Fuel increase of 17 cents under Garnaut model

Garnaut modelling may result in fuel price increase of 5.8 cents a litre by 2010 and 17.4 cents by 2020

By Brad Gardner

An emissions trading scheme may cost trucking operators more than 17 cents per litre in fuel by 2020 under one of economist Ross Garnaut’s abatement strategies.

In releasing his supplementary report at the National Press Club, Garnaut listed four different models for the Rudd Government to choose from, ranging from the ‘soon-as-possible’ scenario to the first, second and third best outcomes.

The most urgent scenario calls for an international agreement on limiting emissions to no more than 450 parts per million of equivalent carbon dioxide, which includes methane and nitrous oxide.

If accepted, this will result in a carbon permit price of $60 by 2020, Garnaut says.

The economist recommends a $20 charge for carbon permits in 2010, which will rise in price each year by four percent plus whatever percentage increase there is in the consumer price index.

The Freight Transport and Climate Change: exposures and opportunities report, released last month, says a $60 permit will result in an extra 17.4 cents per litre in fuel.

The same report predicts a carbon price of $20 per tonne will push up fuel by an extra 5.8 cents per litre.

However, Garnaut says the international goal of 450ppm "is not immediately feasible" because emissions are already 455 parts per million.

He suggested Australia aim to limit emissions to 550 parts per million in the meantime.

"The path to an ambitious objective of 450ppm, or lower, is through early progress on 550ppm," Garnaut says.

During his speech, the Rudd Government’s climate change adviser told the press club the 550ppm approach equates to a 10 percent reduction in emissions by 2020 and an 80 percent reduction by 2050 based on 2000 levels.

However, he says Australia should reduce its reduction scheme to five percent by 2020 if it is unable to reach an international agreement on averting the impact of climate change.

This, Garnaut says, is in line with the Government’s emissions target of 60 percent by 2050.

The report, which is based on Garnaut’s and Treasury’s modelling, predicts the cost of climate change abatement strategies will be 1.1 percent of GDP under the 550pm scenario and 1.6 percent under the 450ppm scenario.

He says the cost of allowing climate change to continue will have a devastative impact on Australia as well as the international community.

"These increases would not lead to a marginal reduction in human welfare but a catastrophic outcome for human civilisation and most ecosystems," Garnaut says.

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