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Australia Gets Its Own “Stern Review”: Draft of Garnaut Climate Change Review Is Released

by Jack Rosebro

Estimated probability of extreme climate impacts, responses, and  threshold excess under each of the four emissions scenarios proffered  by the Garnaut Review. Click to enlarge.

After ten months of research, forums, lectures, consultations, and review of public comment, the Australian government has released a draft[1] of the Garnaut Climate Change Review, a comprehensive economic evaluation on the potential impacts of climate change to Australia’s economy, with recommendations for medium- to long-term policies and policy frameworks that will “improve the prospects of sustainable prosperity” for the country. The report, which follows February’s Interim Report, is named for lead author Dr. Ross Garnaut[2], who is chief climate change advisor to Australia’s Prime Minister Kevin Rudd as well as a professor of economics at Australian National University.

Garnaut’s report looks at Australia’s future economic prospects as they would be influenced by four climate change mitigation scenarios—two that achieve greenhouse gas (GHG) stabilization by 2100, and two that do not: “ambitious” mitigation (450-500 ppm CO2 equivalent, or CO2e), “strong global” mitigation (550 ppm CO2e), “ad hoc” mitigation (efforts, but no stabilization), and no mitigation at all.

Projected effects of climate change in Australia, by sector, in 2100. Click to enlarge.

Although the stabilization scenarios are in line with the findings of last year’s Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report, many subsequent reports have indicated an acceleration of global emissions beyond the IPCC’s estimates, prompting a call for more aggressive emissions reduction targets (earlier post).

While the Review accepts the conclusions of the Fourth Assessment Report, and predicts that Australia—already a relatively hot and dry country—will be harder hit by climate change than most developed nations, it nevertheless argues against further greenhouse gas reduction targets unless all major emitters—and especially China—agree to a global compact on the peaking and subsequent reduction of GHG emissions.

Because Australian action alone will be of little consequence to climate change impacts, there seems to be no case for adjusting Australian limits for new information and developments of an economic or scientific kind... strong Australian mitigation outside a global agreement is likely to corrode the integrity of the Australian market economy.

However, the Review does note that Australia should be prepared to “go further” than the Commonwealth’s current commitment to a 60% GHG reduction by 2050, should other developed countries accept a “comprehensive global agreement” at such levels. Without action, it warns, Australians can expect to experience “disruption in their prosperity and enjoyment of life, and to longstanding patterns in their lives.

Delayed response and stabilization of different components of the  climate system, following the peaking of emissions. Source: IPCC Third  Assessment Report, Figure 5.2, reformatted for the Garnaut Climate  Change Review. Click to enlarge.

In addition, the Review is pessimistic about remaining opportunities to significantly mitigate the effects of climate change.

Damage from climate change, perhaps immense damage, is likely to be part of the Australian reality of the 21st century and beyond. The good options on mitigation will soon be gone...the international community is too late with effective mitigation to avoid significant impacts.

Specific recommendations for emissions reduction targets and trajectories will be included in Garnaut’s final report, which will be presented on 30 September 2008, and which will also include recommendations on the “Australian challenge” of adaption to the effects of climate change.

Australia Dries Up

Percentage area of the Murray-Darling Basin experiencing exceptional  heat for 1910 - 2007. Click to enlarge.

Speaking at the National Press Club in Canberra on 4 July, Professor Garnaut said that by 2050, unmitigated climate change would produce major declines in agricultural production across much of the country, leading to a collapse of irrigated agriculture in the Murray-Darling Basin by 2100. Comprising around 15% of Australia’s land mass, the basin is by far Australia’s most important agricultural area and land-based source of drinking water.

The Murray-Darling has been plagued by long-term drought since 2006[3], although rains were adequate in the north this year. Ecological deterioration across four states and 96,000 kilometers of rivers and streams has reduced twenty out of twenty-three river valley ecosystems in the basin, which is also affected by salinity and invasive species, to either “poor” or “very poor” health[4]. Some wetlands have been disconnected from their water sources to reduce evaporative losses to the basin, and water levels of some inland lakes have dropped below sea level for the first time in recorded history. The resultant acidification of exposed soils may, in some cases, be irreversible.

