Kevin Rudd
Kevin Rudd

Australian Prime Minister, Kevin Rudd, has announced a plan to reduce greenhouse gas emissions by as little as 5 percent by the year 2020 – far less than the 25 percent cut sought be environmentalists.

The White Paper released today says that Australia will cut its greenhouse gas emissions by 5% of 2000 levels by 2020 but could make a cut of up to 15% if other countries also sign up to stronger reductions. The commitment falls well below the 25 to 40% target for 2020 recommended by the United Nations for developed economies and the European Union’s commitment to cut emissions by 20% of 1990 levels by 2020 and to increase that to 30% if a global agreement is reached.

The White Paper also contains details of the governments emission trading scheme to start in 2010.

The price of carbon will be set by the market but is expected to be around $25 per tonne. The government will implement a price cap of $40 per tonne. Petrol will be effectively excluded from the scheme for the first three years, and agriculture for the first five years.

There will be significant compensation to soften the impact of the scheme on business, including an increase to the number of free permits offered to affected industries. The Government will deliver around 25% of carbon permits to polluters for free at the start of the scheme or 35% if agriculture emissions are included. It will also lower the threshold for businesses that qualify for a 60% reduction in the cost of carbon permits. Coal-fired power stations will receive handouts totaling $3.9 billion over five years while “EITEs” (emissions intensive trade exposed) industries will receive annual assistance of at least $2.9 billion in its first year, possibly rising to more than $6 billion by 2020.

The introduction of emissions trading is expected to cause a spike in inflation of 1.1%. Assistance will be provided to various groups including pensioners, carers, the unemployed and seniors – all of whom will receive grants of around $300. Low and middle income families assisted by increases in the family tax benefit and an increase in tax offsets.

Government revenue from auctioning permits will flow into a Climate Change Action Fund. The estimated $1.4 billion will fund three programs designed to help business and community groups.

  • A small business capital allowance will provide assistance to invest in energy-efficient equipment such as improved insulation and more efficient lighting, heating, motors and drives, and refrigeration equipment.
  • A community organisation capital allowance will provide community groups with assistance for similar equipment.
  • And an innovation in climate change program will provide competitive grants funding to contribute to the cost of low-emission technology, production methods and other products or projects to help the Government meet its emission targets.

In a separate announcement, the Government has said that it will bring forward its spending of $500 million on solar and other renewable energy. The expenditure will now occur within the next 18 months rather than spread over six years as previously planned.