The Prime Minister, John Howard, today committed his government to introducing an emissions trading scheme.

Howard said the government would set a long-term emissions target in 2008.

Addressing the Melbourne Press Club at the Hyatt Hotel, Howard also outlined a series of measures costing $627 million over the next five years “that reinforce our commitment to tackling global warming”.

Howard said: “Being among the first movers on carbon trading in this region will bring new opportunities and we intend to grasp them. The Government will examine how to ensure that Australia becomes a carbon trading hub in the Asia-Pacific region. Of course, an emissions trading scheme is only one part of a comprehensive long-term climate change policy framework. There is no magic green bullet. Low-carbon technologies remain the key to an effective response that minimises the costs of limiting emissions.”

The Prime Minister also released a video statement on global warming.

This is the transcript of Prime Minister John Howard’s Address to the Melbourne Press Club.

Thank you very much Mr President, my ministerial and parliamentary colleagues, ladies and gentlemen. Today I want to address the issue of climate change in the hope of striking the right balance for Australia. Climate change is a large, complex and serious global challenge that will occupy the world for decades to come. Over time, the scientific evidence that the climate is warming has become quite compelling and the link between emissions of greenhouse gases from human activity and higher temperatures is also convincing.

Australia has long been an active player in the search for an efficient, effective and equitable solution to climate change. Today amongst other things I outline some new measures costing $627 million over the next five years that reinforce our commitment to tackling global warming. Of all the inhabited continents, Australia already has the driest and most variable climate. Climate change means our water security problems will likely intensify, which is why my Government has invested so heavily in national water reform. Our great and unique natural ecosystems, like the Great Barrier Reef, are potentially threatened and many of our major industries, not least agriculture, are highly sensitive to changes in the climate.

Because of our natural abundance of fossil fuels, Australia’s economic prosperity is also threatened if our response to climate change is misguided and driven by ideology. All the good intentions in the world are worthless if we wreck our economy for no environmental gain. With so much at stake, we must not confuse panic with virtue. Australia’s climate change policy must reflect our unique vulnerabilities and particular economic strengths. It needs to be global, regional, national and local. This challenge, I believe, is best met by a blend of prudent conservatism and economic liberalism. A prudent conservative knows we are but temporary stewards of the environment. The Burkean sentiment that society is a partnership between those who are living, those who are dead, and those yet to be born, is second nature to us.

In the face of risk, a prudent conservative takes insurance. We should, in the words of Rupert Murdoch, give the planet the benefit of the doubt, given the dangers of climate change. A blend of prudent conservatism and economic liberalism has other things going for it. It is realistic about human nature and the pursuit of national interests. It values the power of the market as well as the value of local decision-making, and it knows the limits of state planning and why flexibility must be built into policies and institutions. This mix of prudent conservatism and economic liberalism has steered Australia through more than a decade of successful reform.

Now we must position Australia for a low carbon future. We face a major new reform challenge in designing an emissions trading system and setting a long-term goal for reducing our emissions in the absence of a global carbon scheme. These decisions will be amongst the most important Australia takes in the next decade. They need to be taken carefully and rationally with a clear eye to maintaining our economic strength. Reducing carbon emissions will mean higher energy and petrol prices. Australians need to understand that. Glib calls for drastic, immediate cuts in Australia’s emissions might be easy rhetoric but they carry real and potentially large costs. The best way to combat global climate change is to progressively tighten the screws on emissions while encouraging clean technologies for an energy hungry world.

Notwithstanding some of the fear and loathing that has crept into this debate, four fundamental realities remain. First, climate change requires a truly global response. With Australia’s contribution to global emissions at less than 1.5 per cent and falling, nothing we do alone will materially affect our climate. Second, we must accommodate demands for economic development, energy security and environmental sustainability. Without all three you are left at best with a two legged stool. Third, different countries will choose different policy approaches. National diversity must be both respected and harnessed. And fourth, the Kyoto Protocol is not an effective blueprint for future action. It provides no pathway for meaningful commitments by the very countries which will account for the bulk of future greenhouse gas emissions. Without a framework that includes all major emitters, we lack a genuine global solution.

There is an acute irony here. The loudest voices on climate change, not least the Australian Labor Party, tend to be those who invest almost mystical powers in multilateral institutions. Yet on this issue they are wedded to an instrument, namely Kyoto, which only 36 of 175 nations are required to do anything to reduce emissions. Clearly, climate change is an immense international challenge. That is why Australia is leading on practical steps like our Global Forests Initiative and the Asia-Pacific Partnership for Clean Development and Climate. The good news is that mankind has powerful tools for the task ahead, none more so than the spirit of discovery inspired and channelled by rational science and free markets.

