Chief climate change adviser, Professor Ross Garnaut, has today released his final report on climate policy. Along with the Productivity Commission’s report on international carbon pricing, this Garnaut report represents a key input into the considerations of the Multi-Party Climate Change Committee (MPCCC).

The MPCCC has previously outlined a scheme including a three to five-year fixed carbon price followed by an emissions trading scheme (ETS) with a floating price. The MPCCC is now entering the final stages of negotiations and is due to release policy details in July.

Final Garnaut Report

This final report updates the Garnaut Climate Change Review published in 2008, and concludes a series of update papers released earlier this year. The update papers addressed a wide range of topics including:

  • the costs and benefits of climate change action;
  • global action on climate change;
  • global emissions trends;
  • rural land use;
  • the science of climate change;
  • carbon pricing and reducing Australia's emissions;
  • low emissions technology and innovation; and
  • transforming the electricity sector.

The final report examines carbon measures internationally, considers governance issues and proposes sharing initial scheme revenue between households (55%), industry (35%) and R&D into renewable energy (10%).

Scheme Governance

Perhaps in light of the last three years of escalating policy debate, Professor Garnaut has separated politicians and future carbon policy considerations as much as possible by recommending three independent governance bodies to administer the proposed carbon price. He calls for:

  • a "carbon bank'' to administer the tax and the subsequent emissions trading scheme (ETS);
  • an independent agency to monitor industry assistance, which could be part of the existing Productivity Commission; and
  • an independent committee, based on Britain's Committee on Climate Change, to advise on new emissions targets, consider expansions to scheme coverage and to determine the appropriate time to switch from a tax to an ETS.

Professor Garnaut highlights the importance of proper regulation, particularly in light of recent European ETS scandals, including tax fraud and the re-sale of used carbon credits. Good scheme governance would be key to the success of Australia's carbon policy, Garnaut writes.

Compensation arrangements

Professor Garnaut suggests a starting carbon price of $26 per tonne which is estimated to bring in around $11.5 billion in 2012/13. In determining how this revenue would be shared, he argues that during the initial carbon tax phase, assistance to emissions intensive, trade exposed industries (EITEI) should be based on the 2009 Carbon Pollution Reduction Scheme arrangements, after removing the “global financial crisis buffer”. Following that time, EITEI assistance arrangements should be considered by an independent agency that monitors global carbon pricing to determine whether an economic justification for EITEI assistance remains.

The Productivity Commission’s report on international carbon pricing is due to be submitted to Government on 31 May and is expected to be made public in the following weeks. The Federal Government has committed to releasing details of its carbon policy by July 1.