Garnaut recommends 25% emissions cut , but only if global climate agreement is reached

Australia should cut its greenhouse emissions by 25% by 2020 and up to 90% by 2050 – but only if other countries do the same.

That was the central message from the final version of the Rudd government’s report into climate change, compiled by Professor Ross Garnaut.

He argues that only a global agreement at next year’s World Business Summit on Climate Change in Copenhagen will solve the climate change crisis.

If an agreement is not reached, Garnaut says Australia should seek to only cut its emissions by 10% by 2020.

“The first essential step at Copenhagen is a comprehensive global agreement that adds up to the environmental objective to which it is directed,” the report says.

“Australia will matter to the international community’s fateful decision.”

Like Garnaut’s interim report that was released in July, the full report recommends the introduction of an emissions trading scheme to begin in 2010.

Garnaut says the cost of managing such a scheme would be more than 0.2% of annual economic growth to 2010, although the report does not specify the impact on small and medium businesses.

While nearly all SMEs will be exempt from participation in the trading scheme, the report indicates the general price of electricity, gas and petrol is likely to rise.

But Peter Burn, head of environmental policy at the Australian Industry Group, says businesses will be ready to cope with the cost.

“I don’t think he’s over-reaching. I think that [Garnaut] is doing exactly what he’s told to do,” Burn says.

“It’s pretty clear that small and medium businesses will be impacted largely through electricity prices. There will be cost pressures on transport, plastics, chemicals, paper, and cardboard, anything that they use as inputs into their production.”

“But the key thing is if competitors are experiencing it too, at least it’s a level playing field so you’re not trying to adjust by yourself. This will have a big impact, and I think that businesses will have to change the way they look at management.”

“That’s the beauty of this approach – it does harness market forces and puts the decision making in the hands of the people who are in the best position to change and invest in new processes.”

Environment Business Australia CEO Fiona Wain also stands by the report, saying an ETS could actually encourage innovation.

“There is commercial ‘upside’ available in new projects and practices that deliver goods and services but also reduce greenhouse gas emissions across the economy,” she says.

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• Garnaut’s scary report a disappointment: Kohler