O'BRIEN: Earlier tonight I spoke with the Prime Minister in our Sydney studio. Kevin Rudd can we clear up a simple question at the outset. Will you be launching your Carbon Reduction scheme in 2010 regardless of what's going on in the global economy?
PM: I have said consistently Kerry and I will say it again on your program tonight, our ambition is for the scheme to be launched in 2010. And we have a timetable we put out there, and that will mean getting a white paper out at the end of the year.
O'BRIEN: And yet right now you have absolutely no real idea of what the state of the global economy will be. You won't know whether the world is in a deep and prolonged recession still, by then, you don't know right now what the real state of the Australian economy will be.
PM: Kerry the challenge here is to act responsibly, and to act responsibly in terms of the immediate challenge we are confronted with, with the global financial crisis, I believe we are doing that, there's more work to be done. But also to act responsibly for the medium term and long-term challenges as well.
There's an economic cost attached to not acting on climate change. It all factors into the one equation. And we believe if we are calm, cool, methodical about getting this right, it's important for the long-term well being of our economy as well. And business wants the certainty of a regulatory environment for the future on climate change, not continued uncertainly.
O'BRIEN: But they are also very nervous about what the impost is going to be, and what economic circumstances they're facing when you bring it in. Will you at least leave open the option that if a deep and prolonged recession has hit the world economy and Australia is also struggling to recover, that you might lower your ambitions on - at least on an initial carbon price to give industry a softer introduction to the brave new world than would otherwise happen if the economy was steaming along OK?
PM: You know something Kerry, we are a practical bunch of blokes in the Australian Government.
O'BRIEN: And women.
PM: Blokes in the generic, and you pre-empted me from saying that. And - by which I mean we are going to implement this in a responsible way. We are very mindful of the circumstances in business.
Penny Wong the Minister, Wayne Swan, the Treasurer have been in direct and deep contact with the business community over many, many months now, as have the other Ministers: Kim Carr the Industry Minister, Simon Crean the Trade Minister, Martin Ferguson the Resources Minister.
We know what industry is saying, we know what business is saying, and they are also saying this to us: they want certainty for the future. And we'll be very practical about what sort of trajectory, what sort of pathway we achieve for business and for Australia from 2010 through to 2050. That's the key challenge.
O'BRIEN: Okay, the modelling finds that over 40 years to 2050 the carbon reduction scheme would only slow economic growth on average by one-tenth of one per cent per year. That sounds neither here nor there, but one assumes in the early years the impact on business and consumers will be at its most dramatic, that will be the high end in the early stages. And so presumably the cost to growth would also have to be significantly more at the front end than over the 40 year average.
PM: Kerry our attitude is this. For adjustment for industry, and there's two types here - one is what is called the energy intensive trade exposed sector, the other is called strongly affected industries, principally power generators.
With those industries and those industry sectors we are negotiating an adjustment package which recognises the cost of adjustment. And similarly for households, we have said for low income households we'll ensure that they are looked after.
So we are tailoring the adjustment package to the imposition, the implementation of this Carbon Pollution Reduction Scheme. That's the responsible course of action. What would be irresponsible is to say, ‘Here's the rules for the future, drop you in it, bang, let's see what happens'.
We don't intend to do that. We are cautious, sober and practical about this.
O'BRIEN: The modelling suggests that there's virtually no change in impact on economic growth whether you apply conservative targets of carbon reduction or ambitious reduction targets.
If that's the case, why not go for broke, set high targets and at least match the best case scenarios around the world?
PM: Well as you know from the modelling there is some difference, and it's important to be mindful of that, because we are talking about a spread over time.
O'BRIEN: But it is very minor.
PM: It is spread over time in the economy going out 40 years. And we take our long-term responsibility seriously. The bottom line though is our choice of the trajectory, of the options which have been presented will be made clear when the Government releases its White Paper.
We are some time off that. We have got further work to do. The Cabinet colleagues and I have a lot of midnight oil to burn on this and other challenges in the weeks ahead.
O'BRIEN: And we will come to those shortly. What do you say to the critique of leading climate scientists that even the most ambitious targets assumed by the Treasury modelling that cover Garnaut would still leave the world facing risks of dangerous climate change, that somewhere along the way we would have gone beyond the tipping point, yet Garnaut has favoured a very slow path to 60 per cent reductions by 2050.
Do you accept that very real prospect that if everyone in the world follows the Garnaut path, that the global condition could be catastrophic by 2050?