Australia brings formidable assets to this challenge: an educated, can-do and adaptable people a modern; flexible economy; world class scientific expertise; deep global engagement and an enviable reputation for institution-building and reform. We have mobilised these assets before and will do so again to help build a new global climate change framework and to facilitate Australia’s transition to lower carbon emissions. No great challenge has ever yielded to fear or guilt. Nor will this one. Human ingenuity, directed towards clean technology and wise institutional design, remain our best weapon. The false prophets are those preaching Malthusian pessimism or anti-capitalism. They are the real climate change deniers because they deny rational, realistic and sustainable policy solutions. The moralising tone of utopian internationalism is also not helpful. Institutions will only work and endure if they harness national interests. The world needs less Woodrow Wilson and more Adam Smith to effectively tackle climate change.

Let me remind you on this point that in 1997 the United States Senate voted unanimously 95 to nil against any treaty that did not include major emitting developing countries. Indeed, when the Clinton Administration signed the Kyoto Protocol, it was then Vice President Al Gore who said that the United States could only ratify once and I quote his words, key developing nations participate. The United States has never ratified because the Al Gore condition of that ratification has never been fulfilled. This is a global problem he said that will need a global solution. A decade later nothing has changed to alter that view. I believe that we have reached a new moment of opportunity in this debate after a decade of inflated rhetoric and modest results under the Kyoto protocol. There is now what I regard as an emerging pragmatic consensus on a way forward that includes all major emitters and Australia is helping to forge this consensus.

It is clear that the Kyoto model provides neither a global solution nor a lasting one and that is why Australia supports negotiations on a new global framework. A successful Conference of the Parties to the United Nations Framework Convention on Climate Change to be held in Bali, Indonesia in December, will be crucial. We also support international efforts to set by the end of next year a long-term global goal for reducing greenhouse gas emissions. This is in line with our setting a long-term emissions reduction goal for Australia. We will continue to encourage all relevant international efforts to arrive at a lasting global solution. Last month I outlined Australia’s plan to use this year’s APEC Meeting in Sydney. I see APEC as a major opportunity to bridge continued gaps between developed and developing countries. A comprehensive global mechanism will take years to develop and Australia has decided not to wait for this to emerge and last month I announced that the Government will establish an emissions trading regime for Australia based on a cap and trade model. Our goal is to begin in 2011 subject to relevant design issues being properly completed. One of the first in the Asia-Pacific region, it will be world’s best practice.

Today I announce key design features and administrative arrangements for this crucial piece of national economic architecture. The scheme will include maximum practical coverage of emissions sources and sinks, and of all greenhouse gases, a mixture of free allocation and auctioning of single-year dated emissions permits, a safety valve emissions fee designed to limit unanticipated costs to the economy and to business, particularly in the early years of the scheme and recognition of carbon abatement by firms in the lead-up to commencement of the scheme. The Department of the Prime Minister and Cabinet will be responsible for implementing this system and it will consult widely with industry and others. Before selecting a long-term emissions goal in 2008 the Government will commission careful modelling of the impact of various targets. We will not do as the Opposition has done, set a target with no analysis of the consequences for Australia and then scramble around ex-post for a study to justify it. This encapsulates Labor’s economic inexperience and the risk this poses to Australia’s economy.

The Government will establish a team in the Treasury to oversee this modelling and using a range of Australian economic models Treasury will advise the Government amongst other things on the macroeconomic, sectoral and distributional implications for Australia of reducing greenhouse gas emissions. It will examine the effects of different abatement targets over selected time periods and thirdly model the effects on key economic indicators including growth, employment, income, and prices – particularly of electricity – with special regard to the impact on households. Australia’s long-term emissions target will be both environmentally credible and economically achievable. We will build in flexibility to re-set the emissions trajectory if new scientific information or technologies become available and as the international framework takes shape. This is the smart, sustainable way to set targets.

The Government will also introduce legislation this year for a comprehensive and streamlined national emissions and energy reporting system. We will legislate for a new purpose-built monitoring, reporting and verification system and we will work to remove duplication in reporting requirements on business. Governance will be critical to the integrity of the emissions trading scheme, in particular separating policy functions from operational aspects. From 2009, an independent regulator for emissions trading will be established in the Treasury. Its responsibilities will include allocating and auctioning permits, certifying offsets and ensuring compliance. This emissions trading system will be world class in its coverage and governance. It will avoid the political fixes and economic failures that dogged the initial phase of the European Emissions Trading Scheme. In the years to come, it will provide a model for other nations to follow.