Dr. Wendy Craik, chief executive of the Murray-Darling Basin Commission, has stated that planning for the basin should assume that the drought is permanent, with some parts of the basin having already become so dry as to exceed the most pessimistic climate change predictions for 2055[5]. Drier conditions yet are predicted for next year, with the onset of the El Niño-Southern Oscillation (ENSO)[6].

On 5 July, the day after Garnaut announced the publication of the draft report of the Review, a separate report[7] produced jointly by Australia’s science agency CSIRO and its Bureau of Meteorology was released. The long-awaited report predicts that so-called “drought exceptional circumstances” which used to occur every twenty to twenty-five years, may occur as often as every year, or every other year, for at least the next two decades.

Each drought is also expected to affect twice as much land area as in the past. The report, parts of which, according to Federal Agriculture Minister Tony Burke, “read more like a disaster novel,” was requested as part of a national review of drought policy.

Beyond Value

The Review also discusses resources for which no economic valuation is possible, advising that “Australians will have to decide whether and how much they value many aspects of the natural order and its social manifestations that have been part of their idea of their country.

In the discussion of climate change, much is made of natural wonders—of the Great Barrier Reef, the wetlands of Kakadu, the karri forests. We know that we value them highly, and now we will need to think about whether we are prepared to pay for their preservation.

Mass coral bleaching of the Great Barrier Reef, which can be triggered by a 1º to 2ºC increase in ocean temperature, occurred in the summers of 1998, 2002 and 2006. A comprehensive 2007 report found that climate change-related environmental conditions “are already beginning to exceed the narrow tolerances of many GBR species, and affect key processes[8]. The Review envisions the “disappearance of the reef as we know it” at emissions concentrations as low as 550 ppm CO2e.

Australia also faces a unique energy challenge, not the least of which is its coal industry. It exports more coal than any other nation, and although the majority of exports go to Japan, Korea, and Taiwan, emerging economies such as China, India, Brazil, and Mexico are buying more coal every year. China imported 50% more Australian coal in 2006 than 2005, even though China is itself the world’s top coal producer, having more than doubled domestic production since 2000. Chinese investment in Australian coal operations is also on the rise, and many investors such as Chalco are partially state-owned[9]. The Review recommends a transformation of the energy sector in forty years or less:

If the world is able to meet the challenge of climate change...we will see the emergence of something close to a zero-carbon energy sector in Australia and in all developed and substantial developing countries.

The Four Scenarios

The scenarios considered by the Review are as follows:

  • Ambitious mitigation case. Emissions reductions that lead to a stabilization concentration of 450 ppm CO2e, with an overshoot to 500 ppm CO2e. Carbon dioxide emissions peak before 2020 and decline steadily throughout the century.

  • Strong global mitigation case. In the context of current international discussions, greenhouse gas concentrations stabilize at 550 ppm CO2e. Emissions peak before 2030 and decline steadily through the remainder of the century.

  • The overshoot effect of aggressive, but delayed, emissions reductions, as compared to early reductions
    Ad hoc mitigation case. As concerns rise about climate change, increased mitigation action is likely to occur, but might not be at the scale or speed required to achieve stabilization, even at a moderate target. The Review therefore modeled an “intermediate” emissions case, with high emissions growth early in the century, eventually peaking and then declining very gradually as developing countries accept mitigation targets.
  • No-mitigation case. A global emissions case with no action to mitigate climate change (referred to as the Garnaut-Treasury reference case) recognizes “recent high trends” in emissions of carbon dioxide and other greenhouse gases; continuing throughout the 21st century.

While acknowledging that the most influential projections used in climate change analysis are still those which were set out in the IPCC’s Special Report on Emissions Scenarios (SRES) in 2000 (earlier post), the Review correctly observes that global emissions from 2000 to 2005, as measured by the International Energy Agency, have already outstripped by 16% the annual growth envisioned by the most pessimistic, fossil-fuel intensive no-mitigation emissions scenario in the SRES.

