1 June 2011
Australia's top climate change adviser has recommended that the nation begin with a fixed carbon price of about A$26 (US$27.80), increase it by 4% a year then shift to a floating price regime after three years. Professor Ross Garnaut, who handed his final report to the Australian Government yesterday, has called for compensation to be provided only to those on incomes up to $80,000. Pensioners would have their carbon tax compensation paid upfront and the tax-free threshold for low-income earners would rise almost $9000 to $25,000 under recommendations now being considered by the Gillard government.He said Australian households would "ultimately bear the full cost of a carbon price", while returns on capital were determined in international markets and any reduction by domestic policy measures would be temporary. Therefore, it made sense "on equity and efficiency perspectives for households to ultimately receive the vast majority of the carbon pricing revenue".
Government sources said last night the cut-off at which higher income earners would not receive carbon tax compensation was likely to be "well north" of $80,000.
Under his plan to distribute carbon tax revenue, Professor Garnaut recommended 55 per cent be given to households, about $6.3 billion under a $26-a-tonne carbon price that raised $11.5bn. Thirty-five per cent of compensation ($3.9bn) would be devoted to business assistance and 10 per cent ($1.5bn) to innovation, of which $750 million is already contained in the forward estimates.
Professor Garnaut also launched a stinging attack on business leaders who had criticised the government's approach to a carbon tax. They had put "short-sighted self-interest" ahead of the national interest.
Appearing at the National Press Club, he said there was an argument for Australia to lift its emissions reduction target above the bipartisan 5 per cent reduction on 2000 levels by 2020, and repeated his carbon price recommendation of between $20 and $30 a tonne.
He said the weighted average of developed countries would be an appropriate measure and in tables submitted with the report, he put this at between a 10 and 16 per cent reduction.
In a swipe at Mr Abbott's direct-action policy, Professor Garnaut said a market-based mechanism represented the lowest-cost way for the nation to cut emissions and a direct-action approach risked entrenching a political culture of sectional interests that would permeate other sectors of the economy.
He regretted that climate change policy remained a subject of political division in Australia and the US and said conservative governments in other countries were pushing ahead with emissions reductions targets.
Professor Garnaut also warned that the rise of a new round of international trade protectionism was almost inevitable unless governments adopted similar carbon trading regimes, and that Australia and New Zealand would lose the most from the breakdown of an international trading system.
Professor Garnaut delivered his report a day after the government received a Productivity Commission report on carbon pricing around the world.
Climate change minister Greg Combet told ABC's Lateline last night he had not yet read the report but understood the independents were eager to see its conclusions ahead of further negotiations in the multi-party climate change committee.
Source: The Australian. To read the full story, click here. To read the final Garnaut report, click here