The decision by Japan, Russia and Canada at the weekend to abandon the Kyoto Protocol all but eliminates the prospects for an early and comprehensive global agreement to reduce carbon emissions.

At the G8 meeting the United States also reiterated its long-standing position that it would not join a Kyoto-style binding agreement.

The moves leave the European Union and Australia as the only major developed nations committed to an extension of the Kyoto Protocol after the first commitment period expires at the end of 2012. That means Australia will face binding rules under a flawed agreement covering only 15 per cent of global emissions.

At the G8 meeting, Russia, Japan and Canada made it clear they would not make new commitments under the Kyoto Protocol. These nations argued that a Kyoto Protocol style agreement did not require developing countries like China, India and other developing nations to make mandatory emission cuts.

Developing nations’ emissions are continuing to grow exponentially. China’s Copenhagen offer would see its emissions rise by 496 per cent by 2020 (on 1990 levels), while India’s offer will allow its emissions to grow by 350 per cent by 2020 (on 1990 levels).

Confirmation of the likely demise of the Kyoto Protocol means that Australia will be introducing a new $11 billion carbon tax on the economy in the absence of a binding global agreement to reduce emissions.

Going it alone on a carbon tax will simply serve to undermine the economy sacrificing jobs, our international competitiveness and standard of living.

Modelling prepared for State and Territory Governments shows that a carbon pricing scheme similar to the policy under consideration would reduce forecast employment by 126,000 by 2020.

An Australian carbon pricing scheme will be effective only as part of an integrated policy approach, including:

  • a global agreement that includes concerted and comparable action by all major emitters;
  • a measured transition to carbon pricing, with cost burdens comparable with those facing our competitors, and
  • the development and deployment of low emissions technologies.

In the absence of a binding international agreement on greenhouse gas emission reductions, there should be a full
allocation of permits to trade exposed firms.

Given the slow progress in global negotiations and to provide clarity and certainty for investors, the initial allocation should be fixed for 5 years, with an independent review conducted thereafter to assess progress made by other nations towards binding emission reduction commitments.

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