By Ryneisha Bollard

A skyline polluted with carbon emissions. Image: Ian Britton

Following the Australian government’s decision to delay an Emissions Trading Scheme (ETS) till 2012, the U.S. government has released their own ETS draft along with other plans to cut greenhouse gas emissions under a new climate bill.

Stephen Howes, Director of International and Development Economics at the ANU’s Crawford School of Economics and Government, spoke to the Wire about what this means for Australia.

Stephen Howes: There is a strong emphasis in this bill on providing rebates to consumers. So consumers will be compensated for those price increases just as they would have been under the Australian scheme. So it’s similar to the Australian scheme it just has even a stronger focus on compensating consumers and that makes a lot of sense

So the idea is you’re not compensated on the amount you individually use because if that was the basis then you would have no incentive to be more efficient with your energy use.

But you’re given compensation on the basis of, you know, how much the average household or a household of your type would be using. So the consumer is shielded from that price impact, but again the incentive is there for all consumers to use electricity more efficiently, and for producers to switch from high emissions to low emissions technology.

Ryneisha Bollard: The climate legislation, apart from the ETS, does include things like renewable energy?

Stephen Howes: It has a lot of provisions relating to different technologies and most of them relate to government investments, so governments will invest in carbon capture and sequestration, you know so-called clean coal, there are financial incentives to support the nuclear industry and I assume there are financial incentives for the renewable energy sector. There isn’t a separate renewable energy standard as we have in Australia now.

Ryneisha Bollard: Kevin Rudd has put part of the blame on the delay for and ETS here on the lack of progress on climate change internationally. Do you think he can still make this argument given that the US is developing an ETS of its own?

Stephen Howes: The Australian position has always been that we are going to cut our emissions by at least five percent, no matter what other countries do, that has been our position. And then envision we would do more if other countries do more.

The government has always said that five percent sounds like a small number, but its actually not going to be easy to achieve.

So the real question about the Australian Government position I think goes beyond what’s happening in the US, its about how we’re going to achieve that five percent and we really don’t have policies in place to achieve that. In terms of the significance of this piece of legislation, its certainly a step forward for the US, I think it’s a big step forward, but it is only a step, so its not at all guaranteed that the senate will pass this bill.

There has been attempts in the past, and while the numbers have gone up they haven’t gone close to passing it yet. If it were passed, then if the senate and the house were able to reconcile their two bills and you actually got an act to the president, I mean that would transform not just the outlook for action in Australia but the whole global outlook.

So it’s a very significant voyage America’s engaged on, this Bill takes them forward, but does it take them all the way?

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Ryneisha Bollard: How effective do you think an emissions trading scheme is on reducing carbon emissions?

Stephen Howes: Well I think everyone would agree that unless you have a price on carbon, you wont get an emissions reduction and an emissions trading scheme is just one way to get a price on carbon. So I think a price on carbon is essential to get any reduction on emissions.

It’s not the only instrument you need, but it is an essential part of the policy mix and where it’s been tried, which is in the European Union.

You know, for all the problems that the European Union’s had, they have seen that the emissions trading scheme and the carbon prices its introduced has seen a reduction in emissions.

It’s not just a theoretical proposition it has a track record as well.

Ryneisha Bollard: You did mention that, if they do get it past it would have a significant impact on progress on a global climate deal, could you just elaborate with that? I mean what kind of immediate actions after that do you think we’d see. Do you think we’d see? Do you think we’d see more countries taking on climate legislation including an emissions trading scheme?

Stephen Howes: Yeah, you know you can look at it historically and the fact that we had the Kyoto protocol which the US signed, but then never ratified, and that failure weakened that protocol. And so right from then, I think the absence of US leadership more than anything else has hurt the global climate change efforts.

So just symbolically for the US to move forward in this would have a galvanizing effect. First of all in other developed countries such as Australia and Japan who are considering carbon price.

But then, equally importantly, or more importantly, in the developing countries, you know now as a result of Copenhagen countries like China have got quite ambitious targets to contain their emissions. And they’re now thinking about, “Well what policies do I put in place to contain those?” But you can hard expect China to put in place a price on carbon, you know unless the United States does.

China might end up doing that anyway but there’s certainly a high probability of China doing it, and it would be a higher carbon price if the US goes and does it.

So I think as well as a much better atmosphere for the international negotiations you’d see an effect on developing policies in both the developed and the industrialising countries.

Ryneisha Bollard is a reporter from the Wire.