Those who have seen Al Gore's film An Inconvenient Truth were once again reminded that only two of the countries involved in the Climate Change negotiations leading up to and following the Kyoto Protocol (now almost a decade old) have refused to ratify that agreement.

Those two ‘recalcitrant' countries are of course the US and Australia. In addition, these two governments (both supposedly wedded to the magic of the market) have attacked the Protocol's core principle of capping and pricing emissions – the use of the market mechanism to reduce emission levels at the least possible cost of implementation.

Back in 1997 there was much debate about the apparently generous deal that Australia got out of Kyoto as a result of the skill and hard bargaining of its negotiators. By now it should be evident that this debate was a bit beside the point.

The main point is not that Australia refuses to meet its own domestic emissions target, or that this target was an especially lenient one. The truth is uglier than this. The objective of the Australian government under Howard is not primarily to avoid meeting its obligations under Kyoto or to ‘opt out'. The real driver, and the reason it has joined the US in failing to ratify, is that it wishes to sabotage this international agreement. This is worse because it seeks thereby to undermine the efforts of other countries to reduce their greenhouse gas emissions by the most cost-effective means.

There is a growing realization of the enormity of Australia's dereliction of duty to the planet. Among the excellent recent appraisals has been Peter Mares' discussion with Professors Ian Lowe and Tim Flannery on ABC Radio National's National Interest program on August 27, 2006. Similar ground was covered on August 28 in the equally incisive Four Corners, with Jonathan Holmes' report ‘What Price Global Warming?'

However, neither of these programs quite nailed this ugly truth, though the latter's revealing interviews with the spokesman for the export coal industry did get close.

Elements of the existing policy

In the National Interest interview, both Ian Lowe and Tim Flannery were appropriately harsh in their characterisations of the Government's ‘policy' on climate change. The key elements, but not the underlying strategy and purpose, of that policy consist largely of:

Each of these characteristics is important but the ‘underlying strategy and purpose' of Howard's climate change policy remains elusive [1] .

The importance of least-cost emission reduction

As is well known (and often resented) around the world, Australian diplomats, almost ten years ago now, extracted a ‘generous' arrangement for this country under the Kyoto Protocol. This supposedly took the form of a lenient greenhouse gas emissions target that allowed Australia (unlike most participants) an increased level of emissions by 2012 (in fact by as much as 8 per cent above 1990 levels), by allowing the inclusion of carbon ‘sinks' such as would result from reduced land clearing [2] and by allowing international trade in emissions certificates. The latter two arrangements would have the effect of allowing the domestic energy sector (the main national emitter) to increase its emissions potentially by well over the allowable 8 per cent compared with 1990. The Protocol also included a total of six types of greenhouse gas emissions, going well beyond the carbon dioxide that is emitted from combustion of energy.

However, the particular deal that Australia got back in 1997 under Kyoto is not the central issue. In the Federal Government's thinking, the meeting of a domestic target for greenhouse gas emissions was probably always a second order matter.

In fact, in terms of managing domestic politics, a harsher deal than Australia got from the Kyoto Protocol would have made it easier for the Howard Government to spuriously ‘justify' to the public its decision not to ratify that Protocol.

Further, it should be acknowledged that (like the inclusion of a comprehensive range of greenhouse gases) the inclusion of carbon sinks, at least in principle, was an important administrative advance – although there are major measurement and monitoring difficulties in its implementation. Similarly, the international trading of emissions permits is sound economics.

Unfortunately, even among some environmentalists of good will, the importance of achieving emission reductions at least possible cost is not always recognised. Further, such least cost solutions should also be sought on a global scale, as would be encouraged by making emission certificates tradable internationally.

Why is seeking the ‘least cost' solution so important among the infinite number of possible approaches to achieving a given abatement? This is because the scale of the required abatement actually required to stabilize atmospheric emission levels by, say, 2050 is so great – far in excess of that achievable under Kyoto. Hence, it is important that the associated cost burdens be reduced as far as possible for a given level of abatement. If, instead, particular interest groups successfully promote to government their own emission-reducing but high cost technologies, other more cost-effective approaches to abatement will necessarily be squeezed out.

Avoiding such costly distortions is a major benefit from using market instruments such as tradable emissions permits or carbon taxes. For example, economic modeling experience suggests that limited supplies of natural gas are far more effectively used in generating electricity instead of using coal, rather than in artificially inducing the use of gas instead of oil-based transport fuels by exempting the former from fuel excise. This is partly because the use of gas in combined cycle gas turbines is far more benign in terms of greenhouse gas emissions than is coal (as both Flannery and Lowe acknowledge).

Just ‘opting out' – or sabotaging Kyoto?

What is the core strategy and purpose of Howard's climate change policy? It has less to do with Australia's domestic emissions than with emissions in other economies that result from their use of coal – and Australian export coal in particular. This is an important distinction that is often not fully understood.

The Howard government is thus obsessively concerned about the supposed impact on the Australian economy when other countries strive to meet their emissions targets under a global agreement such as Kyoto.

But will the Australian economy actually suffer in the event that the growth of its export coal industry moderates in response to the implementation of global greenhouse gas emissions constraints?

This is by no means clear. First, unlike say many of the OPEC states, Australia has a great diversity of commodity exports. Coal is important but far from all-important to the economy of the ‘lucky country'. Second, as a side-effect of market-driven contraction of coal export revenues, benefits will accrue to these other Australian export-oriented industries: including to natural gas (LNG) which is far more benign in terms of its effects on climate change. Third, Australia's support of effective action to reduce global emissions will of course reduce the extent of climate change – the effects of which would be suffered within Australian territory itself, by current and future generations of Australians.

To refer to the Australian government's current position (and that of the US) as ‘jointly sabotaging Kyoto' is perhaps too restrictive a characterisation. More accurately stated, Australia's policy under the Howard Government has been to attempt sabotage, not just of Kyoto, but of any international climate change treaty or protocol that ‘works' – to the extent that such an arrangement adopted globally would reduce the profits of Australia's export coal industry [3].

Thus, it is no surprise that the Prime Minister has positioned himself as a ‘climate change sceptic' (Four Corners August 28). John Winston Howard is an active participant in the ‘history wars' and seems concerned about his place in history. Taking a world-historical ‘long view', Howard's page in the history books will be marked by a charge of global sabotage.