(introduction...)

Abatement of energy sector emissions
Economic impact of abatement strategies
Non-energy emission abatement
Australia's international role
Carbon taxes, externalities and other policy instruments
References

Hugh Saddler

Greenhouse gas emissions have been at the forefront of public policy debate in Australia for over three years. In October 1990 the federal government adopted an 'interim planning target' - to reduce emissions of greenhouse gases to levels 20 per cent below 1988 emissions by 2005. The reduction of 20 per cent relative to 1988 levels was first proposed at an international conference held in Toronto, Canada in 1988; it is referred to as the Toronto target in this chapter.

Gases controlled by the Montreal Protocol on Substances that Deplete the Ozone Layer, that is, chlorofluorocarbons and related compounds, were not included, but the government had previously announced that the use of CFCs would be eliminated by 1995. The undertaking with respect to other greenhouse gases was subject to the important qualification that it would not proceed with measures which have net adverse economic impacts nationally or on Australia's trade competitiveness.

The eight Australian state and territory governments have important policy powers relating in particular to the electricity and gas industries and to the control of pollution. Their concurrence and participation is virtually a prerequisite for the realization of the federal target. The eight governments have agreed to participate with the federal government in the development of a national greenhouse response strategy. A draft strategy document was released for public comment in June 1992.

Although it is normally viewed as a developed country, Australia's economy is heavily dependent on exports of raw and partly processed commodities. Among the most important Australian exports are coal, liquefied natural gas (LNG), and alumina and aluminium metal smelted with coal-fired electricity. Consideration of greenhouse response strategies has therefore been strongly influenced by concerns about the possible effects of any abatement measures on Australia's international competitiveness as a supplier of fossil fuel intensive commodities.

A steady stream of reports and studies from government, business and nongovernmental organizations has provided the material for an enthusiastic public policy debate. Many of the reports have sought to estimate the costs to the Australian economy of reducing carbon dioxide emissions by changes in energy supply and use, focusing in particular on the costs of meeting the Toronto target. This narrow emphasis on a single goal reflects partly the concerns of special interest groups who fear the impact of achieving the target on their activities. Most studies have sought to estimate the macro-economic effects of a carbon tax on fossil fuel use that would suppress demand for fossil fuels in 2005 to the Toronto target level. The narrow focus of so many of these studies has had two unfortunate effects. First, it has encouraged an 'all or none' view of the desirability of implementing emission reduction policies. And second, it has led to neglect of policy instruments other than a carbon tax.

Nevertheless, the studies have greatly improved our understanding of the workings of the Australian energy system and its interaction with the wider economy. Very much less is known about non-energy related sources of greenhouse gas emissions, which are the principal sources of the other important anthropogenic greenhouse gases such as methane and nitrous oxide.

In this chapter, I examine the cost and scope of emission abatement measures available in Australia. I also review estimates of the effect on the Australian economy of achieving various levels of abatement.