Action, Wealth, and Cooperation

The Review is shaped by three major themes:

  • Call to Action. Uncertainty surrounding the climate change issue is itself a reason for “disciplined analysis and decision” rather than delay, reasons the Review.

    Uncertainty does not make the case for delay. Rigorous decision making under uncertainty recognises that options have value, and that option values decay with time... To delay is to deliberately choose to avoid effective steps to reduce the risks of climate change to acceptable levels.

  • Wealth. Despite the economic uncertainty of recent years, due in part to Australia’s drought, the country’s prime asset in meeting the climate change contest remains its “relatively prosperous, flexible, market-oriented economy that has emerged from difficult reforms over the past quarter century.

  • Cooperation. As global co-operation is necessary to the decline of greenhouse gas emissions and stabilization of atmospheric levels of GHGs, domestic policy must be “deeply integrated” into global discussions and agreements. Any unilateral efforts toward mitigation should be “short, transitional, and directed at achievement of global agreement.

Climate change presents a new kind of challenge. It is uncertain in its form and extent, rather than drawn in clear lines. It is insidious rather than directly confrontational. It is long term rather than immediate, in both its impacts and its remedies. Any effective remedies lie beyond any act of national will, requiring international cooperation of unprecedented dimension and complexity.

Emissions in the Platinum Age

Garnaut argues that humanity is entering a “Platinum Age” that has already outstripped the growth and development of the “Golden Age” of the 1950s and 1960s, and which is on track to create “a greater absolute increase in annual human output and consumption in the first two decades of the 21st century than was generated in the whole previous history of our species, and then adding almost that much again in the next following decade to 2030.”

An expert on China’s economics, Garnaut not surprisingly devotes significant consideration to that country’s emissions:

...the extraordinary growth in emissions from the major developing countries, first of all China, means that their early participation in a global agreement on mitigation is essential for success. This conclusion is at odds with the momentum of current international discussions. It may not seem fair to the developing countries, given their stage of development and the history of the international discussions. But it is essential for successful global mitigation.

An Australian Emissions Trading Scheme

The Review recommends the auctioning of emissions permits for greenhouse gas emissions up to limits, released in line with Australia’s emissions reduction trajectories. The trajectories would be firm for five years, then indicative to 2050. Permits would be sold through a competitive process. “If the Government is disciplined on the selling of permits” rather than giving permits away, as was done under the ill-fated European Union ETS scheme, “it will have substantial revenue” to disburse.

Garnaut stressed that the emissions schemes should not raise revenues for government, but that half of the proceeds from the sale of all permits be returned to households, one-third to “trade exposed” businesses that have foreign, non-mitigated competitors, and the remaining 20% allocated to renewable energy projects. It is recommended that as many sectors participate as is politically feasible; “the more sectors included in the emissions trading scheme, the more efficiently costs will be shared across the economy.

However, payments to industry create a potential problem: “We have been convinced by the evidence that while payments to trade-exposed, emissions-intensive industries to avoid ‘carbon leakage’ are justified in principle, their application raises dreadful problems,” says the Review. The temptation towards a “rush for government preferment” is cited as a perennial political reality.

The Australian government has already committed to a mandatory renewable energy scheme (MRET) that requires electricity providers and large users to source an increasing proportion of their power from renewables. The goal is to ensure that renewables are already commercially available when the increased price of carbon under the emissions trading scheme makes them cost-competitive. Professor Garnaut has recommended that government commit to the scheme’s cap of A$40 (US$38, €25) per ton of CO2, even if it means missing the target of 20% of renewable energy by 2020, and then transit to the emissions trading scheme as soon as possible.

Opportunities to bring neighboring countries into the emissions trading market are also envisioned: while there is a wide margin of error surrounding available data, Indonesia’s emissions are thought to be as high as 2 Gt CO2 per year, around five times Australia’s total CO2 emissions, with more than three-quarters of that from deforestation.