PM: We accept the scientific evidence as presented by the International Panel and we accept of course, the range of options which were presented to us by the economic modelling from Treasury. Our challenge as political leaders in this country is to craft the path up the middle of that. I believe we can do so responsibly and at the same time, jag the rest of the international community into action.
That is the hard bit. But we face an election very soon in the United States, both Republicans and Democrats are committed to action. One of our first challenges will be to engage the incoming American administration on working with us on this.
If America is on board with concerted global action and the Europeans and critically, the emerging economies, China, India and elsewhere, we have a prospect, a prospect of getting there.
That is a point in terms of carbon intensity in the atmosphere which is still capable of producing a secure environmental future for the planet. All I know is, the alternative, the one we were handed 10 months ago when we got into Government, was zero.
O'BRIEN: But you have suddenly gone from -
PM: We have gone from zero to where we are in ten months.
O'BRIEN: But you are saying, that is some prospect of achieving that. Some prospect. That doesn't fill you with confidence, does it? On the one hand, the Treasury modelling appears to make the heroic, a heroic assumption that science will have found a way to produce acceptably clean coal by 2020. But on the other hand it appears to ignore the impact of meeting 20 per cent renewable energy targets by 2020.
Don't both of those factors, or the absence of them, represent serious flaws in the Treasury modelling?
PM: When you come to, for example clean coal technology, CCS, carbon capture and storage, on which this government has done a lot of work in recent times, with our proposal for a Global Carbon Capture and Storage Institute, it is quite clear from previous work that has been done by the International Energy Agency for example that the carbon price in the vicinity of $20 or $40 per tonne, that the use of clean coal technology becomes economically feasible.
One of the reasons that we are doing this work through the Global Carbon Capture and Storage Institute is in fact to work out how Governments and industry work together to close any financial gap in this very important, exciting and revolutionary technology.
The other part of your question was about renewable energy. Renewable energy is of course important for the future for this reason: that if you bring in renewables through a renewable energy target, what you do is you bring forward a lot of investment in those new energy producers early on.
O'BRIEN: Yes but the Treasury, Treasury hasn't even taken that into account in its modelling. I would have thought that was a big positive.
PM: Well the renewable energy sector is embraced in the Government's overall strategy.
O'BRIEN: But it is not in the Treasury modelling.
PM: Well the assumption that the Renewable Energy sector will be enhanced by the RET, the Renewable Energy Target, is quite clear.
That is, that is that you will have this early jagging of investment in renewable energy technology early on. And the purpose of this is to achieve a critical mass of solar, of wind and the other renewables early on in order for them to be able to play their role in the overall Carbon Reduction Scheme.
O'BRIEN: Very briefly, you have taken time out from this little thing called the global financial crisis today to focus your attention briefly on the Treasury modelling. How much of your time is the global crisis taking up on a day to day basis right now, how much of your time?
PM: A truck load.
O'BRIEN: Nearly all I would think.
PM: It is a fair old truck load. It is a fair bit of time. I mean we are working intense hours and we have for quite some time. When I say we, it is the team, you know the Treasurer, myself, the Finance Minister, the Deputy Prime Minister, and in the case of Climate Change of course Penny.
A lot of time, a lot of work, a lot of effort and supported by a great team of officials.
O'BRIEN: But this is the core of your government, certainly in the economic sense and the point I am about to make is that given that you and the cabinet were already famously working overtime to implement your election agenda, this crisis must be a massive distraction for you and your senior economic ministers, from much of the rest of the agenda.
For instance, you're off to the US for the G20 Global Crisis meeting on November 15. Back for a minute for the local Government Summit on the 18th, then off to Peru for APEC on November 22, then back for COAG.
That is a brutal schedule.
PM: Well, I don't know what you are recommending, a cup of tea and a Bex and a quick lie down?
O'BRIEN: No not at all, I am asking the obvious question, something has to suffer?
PM: We are supported by a very good team. Look the truth is, these are huge challenges. It stares you in the face. And I have got to say talking to many of my counterparts around the world, other heads of Government, they are all facing the same challenge.
In our case it is even a little worse because we are in this time zone. We have teams who actually almost around the clock following international financial market developments in the American hemisphere, the European hemisphere and then here. Because each of these things can affect us like that, so we have to be on top of it.
It's tough, but frankly it is the reason we were elected, be on our game, be ahead of the curve, where we can, and to take decisive action, which I believe we have.
O'BRIEN: Well under the circumstances I won't take up any more of your time, Kevin Rudd thanks for talking with us.
PM: Good to be on the program.