But there’s another point that doesn’t seem to have permeated into Insiders‘ non-random sample of the commentariat (with the exception of Brian Toohey). If you look at the press release, it seems that a 10% cut in absolute emissions by 2020 (a 30% cut per head of population) as part of a global agreement, will cost us less than a 5% cut (25% per capita) without one. What’s going on?

To understand this, you have to understand the nature of the targets Garnaut is proposing. The Australian government would issue permits in quantities that declined gradually to the target level. But that doesn’t necessarily mean that emissions will physically emanate from Australia in those quantities. Why? Because of international trading in permits.

It’s not yet clear (to me at least) exactly how such international trading would work – whether private firms would trade directly on the global permit market, or it would be handled on a government-to-government basis. In the end, it doesn’t really matter; the net result of a global agreement would be that permits would be worth essentially the same around the world, and would be readily bought and sold as advantageous. If it turns out that emissions reductions in Australia are easy and cheap, we’d end up making greater physical reductions than 10% by 2020 here, and sell the surplus permits on the international market. If it turned out to be easier and cheaper to make cuts elsewhere – for instance, not logging Indonesian forests, or building hydro-powered aluminium smelters in Tajikistan, or improving appliance efficiency standards in the United States – we’d buy additional permits from those sources.

In a situation without a global agreement, opportunities for international trade will be much more limited. Of particular concern is an inability to trade with developing countries, because a lot of the opportunities for cheap mitigation are physically located there. That’s why the modelling indicates that the costs would be higher, and achieve less mitigation, for Australia in the absence of a global agreement.

Amongst the other consequences for such a global permit market is the possibility that Australia will do very little, and simply buy extra permits as required on the global permit market. But will you feel comfortable paying other people to clean up their mess, rather than cleaning up our own, even if that’s the economically rational thing to do?

The starting point for Garnaut – at least, with the scenarios he hopes will happen – is what level of greenhouse gases we are aiming for in an international agreement. His conclusion, expressed at length in the report, is, essentially, the lower the better. That’s something that shouldn’t come as any shock to anyone that’s been reading LP (particularly some of Brian’s excellent posts on the matter), but it’s good to hear it from Garnaut. A world in which greenhouse gas levels are stabilized at 550ppm is likely to be a heck of a lot better than a world without mitigation, but the consequences are at best nasty and still potentially catastrophic. “450 world”, as Garnaut calls it, reduces both the certain damage and the risks of catastrophe some more. But, as he puts it, “A similar case can be made for the superiority of 400 ppm overshooting over 450 ppm overshooting, as for 450 ppm over 550 ppm.” But a global agreement on 400ppm is a long, long, way off in Garnaut’s view. He’s crunched the numbers on two “global agreement” scenarios, one for a 550ppm target and one for a 450ppm target. Given that, what’s Australia’s share?

This comes back to material discussed at length in the earlier Draft Report. Essentially, Garnaut’s view is that the only feasible approach is (in principle) give each country an emissions allocation that reduces over time; countries than then trade allocations with each other if they so choose. The allocations are awarded under a “contraction and convergence model” – countries start out with a per-capita allocation based on their current emissions. Gradually, the per-capita allocation converges such that at some future time – Garnaut picks 2050 – all countries are given allocations in direct proportion to their populations. There are some wrinkles, but that’s the basic idea. Given those assumptions and a pile of demographic data, out drops the 2020 and 2050 targets for either “550 world” or “450 world”.

The 10% reduction by 2020 suggestion that’s been characterised as “Garnaut’s recommendation” is what Australia would need to do, given an international agreement on “550 world”, using the per-capita contraction and convergence out to 2050.

So why did Garnaut recommend “550 world” targets, when he clearly thinks that “450 world”, or even lower, is the way to go? Simple. He doesn’t think “450 world” is politically achievable. In his own words,

“Achieving the emissions limits set by the 550 scenario over the next decade would be a major win, reflecting unprecedented levels of global cooperation. It might just be feasible. It is not realistic to expect that the international community would, in the few years immediately ahead, agree on the even tighter emissions containments and reductions consistent with a 450 world.”

The report goes on to explain that – essentially whatever the developed world does, “450 world” -is not achievable without cuts in the developing world well beyond what’s on the agenda at the moment. In his view, the way way to getting to 450ppm is…

The most important first step towards stabilisation at 450 ppm CO2-e is to quickly put in place an effective international agreement directed at 550 ppm, to put in place the national and international carbon pricing and support for research, development and commercialisation of low-emissions technologies that can lower the costs of mitigation, and to begin the process of reduction of emissions.

Australia should, in his view, continue to push as hard as it can for 450ppm (and lower targets) in future international negotiations on climate change.

There are a couple of other scenarios investigated in the report, for a world in which there is no international agreement on climate change. While there’s not time to discuss these fully in this post, the really short version is that even a bad global agreement is likely to be better for Australia than no agreement; the unilateral action scenarios suggest that it’ll cost us similar amounts and achieve a lot less without a global agreement. Why? Because (and it shouldn’t come as any surprise that an economist like Garnaut would take this view, modelling to back it up or not) global trade in allocations will achieve emissions reductions at the cheapest location, and much of the time that won’t be in Australia.

In any case, there’s Garnaut’s targets in a nutshell. What are some of the potential criticisms? One has already come up in comments on the previous thread: the rate of convergence. Giving Australia 40 years to bring its per capita emissions in line with, say, India, might well be viewed as a pretty big free kick to a disproportionate polluter.

Another argument is that the whole idea of contraction and convergence – and per-capita emissions allowances, isn’t a good one. I must admit that the idea that somebody immigrating to Australia from a low-emissions country essentially gets a bonus of free emissions permits – which will be quite valuable as time goes on – is a worry.

Finally, you might also quibble with Garnaut’s view of the global politics of how best to achieve the long-term goals of 450ppm or lower. Australia’s case for the world to adopt 450ppm or lower might be stronger if we voluntarily undertook additional emissions reduction commensurate with such a target – which, I think, is what environmental groups are arguing.

Anyway, as best I can understand, that’s where Garnaut is coming from.

Ross Garnaut will be at the National Press Club in Canberra today at 12.30pm to release his next report – on Targets and Trajectories.

There’s been a fair degree of speculation around that he will recommend a low target. Bernard Keane wrote in Crikey the other day:

Ross Garnaut’s Supplementary Draft Report to be released on Friday will propose a carbon reduction trajectory based on a 0-15% reduction on 2000 emission levels by 2020, according to sources close to the review. The Report is based on extensive modelling by Treasury and Garnaut’s review team, which has been delayed on several occasions.

Senator Christine Milne at GreensBlog makes the argument that the policy shouldn’t just be seen through the “economic reform” frame, which is squarely where the government has attempted to position it (for a range of reasons – including a previous round of responses to arguments that it lacks a “narrative”). It needs to be recalled that big business is not the only interlocutor in the policy debate, and it was surely significant that a research report from Crosby/Textor of all people released this week suggested that the public wanted to see business make sacrifices to address an urgent issue.

Milne:

What this means for Professor Garnaut, and the Rudd Government, is that any policy framework that seeks to address climate change must actually seek to prevent runaway climate change. We must seek to limit warming by as much and as fast as we still can or else the warming we have already locked in may swiftly overtake us. A policy which seeks to make incremental change, which seeks to cut emissions at the edges, without a plan to completely decarbonise our economy, is not a climate change policy. It may be an economic policy. It may be an election policy. But it is not a policy that seeks to address climate change.