Emissions from fires in peat land in Indonesia alone are estimated to be about 1,800 Mt per year, about three times Australia’s total emissions[10]. In addition, Papua New Guinea’s annual forestry-related emissions has been estimated to exceed 100 Mt CO2, a quarter of Australia’s total CO2 emissions.

Both countries could be motivated to reduce emissions from deforestation, provided they were compensated for the loss of economic opportunity through the sale of rights generated by the avoided emissions on an international market. Ultimately, the Review recommends that both Indonesia and Papua New Guinea be linked to Australia’s emissions trading scheme, with rights to trade any reduction in emissions below their national target levels to the Australian government or market participants.

Energy Transformation

Australia’s greenhouse gas emissions, by sector (2005 shown). Click to enlarge.

The story will unfold over the next 40 years,” Garnaut writes. Although Australians “have become accustomed to low and stable energy prices,” rising capital costs and price increases for coal and natural gas are projected to be much larger than the impact of the emissions trading scheme for some years. Australia is relatively energy-independent, and “support for research and development and for structural change in transmission infrastructure will allow Australia’s natural endowments in renewable energy” such as wind, solar, solar hot water, geothermal, and wave power “to be efficiently brought to account.”

Thermal efficiency and carbon dioxide production of current and  envisioned coal processing technologies. Click to enlarge.

The emissions trading scheme is also designed to engender transition to a “near-zero emissions energy sector” by 2050. However, given Australia’s economic reliance on coal exports, the country will be challenged “to develop technologies that allow coal combustion with zero, or near-zero, carbon dioxide emissions while maintaining its relative competitive position as a fuel.” Global coal prices have risen 180% over the past three years, and more than doubled in the past year alone, driven by demand in China and India as well as a constrained supply system. Coal-based electricity generation, both domestic and exported, is likely to become be politically untenable unless carbon capture and storage becomes commercially effective.

Projected costs per megawatt-hour, in Australian dollars, of both  conventional and clean coal processing technologies.

Australia’s vast uranium deposits add to the complexity; while the Australian Government is firmly against domestic nuclear power generation, its economy benefits from the export of uranium. The Review opines that “Australia would be best served by continuing to export its uranium, while focusing on low-emissions coal, gas and renewable options for domestic energy supply.

Anticipating criticism of his economic analysis, much of which has already begun, Garnaut writes in the introduction to the Review:

Many will disagree with elements or the whole of the conclusions of this Review. Many will disagree with the policy proposals that flow from the conclusions. They would prefer cheaper, more certain, later and less disruptive ways forward, or higher levels and urgency of Australian mitigation ambition. The Review would prefer cheaper, more certain, later and less disruptive ways forward, if any were available that were not associated with large risks of damage from climate change.

On Friday, Prime Minister Rudd said the Garnaut Review was “one of a number of inputs” under consideration by the Government.

Garnaut was Senior Economic Adviser to Australian Prime Minister Bob Hawke from 1983 to 1985, and Australian Ambassador to China from 1985 to 1988. In early 2007, he was directed by then-Opposition Leader Kevin Rudd, as well as the First Ministers of the eight states and territories of Australia, to produce the Review. Garnaut is also Chairman of Lihir Gold, Limited, a publicly traded gold mining company with operations in Papua New Guinea, West Africa and Australia.

Resources

  • [1] Ross Garnaut: , 4 July 2008

  • [2] Australian National university faculty for Ross Garnaut

  • [3] Murray-Darling Basin Commission: . 9 May 2008

  • [4] Murray-Darling Basin Commission: . (19 June 2008)

  • [5] The West Australian: . (9 May 2008)

  • [6] CSIRO: (February 2008)

  • [7] CSIRO/Bureau of Meteorology, Australia: (July 2008)

  • [8] Great Barrier Reef Marine Park Authority: Climate Change and the Great Barrier Reef: A Vulnerability Assessment. (2007)

  • [9] Robert McDonald, Herald Sun: . (17 June 2008)

  • [10] Delft Hydraulics: . (2006)

Comments

clett

I can see the Ossies quietly dumping megatons of iron-sulphate off-shore, regardless of whether other nations agree to it, in response to this.

John Taylor

Translation ...

