PM thaws on carbon trading

Sydney Morning Herald
Tuesday 14/11/2006 Page: 1
Wendy Frew: Environment Reporter

Business calls for climate action, Nuclear option firms

JOHN HOWARD has yielded to pressure to consider a global carbon trading scheme, while business leaders say they are ready to take action against climate change.

In a carefully co-ordinated announcement last night, the Prime Minister told members of the Business Council of Australia that the Government would establish a working group with business to examine a carbon trading scheme.

His remarks followed a declaration by the council's president, Michael Chaney, that a market based, global agreement was the only valid, long-term solution to climate change.

"It has to be global because climate does not acknowledge national boundaries and because all nations must participate to minimise the impact on individual economies," Mr Chaney told a council dinner in Sydney.

"It has to be market-driven because only a clear and unambiguous link between carbon emissions and market value can provide both business and the community with a consistent and long-term motivation to reduce emissions." The Government has been reluctant to move on setting a price on greenhouse gas pollutants such as carbon, arguing the inevitable increase in the cost of energy would erode Australia's competitive advantage. Australia generates some of the world's cheapest - but dirtiest - electricity from its large reserves of black coal.

A price on carbon would make coal-fired power more expensive and renewable energy from wind turbines and solar panels more competitive. It would have the same effect on nuclear power, currently one of the most expensive ways of generating electricity.

Mr Howard continued to push nuclear power as an option yesterday, despite widespread public concern about the dangers and disposing of radioactive waste. The Prime Minister sees it as a solution to climate change because, once in operation, nuclear reactors generate relatively little greenhouse gas.

The Treasurer, Peter Costello, is also warming to carbon trading and yesterday he said Australia would have to be part of a global trading scheme. `Australia won't be able to stand outside a global agreement. What is wrong with the current situation is ... you don't have agreement from large economies such as China and India. If it is part of a comprehensive carbon-trading agreement, then Australia should be in there working to make sure that that is the best one available and one that is suited to Australians." A Lowy institute poll in October found 68 per cent of Australians believed climate change was a "critical threat" needing immediate government action, even if it involved significant costs.

Mr Chaney said Australia should take advantage of the strong relationships it had built with the world's biggest greenhouse gas polluters, the US, China and India, to set guiding principals for a global agreement.

In the face of international condemnation for refusing to ratify the Kyoto Protocol, Australia and the US last year formed the Asia Pacific Clean Development and Climate Partnership with China, India, South Korea and Japan, to develop technology to cut emissions from traditional forms of energy such as coal and gas.

Some business council members, such as Westpac and Insurance Australia Group, have long lobbied for carbon trading but companies involved in energy intensive industries, such as aluminium and cement, have resisted, fearing the costs.

The Kyoto Protocol set country by country emission reduction targets and the groundwork for a carbon trading scheme. Those initiatives have already generated billions of dollars worth of trade in investment in carbon offsets - such as the planting of trees - although most countries have failed to meet their emission targets.