Australia’s Climate Change Authority says that the country’s current minimum emissions reduction target of 5 per cent is inadequate and “not a credible option”, because it leaves Australia lagging behind the actions of other countries and would force very rapid reductions to catch up lost ground after 2020.

The CCA – an independent body established by the previous government, but which the new Coalition government is seeking to disband – said a 15 per cent reduction target by 2020 “is the minimum option” and indicated it could go as high as 25 per cent in its final report.

The 180-page analysis says a 15 per cent reduction target by 2020 should be accompanied by a 35 to 50 per cent cut by 2030; and a 25 per cent reduction by 2020 should lead to a 40 to 50 per cent cut by 2030. Overall, Australia’s “carbon budget” should be restricted to 10.1 billion tonnes from 2013 to 2050 – the equivalent of 17 years emissions at current levels.

The CCA says such cuts can be made at a relatively low cost to the economy, with a 25 per cent target costing just an extra 0.16 per cent of gross national product over a 15 per cent target.

The different in annual gross national income per person in 2020 from a 5 per cent reduction target to a 25 per cent reduction target is just $200. Put another way, the average Australian would meet his anticipated 2020 income target just three months later.

That, however, is based on the current carbon price and the once planned move to an emissions trading scheme. The CCA says a domestic only focus, with no carbon price, as per the new government’s Direct Action policy, would be more expensive, requiring an “effective carbon price” of $65/tonne by 2020 instead of $27/tonne if international emissions are included.

“A 5 per cent reduction from 2000 levels is inadequate on a number of grounds,” said CCA chairman Bernie Fraser, a former governor of the Reserve Bank of Australia.

“For one thing, the Government’s own conditions for moving beyond 5 per cent have been met. Most tellingly, a 5 per cent target implies very rapid reductions in emissions in the period after 2020, if Australia was to play its part in concerted international action to limit the increase in global temperatures to no more than 2 degrees Celsius (above pre-industrial levels).

“Evidence is also mounting that several other countries Australia is often compared with are gearing up to reduce their emissions more aggressively by 2020. (see graph below). A 5 per cent target would leave Australia lagging behind others, including the United States.”

A final recommendation on a single target for 2020 – along with a trajectory out to 2050 and an emissions “budget” – will be made in the CCA’s final report due at the end of February – presuming the authority has not already been closed. The new government wants to bring advice about climate targets “in-house”. It has already closed the Climate Commission, which provided scientific advice, for the same reasons. It is seeking to remove the carbon price and close the Clean Energy Finance Corporation.

The release of the report is hugely embarrassing for the new government, given that it proposes to repeal the carbon price, and the legislative requirement to meet even a 5 per cent reduction target, and replace it with a policy called Direct Action, which mostly involves an emissions reductions fund where bureaucrats assign subsidies to polluters for projects and investments that could reduce emissions.

The CCA does not make an assessment of Direct Action because the details have not been released. But it says that Australia should allow international permits (something the Coalition has hitherto ruled out) to take the reduction target to beyond 10 per cent.

Most private assessments have questioned whether Direct Action can meet even a 5 per cent target, and economists say it is likely to be more expensive than a market based mechanism. The CCA says that 5 per cent now represents a small hurdle because of the falling cost of renewables, the opportunities for low cost abatement such as energy efficiency, and because Australia can roll over a surplus of credits from the Kyoto mechanism.

It says that as part of the international negotiations, Australia will be asked to review its minimum 5 per cent offer and to firm up its 2020 intentions in 2014. A new international agreement, involving all major emitting economies, is scheduled to be negotiated by 2015.

“This is a critically important issue for the whole Australian community and its airing in the Draft Report is expected to elicit substantial feedback, including on the extent to which Australia might have recourse to use international emissions reductions to achieve its targets. The Authority will weigh up that feedback in coming to its final recommendations.”

In other highlights of the report:

– Gross National Income (GNI) per person is projected to grow by an average of 0.80 per cent annually over the period to 2020. A 15 per cent target would reduce this growth in GNI per person by just 0.02 per cent, and a 25 per cent reduction target would reduce this by just 0.04 per cent. In dollar terms, GNI per person is projected to grow from about $62 350 in 2012 to about $66 450 in 2020 with a 5 per cent target; to $66 350 with a 15 per cent target; or $66 250 with a 25 per cent target.

– The CCA notes that the world’s two largest emitters – China and the US – are stepping up their efforts to reduce emissions, by investing heavily in renewable energy projects, closing inefficient coal power plants and trialling market mechanisms to reduce emissions, and imposing restrictions on emissions from coal-fired power plants. Despite these efforts, the cumulative effect of current 2020 emissions reduction pledges falls short of what is required to hold temperature increases below 2C. It says this suggests all countries, including Australia, will need to do more to help achieve this goal.

– The CCA says that since 1990, the size of the Australian economy has doubled, but the level of emissions has stayed much the same. Emissions reduction policies and other changes in the composition of the economy have been important in keeping emissions flat. It says the impact on economic activity and national income would be relatively small even if more ambitious emissions reduction targets were to be adopted.

– It says the costs of several low emissions technologies, particularly renewable energy, have fallen significantly. And Australia’s emissions in 2008 to 2012 were lower than its commitment under the Kyoto Protocol, which means that Australia has 91 million tonnes of CO2-e of emissions rights which it can ‘carry over’ to the next period – this represents a potential 3 percentage point contribution that might form part of a more ambitious 2020 target.

– The CCA says official projections made in 2012 indicated that 754 Mt CO2-e of emissions reductions were required in the period to 2020 to deliver the 5 per cent reduction target. On current estimates, the same level of emissions reductions would be equivalent to an 11 per cent reduction. Taking into account the Kyoto ‘carry over’ equivalent to 91 Mt CO2-e, this would imply a 14 per cent reduction by 2020.

– The CCA says that a wide range of emissions reduction opportunities are available across all sectors of the economy at relatively modest cost. Electricity is the most important sector for potential emissions reductions. It has the largest share of Australia’s emissions, and the modelling undertaken for the Authority suggests it could contribute the largest share of emissions reductions if policy drivers are effective

– The CCA identifies two major low cost emission reduction opportunities – using energy more efficiently in homes and businesses, and continuing to reduce land clearing. It also recommends adopting cleaner, low emission technologies and production processes.