Market Turmoil Mustn't Curb Carbon Work, Garnaut Says

By Angela Macdonald-Smith

Oct. 3 (Bloomberg) -- The world needs to push forward on targets to reduce greenhouse gas emissions even as turmoil grips financial markets, said Ross Garnaut, the Australian government's climate-change adviser.

Global warming is a long-term problem that will remain after the current economic downturn is past, Garnaut said today in an address in Sydney. Nations need to be careful not be to ``knocked off course'' by ``short-term'' economic issues.

The U.S. House of Representatives is set to vote later today on a $700 billion financial-rescue package to help boost the flagging economy. Faltering growth and rising unemployment in the U.S. are coinciding with efforts to reach a global agreement on how to limit carbon dioxide output. Almost 200 countries have just over a year before a pact must be signed in Copenhagen to replace the Kyoto Protocol.

``It would be a really serious mistake if we saw the financial crisis as a reason for going slow,'' Garnaut said. ``If we were negotiating an international agreement this week, then it would be a major problem, but financial crises are very damaging, hugely damaging, but they pass.''

The position adopted by the U.S. leadership after next month's elections will be ``tremendously important'' for the direction the world takes on climate change, Garnaut said.

`More Difficult'

``One question is, will the U.S. be preoccupied by its financial sector broaches?'' he said. ``I think it need not knock U.S. policy off course.''

The financial turmoil is making talks on a new climate accord ``more difficult,'' German Foreign Minister Frank-Walter Steinmeier said in Berlin on Sept. 30.

The credit crunch will also make it more difficult for the Australian government to introduce its planned carbon trading system, due to start in 2010, said Gary Cox, manager of environmental derivatives at the Australian unit of broker Newedge Group.

``The question of the environment seems to pale into insignificance when economic survival is at stake,'' Sydney-based Cox said.

Industry, which has already argued the plan will be expensive, now faces a financial crisis, he said. ``Companies will be saying, `This is not a good time to be starting emissions trading'.''

`Fair Share'

Earlier this week, Garnaut said that Australia's $1 trillion economy can manage cutting carbon emissions 10 percent by 2020, or potentially as much as 25 percent, as part of a global agreement. The targets would cost the economy between 0.1 and 0.2 percent of annual economic growth to 2020, he said.

The 10 percent reduction would be Australia's ``fair share'' of a global agreement to stabilize CO2 concentrations in the atmosphere to 550 parts per million, while the 25 percent target would be its share of a more ambitious agreement for 450 parts per million concentrations.

The 450 parts per million target leaves about a 50 percent chance of limiting the global mean temperature increase to 2 degrees Celsius above pre-industrial levels, according to Garnaut's report released Sept. 30.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net