The Australian Government’s emissions reduction target announcement yesterday sets in train a fundamental restructuring of the Australian economy.

Although criticised by some groups as unambitious, the reality is that the 10% target range of –5% to –15% is a reduction of between 25% and 34% on a per capita basis and, as such, is more aggressive than those proposed by other developed nations.

Achieving such reductions will require substantial economic restructuring.

Australians must recognise that the decision to price carbon will impose considerable additional costs on them, especially with regard to energy, which in turn will flow through to the majority of domestically produced goods and services. This is not to say that we should not take this initiative, but rather, that we must do so fully aware of the consequences and be willing to accept the costs of doing so.

Those companies who produce goods in Australia either for sale in overseas markets, or compete with imported goods manufactured in countries who do not price carbon, similarly face particular challenges, with the potential in some cases of substantially reducing competitiveness and returns. The continuation of effective arrangements for these industries until there is a level global playing field will be essential to prevent any unnecessary domestic job losses and carbon leakage.

Global warming is a global problem, which can only be solved by concerted global action. Australia can not go it alone. This will neither reduce global emissions nor ensure Australia’s ongoing economic and environmental prosperity. Australia’s actions must be calibrated to those of other competitor nations and technology developments.