. The market is the problem, not the solution.

Professor Barry Brook, Director of Climate Science at The Environment Institute, University of Adelaide

Garnaut has elaborated and updated his report in line with the latest science and lack of effective action nationally and globally.

But the bottom line, in my opinion, remains the same. We need to scrap the renewable energy target (RET) and feed-in tariffs (FiTs), set a low initial carbon tax at about $10 per tonne, establish an equivalent of the Board of the Reserve Bank to manage the tax and set future prices, and have some legislated schedules (gateways) such as a floor price of $20 per tonne by 2015, $30 per tonne by 2020, and so on. The rising price – with short-term decisions taken out of Government hands to avoid distortions arising from political expediency – is absolutely key.

Finally, and in line with eliminating the RET and FiTs, we need to really level the energy playing field and allow nuclear to compete with renewables and fossil fuels with carbon-capture and storage.

Professor John Quiggin, the School of Economics, University of Queensland

The main innovation in the final Garnaut Review is a substantial emphasis on the UK model, in particular the proposal for an Independent Committee similar to the UK Committee on Climate Change.

The UK approach has already achieved substantial reductions in emissions, and the recently announced commitment to reduce emissions to 50% below 1990 levels by 2025 is an indication of what can be achieved. The experience of the UK provides a direct refutation of claims that the achievement of significant reductions in emissions will be economically ruinous.

As the Review observes, provided that businesses are not overcompensated, the return of revenue from the carbon tax to households should offset the relatively modest impacts on the cost of living that are likely to arise.

Professor Peter Rayner, School of Earth Sciences, University of Melbourne

Garnaut has commissioned a fresh look at the recent data and found that the problem of global warming can’t be wished away. Indeed the case has strengthened from “balance of probabilities” to “beyond reasonable doubt”, a view in line with almost all recent research and assessment.

What’s new is an optimism motivating his call for stronger rather than weaker action. Copenhagen and Cancun are not a failed possibility to do much but rather an agreed certainty to at least do something.

The “contraction and convergence” solution (page 5 of the summary) says that we all have equal right to pollute and that we should stabilise concentrations at safe levels, with 2050 a target date. The world is starting to act on these joint principles meaning Australia can be more rather than less assertive.

A point missing in at least the summary of the report is that the science basis for including the land sector into any trading scheme (how do we measure it, how do we guarantee its stability etc) isn’t really established yet and would need pretty quick action if we were to credibly consider the introduction in 2015.

Fiona McKenzie, School of Geosciences, The University of Sydney

My comment relates in particular to Part III, Chapter 9, on the ‘Innovation Nation’ and the section on biofuels and biosequestration.

The recognition that the land sector can make an important contribution in the transition to a low-emissions economy is welcome.

That said, the opportunities required for generating knowledge and innovation on-farm are more than carbon pricing and fiscal incentives. Also needed are flexible and enabling institutional environments and new partnerships that promote not only frontier research and technology, but also incremental problem solving and on-farm experimentation.

Farmer driven innovations have the potential to attain sustainability, but only if the institutions put in place are appropriate.

Comments collected by The Conversation and the Australian Science Media Centre.

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