Australian Adviser Urges Broad Carbon-Trading Plan

By RACHEL PANNETTJuly 7, 2008

CANBERRA, Australia -- Australia's climate-change adviser issued a draft report recommending the government adopt a tough, broad-based emissions-trading plan that includes vulnerable sectors such as transportation and energy-intensive companies from the outset.
Australia contributes only around 1.5% of global emissions but tops the U.S. on a per-person basis because of its heavy reliance on hydrocarbons for generating power.
Trade-exposed and energy-intensive industries look like the biggest losers under the preferred approach of the adviser, Ross Garnaut. The report recommends compensation for industry be capped at 30% of all revenue generated through the auction of carbon permits.
Under an emissions-trading plan, countries cap the amount of carbon dioxide that companies can produce. If they exceed this cap, they must buy so-called carbon permits from companies that have surplus permits.
Equity analysts have warned that emissions trading may derail the country's resource-based economic boom by pulling the plug on the supply of cheap fossil fuel-based energy that has allowed industry to prosper in recent years.
Mr. Garnaut said Australia has a "larger interest in a strong mitigation outcome" on greenhouse emissions than other developed countries, because it is a hot, dry country, and even small variations in climate are damaging.
"The structure of our economy suggests that our terms of trade would be damaged more by the effects of climate change than would those of any other developed country," he said.