What the world can learn from Australia’s climate policy

Australians might be surprised at the level of international interest in Australian climate policy these days. For foreign policy makers the issues are both practical and political: can Australia achieve its stated commitment to reduce greenhouse gas emissions by 5-25 per cent from 2000 levels by 2020? Will it? Can it reach the top of this range?  And what is enough to consider that Australia is doing its fair share?

Why does this matter globally?

Australia is pursuing a relatively advanced national climate policy which has drawn attention around the world. In addition, the world expects Australia, as a significant emitter (among the top 15 on both an aggregate and per capita basis), to pull its weight in the effort to prevent dangerous climate change. Australia, likewise, needs the rest of the world to do the same. Indeed, every country in the world is in this position.

In this context, domestic climate policy needs to give a country flexibility to adapt to global developments, while simultaneously giving the rest of the world confidence that the country can follow through with its commitments. Domestic climate policy with international credibility can encourage global progress.

Can Australia achieve its targets?

While not perfect, Australia’s carbon pricing mechanism, soon to transition from a fixed fee per tonne to an emissions trading scheme (ETS), has features that provide both flexibility and credibility. When the ETS starts, Australia will set annual limits on its emissions in a rolling five-year outlook. This prevents the country from being locked into limits that may turn out to be too weak. The ETS is linked to the EU ETS, and, to a lesser extent, the Kyoto Clean Development Mechanism. These links enable Australia’s scheme to reflect international developments. The legislated caps provide greater certainty that Australia is able to achieve whatever target it sets.

It’s worth noting that others in the region are also establishing cap-and-trade schemes: South Korea and China are both working on their own systems, and China in particular is keen to learn from Australia’s experience.

Will Australia achieve its targets?

Analysis from WRI’s Open Climate Network shows that with its existing policies Australia can reach the top of its target range. Whether the fixed carbon price switches to a cap-and-trade scheme in 2014 or 2015 will not make a difference to Australia’s ability to achieve its targets.

That said, a weakness of the existing policy framework is that it raises the possibility that Australia will rely heavily on international permits, and put insufficient effort into lowering the carbon intensity of its domestic economy. This might appear not to matter in the short term, but over the coming decades, deeper carbon cuts need to be made and international permit prices could rise significantly. This presents the risk that investments made on the basis of lower carbon prices become uneconomic.

Is it enough?

Along with 190 other countries, Australia has committed to keeping global warming to less than two degrees Celsius, a level that gives the world a good chance – though not a guarantee – of avoiding the worst impacts of climate change.  The connection between an individual country’s 2020 target and the global goal is not particularly obvious: allocating each country’s share of the global task demands a balance of science, economics, politics and ethics. What is clear, however, is that for a country that is highly vulnerable to climate impacts – as Australia is – the wisest strategy is to select a target that encourages other countries to be sufficiently ambitious to achieve the goal and minimizes the costs of achieving it.

Think of the 2020 target as a signpost on the road to 2050 – it’s a signal for other nations but also an opportunity for Australia to determine how it is tracking against other countries and against its own emissions history and commitments. Too little effort by 2020 increases the cost and challenge in following years, and could also suggest to the world that you’re not serious about pulling your weight. In contrast, showing leadership has benefits – though the upper bound of Australia’s target is pretty similar to other advanced economies, so there’s little risk of leading the pack. The table below shows the 2020 targets of the other countries we’ve assessed through the Open Climate Network. (Because countries use different starting years as their baselines, we’ve translated them to be consistent with Australia’s 2000 baseline.)

*Targets are inclusive of land use, land use change and forestry (LULUCF). The UK emission target is both inclusive and exclusive of LULUCF. High EU targets taken from WRI, Interactive Chart: Analyzing Comparability of Annex I Emission Reduction Pledges.

Over the next year or so countries will begin proposing their targets for the post-2020 period. These will be reviewed by the international community, and should form the basis of a global agreement covering all major emitters in 2015. Australia’s comprehensive climate legislation has the potential to inspire other countries—such as the United States, with its recent national climate plan—that are just beginning to commit to ambitious mitigation action. Given that in these negotiations the aim is not to minimize one’s own obligation but to maximize the commitments of others, Australia’s target range and the ability to achieve it puts the country in an excellent position to be a constructive player. If Australia is serious about leveraging global action it should make the most of that opportunity.

Jennifer Morgan is director of the Climate and Energy Program at the World Resources Institute