Tough times ‘make carbon targets easier’

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THERE is no need to delay the introduction of Australia’s emissions trading scheme according to a highly respected carbon analyst, who says the global economic downturn will make it easier for Australia to meet its targets.

Mark Lewis, Deutsche Bank’s international head of commodities research, whose views are often sought by the Government and Opposition Leader Malcolm Turnbull, believes Australia should stick to its 2010 start date. He said the drop off in demand for resources would curb Australia’s emissions.

His comments came as Mr Turnbull toughened his stance on Australia’s Carbon Pollution Reduction Scheme, saying he was not convinced that a starting date before 2012 was “practical, responsible or necessary”.

Speaking to BusinessDay during his trip to Australia where he met policy leaders in Canberra, Mr Lewis said he “definitely wouldn’t buy that argument”.

“There is a positive way of looking at the financial crisis and a negative way. The negative way is to say this will push discussions about climate change down the pecking order of major issues on a geopolitical scale because global leaders are so concerned about the economic outlook,” he said.

“There is never an easy time to bring in a trading scheme but I definitely wouldn’t buy that argument that you definitely can’t do it in a recession, because it becomes easier to achieve the target. There is no need for delay.”

Australia is yet to benefit from the drop in demand, with the latest figures from the Climate Group recording a jump in emissions. Victoria’s total emissions from energy generation and petrol use over the summer period rose 0.5 per cent, with a 5.6 per cent increase in emissions from coal-fire generators.

Mr Lewis also called on Australia to adopt an adjustable cap on emissions to avoid volatile carbon prices and to seriously consider establishing a central bank to set that level.

He said the sharp drop in the European Union’s carbon price could provide a lesson for Australia.

In a bid to raise funds during the economic slowdown, cash-strapped companies have been selling their emissions permits to raise money, causing the permit price to fall as low as €8 ($A16) in February from almost €31 last July.

“What the European experience is telling us is that policy makers should reserve the right to modulate the market. One of the issues we have seen with the European scheme is that the cap has been fixed very rigidly out to 2020 and there is little or no flexibility to modulate that cap,” Mr Lewis said. “With demand suffering the kind of very violent swing that we have seen over the past year we have also seen a volatile carbon price.

“I think as a policy maker you should be able to give yourself the discretion to modulate. That may be through the form of a central bank, which I know is a subject that has been mooted down here.”