Being among the first movers on carbon trading in this region will bring new opportunities and we intend to grasp them. The Government will examine how to ensure that Australia becomes a carbon trading hub in the Asia-Pacific region. Of course, an emissions trading scheme is only one part of a comprehensive long-term climate change policy framework. There is no magic green bullet. Low-carbon technologies remain the key to an effective response that minimises the costs of limiting emissions. This in turn demands a comprehensive portfolio of clean energy solutions. Removing any one technology from the mix increases the costs of action and makes stabilising global emissions that much harder. Ultimately, technologies must meet the test of the market. There is, however, still a role for government to support research, development and demonstration of low emissions technologies.

Australia has the physical resources, the human capital and the technological strengths to be a global leader in key low emissions technologies. We can be an energy superpower in a carbon constrained future, but only with the right policy settings and only if we draw on all our national capabilities and resource advantages. Abundant reserves of coal, gas, solar energy resources, geothermal potential and the world’s largest low-cost uranium deposit provide a natural strategic focus for Australia’s clean energy technology policy. Under our Low Emissions Technology Fund the Government has already funded major projects which together involve investments of approximately $3 billion. These include the world’s largest and most efficient photovoltaic solar power station and the Gorgon CO2 Injection project which will be the largest geosequestration project in the world.

As a major producer and exporter, Australia has a crucial role to play in clean coal technologies. Renewable energy sources, and our relative strengths in solar, wind and geothermal energy will also be important but the Government also believes that Australia, sitting on almost 40 per cent of the world’s low cost uranium reserves, cannot stand aloof from nuclear power. This would be an act of economic and environmental folly in the extreme. Nuclear power has no direct CO2 emissions and is already a significant part of the world’s energy system. New generation nuclear energy systems known as Generation IV, promise further advancement in fuel utilisation, cost competitiveness, safety, waste minimisation and ensuring technology and products do not fall into the wrong hands. Today I announce that the Government will invest $12.5 million in a Nuclear Collaborative Research Programme between the Australian Nuclear Science and Technology Organisation, ANSTO and Australia’s university sector. This will augment Australia’s ability to participate in the global Generation IV Nuclear Energy Systems Initiative.

Ladies and Gentlemen, we all have a role to play in reducing greenhouse gas emissions which goes beyond the easy morality of gestures. As I’ve said earlier, our actions must be local, as well as global, regional and national. A strong climate change policy requires a community response, in the same way that water security demands the widest possible community engagement. The Government is committed to encouraging local communities and households to take their own practical action both to lower carbon emissions and to better manage our nation’s scarce water resources. We are currently providing up to $12,000 to schools that install solar electric panels and under the Community Water Grants programme at least 1,600 schools have received funding for rainwater tanks. Today I announced that in addition, the Commonwealth will provide up to $50,000 to ensure every Australian school can install a solar hot water system and a water tank. These Green Vouchers for schools will help lift awareness of the challenges future generations face to reduce greenhouse gas emissions and to better manage our water. Clearly, the more people change and adapt their own behaviour, the less reliant governments will be on blunt instruments that carry a heavy cost.

Under our Small Business and Household Action Initiative all households will receive information about climate change actions that they can take. They will be able to calculate their carbon emissions and seek to become carbon neutral by purchasing offsets through the Government’s Greenhouse Friendly programme. More than 22,000 homes have received or will receive direct support under our Photovoltaic Rebate Programme. The rebate currently available is up to $8000 per home. We have already supported the installation of solar hot water systems in more than 170,000 Australian homes. These Renewable Energy Certificates can be worth up to $900 towards the cost of the solar hot water system. Today I announce some further steps to bring solar hot water within the reach of Australian families. We intend to provide an additional $1,000 per household so that up to another 225,000 homes can upgrade to an energy saving solar hot water system. Water heating is the largest single source of greenhouse gas emissions from the average Australian home. Now more Australians will have access to Australian solar technologies with the capacity to reduce carbon emissions and to save households about $300 in annual energy costs.

The policies I have announced today bring to $3.4 billion the Commonwealth Government’s investment in tackling climate change since 1996. Earlier this year, I described myself as a realist on climate change. Increasingly I’m also an optimist because of the sheer dynamism of 21st century capitalism and the new momentum emerging for a more comprehensive global framework to succeed the Kyoto approach. Stabilising atmospheric concentrations of greenhouse gases will require a deep transformation of the world’s energy systems. It will be hard, but it is possible. We do not have to sacrifice economic prosperity. We do not have to rethink capitalism, but we do need to engage the community. We do need massive investment in low carbon infrastructure and we do need a far-reaching new phase of economic reform here at home to establish a world-class emissions trading system. One thing is for sure. The world will only unleash the clean technologies of tomorrow and successfully tighten the screws on greenhouse gas emissions against a backdrop of economic strength, and it is only against that backdrop of a strong economy that we can deliver the best environmental outcomes. On that basis Australia can more than play her part. Thank you.