Australia Aims to Cut Carbon Emissions 5-15% by 2020

By Gemma Daley and Angela Macdonald-Smith

Dec. 15 (Bloomberg) -- Australia will aim to reduce carbon emissions by between five and 15 percent from 2000 levels by 2020 to tackle global warming and protect its A$1 trillion ($662 billion) economy, Climate Change Minister Penny Wong said.

The reduction would help Australia meet its goal of cutting emissions 60 percent by 2050, Wong said. The plan would trim economic growth by 0.1 percentage point a year between 2010 and 2050, assuming an initial price of A$25 a metric ton of carbon when emissions trading starts in 2010.

“These targets are hard for Australia,” Wong told reporters in Canberra. The objectives are “underpinned by the most comprehensive and robust emissions trading system anywhere in the world.”

The 5-15 percent reduction compares with a European Union target to cut greenhouse gases by a fifth in 2020 from 1990 levels. The U.S., Canada and Japan, at United Nations-led climate talks last week in Poznan, Poland, rebuffed demands by developing countries for pledges to cut greenhouse gas emissions.

The government will provide A$3.9 billion of free permits to coal-fired power generators over five years starting 2010 to compensate them for the added expense of introducing a cost on carbon. That assistance will be reviewed after five years.

LNG, Smelters

It will also provide permits to emissions-intensive trade- exposed industry at two rates. Activities including aluminum smelting, iron and steel manufacturing are likely to get 90 percent of their permits free. Liquefied natural gas producers and petroleum and alumina refiners will probably be among those gaining 60 percent of their permits free.

The government will release a guide on eligibility for the two rates at the start of 2009.

Prime Minister Kevin Rudd, 51, ratified the Kyoto Protocol on his first day in office in November last year. The G-8 countries on July 8 pledged to reduce output of heat-trapping pollution by at least 50 percent by 2050.

“To delay any further would be reckless for our economy and our environment,” Rudd told the National Press Club in Canberra after the white paper was release. A climate-change protester was removed from the room after she heckled Rudd.

2009 Climate Deal

One hundred and eight-nine nations agreed on Dec. 13 to negotiate a climate deal through 2009, overseen by the United Nations. World carbon dioxide emissions from energy use rose 2.8 percent last year as coal consumption outpaced crude oil and cleaner-burning natural gas, BP Plc said.

Australia’s emissions from fuel combustion rose 31 percent in the decade through 2000 and jumped 45 percent in the 15 years through 2005, International Energy Agency data show.

The nation’s annual economic growth rate will be little affected in the 40 years following the start of an emissions trading system, the Treasury Department said in October.

Gross domestic product per capita will grow at an average annual rate of 1.2 percent to 1.3 percent between 2010 and 2050 as Australia moves to reduce greenhouse gas emissions, it said. By comparison, growth will be 1.4 percent if no action is taken.

Australia’s proposed cap-and-trade system is similar to that used in the European Union.

Companies may leave Australia because of increased costs under the carbon plan, the nation’s Business Council said on Aug. 21. BHP Billiton Ltd. Chairman Don Argus in September urged the government to rethink the cap-and-trade system and consider a carbon tax instead.

The plan includes A$11.5 billion in assistance for families and businesses in 2010-11. That will help households, especially pensioners and those on low incomes, cope with the system.

To contact the reporters on this story: Gemma Daley in Canberra at gdaley@bloomberg.netAngela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net