Last week, from the midst of COP-14 in Poland, I reported that the major developed countries were engaged in something of a waiting game on emissions targets, each waiting to see what others would do before announcing their own.
As you may remember, on Wednesday of last week Canada, Australia and Japan pulled the text on 2020 emissions targets from one of the conference texts. The absence of the targets (25-40%) left states waiting to see if others would commit before they did in a classic example of game theory.
Australia put itself in the best position in this game by delaying announcement of its targets until today–two days after the end of the Poznan COP-14. It has now pledged a 5-15% cut by 2020, as well as an auction-based cap-and-trade system covering 75% of emissions. Permits will be auctioned with a maximum price of A$40, with the system becoming operational by mid-2010.
The emission target is much lower than other major developed countries, especially in Europe and increasingly the USA where targets are 20%. You’ll also notice that this number is a range, and not a particularly narrow one. If ‘other countries’ (read: USA, Canada, Japan) do not take on targets themselves in Copenhagen–meaning that there would not be a global emissions cut for developed countries–Australia will take the 5% option. If a global deal is reached then the numbers move up, presumably on some kind of undefined sliding scale. The definition of these numbers will, in turn, shape the domestic carbon market price.
Effectively, Australia has managed to keep it hand in the game by allowing itself some room for maneuver into the future. It has the advantageous position of having made a commitment but also allowing itself remaining competitive by altering that commitment in such an uncertain political process.
From the inside, however, this position looks less advantageous; Prime Minister Rudd is under significant pressure from the mining lobby in Australia, who, according to reports in the corridors at Poznan, were pushing for the abandonment of the cuts completely. On the other hand, Rudd has consistently run on a green political platform, building expectations from both NGOs and European Leaders over the past year of major emissions cuts.
Rather than a carefully calculated game theory move, Australia’s announcement today is more of the sum of the pressures Rudd faces from various sides.
An interesting question to emerge from this announcement is just how many more countries will use this ‘targets range’ in their discussion about interim targets this year. The EU has said 20%, with a possibility of 30%; now Australia is 5 to 15%. Are we seeing the overcoming of traditional game playing where an early mover incentives other change? Maybe in this, the most complex of games, countries will all set ranges and then simply negotiate to a common point–thus partially overcoming some of risk taken by the earlier players, which has often disincentivised action.
It’s certainly a ‘one to watch’ for 2009.