We got a problem ...
The problem is not Global warming, it is our coal market, so lets work on "clean coal" and pretend there is such a thing.

OK ... business as usual, we done our bit.


Reality check ...
All fossil fuel use is a problem, and we have much better alternatives.

The Australian solar tower project sits waiting for funding, and cannot get a loan to build it despite the technology being sufficiently proven, and the costs being in line with other electrical production , and despite it using free sunlight for fuel.

Wind power fails to get a comment despite this being cost competitive with coal now.

Solar voltaic power fails to get a comment despite Australia having some of the best locations in the world for solar power generation.

Bottom line
A carbon trading scheme is nice and will do a little to help, but real change means developing new technologies and new industry to replace the old.
Develop alternative energy, then old fossil fuel power will no longer be competitive and CO2 will no longer be a problem.


macroshaft

It may be time for a 'real-political' check here with Australian coal exports racing past the 35% mark, heading for a mere 50% of the country's export income.

Any talk of fighting global warming is limited to playing to the gallery.

stas peterson

Garnaut is a true-believer. He wants higher taxes to encourage movement from fossil. But he guarantees that there are no alternatives to move to.

Nuclear electric generation is VERBOTTEN! per Garnaut. Wind and Sun even doubling or tripling are insignificant, and will stay so.

Everyone is encouraged to adopt Electric Cars. But they are an impossibility without Electricity, to power them. There is no way to generate the amounts of electricity needed for them.

Without electricity there is no way to convert from fossil for heating, ventilation, or air conditioning, or HVAC.

So it comes down to a reason for more Taxes. And a carbon market that doesn't accomplish anything, without any allowable alternatives. When circumscribed thusly, it does nothing, except to make money for the politically connected "rentiers". These rent-seekers like Al Gore, and his Carbon offset companies, that are allowed to create phony Carbon-credit money.

Garnaut will succeed only in getting his master, Mr. Ruud a return to private life.

arnold

Garnout is suggesting that as Australia is a major coal exporter, particularly into Asia, that a comparitively larger portion of carbon tax revenue be spent on clean coal - carbon sequestration.
All developed countries should spend their research moneys in the areas of expertise and relevance. If tangible Carbon sequestration results are not achieved before 2015, that should need another look.
He mentions US investing in transport, (particularly road), France in Nuclear etc.

That Australia has a chance to abandon ots obstrucionist approach that it has been pursuing for the last 12 years, that rapid progress has been made in the last 6 months.
He seeks to point a way through the "diabolical" challenges, but agrres that the obnly certainty is that if any of the developed countries frustrate or hinder the process, the future will likely be a worst case scenario.
He goes on to say that the academies of sciences in India and china are very active in pursuading the respective govts to be on board by 2013.

The media here are reporting the introduction of carbon taxes statrting at $20 per ton would increase fuel prices by 5 cents per liter.
back of the envelope suggests that equates to 2c to co2 tax and 3 cents to administration.
The newly in opposition liberal party wish to see 5c per liter deucted from the current fuel excise.
Many feel that $20 - 30 per ton would be a goood starting point but that the tax required to initiate the required chang is in the order of $200- per.
Local and international climate change refugees are another issue looming with Australia and New zealand yet to formalise arrangement for dealing with the rapidly approaching regional crisis.

The challenge taker

I saw how Australia suffered extreme drought in the national geographic sometime last month and while it is like that in there, here in my country, it is the typhoon that devastated the land. In other countries like the U.S., it's the hurricane and flood and in China it's the earthquake and flood too.

Are we really loosing the grip over the natural resources that used to protect us from these tragedies and could this be the time for nature to take what belongs to them? I hope not because if that is the case, I hope we are not too late about it.

import export business

As an aside, some interesting economic questions are raised by the fact that in some cases international production chains are managed almost entirely within a single multinational corporation (roughly 40 percent of U.S. merchandise trade is classified as intra-firm) and in others they are built through arm's-length transactions among unrelated firms. But the empirical evidence in both cases suggests that substantial productivity gains can often be achieved through the development of global supply chains.

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