LAURIE OAKES: Professor, welcome to the program.

ROSS GARNAUT: Hello, Laurie.

LAURIE OAKES: The "Sunday Age" today has a cartoon showing you, examining your terms of reference and the terms of reference say simply, "scare the hell out of everybody." Is that your mission?

ROSS GARNAUT: That's not my mission and I don't think that's what I'm doing, Laurie. I'm telling it as it is. We've got a good team of people who are using the best Australian science and what we're aiming to do is to give the Australian people a clear view of the risks and they're considerable.

LAURIE OAKES: Yeah, well, I can tell you the report is scary, but is it scary enough, do think, to persuade people they should pay more for their power, their transport, their food, just about everything else?

ROSS GARNAUT: There's some hard choices to be made by the world community and the Australian community as part of it and there will be adjustments in the short term if we're to reduce the risks for the long term. These are hard decisions. Our job is to put to the Australian community, very clearly, what the costs are, what the risks are if we don't take early action and there'll be a lot of discussion of that at the community level, at the political level, and we hope to provide the raw material for good decisions.

LAURIE OAKES: If the Government follows your recommendations, what changes will it mean to the Australian lifestyle?

ROSS GARNAUT: It will mean, over time, higher prices for all goods and services that contain products that emit greenhouse gases. I suppose households will notice most higher electricity prices and higher fuel prices, especially higher electricity prices. Also heating prices in the home.

But that can be balanced by payments to people in other ways because the Government will get a lot of revenue from selling permits and when the Government sells a permit, the power company or the oil company pays it and passes it on to consumers. The Government can give that back to business or households and it still has the desired effect so long as it's not actually putting the price of fuel or electricity down.

LAURIE OAKES: I know the amount of revenue will depend on the price set for carbon, but what order of money are we talking about?

ROSS GARNAUT: Well, don't take what I'm going to say as an indication of price because we've got a lot of hard work going on and we'll be revealing the results of all of that at the end of August. But if the carbon price was $10 a tonne, the Government would be getting upwards of $4 billion; if it was twice that, it would get twice as much. If it was four times that, it would get four times as much.

LAURIE OAKES: Now, most people seem to think that the likely starting point is $20 a tonne. Does that make sense?

ROSS GARNAUT: I'll be fair dinkum, we've got a lot of work going on and I don't know at this stage. We've got a lot of complex things to model. We've got a joint team working on that from our review and from the Commonwealth Treasury. It's the best work of this kind that's been done anywhere, and when we've got the results, I will be presenting those to Australians in August.

LAURIE OAKES: The petrol is obviously a big issue at the moment, it's been dominating politics in Australia for a couple of months now. Why are you so adamant that petrol should be included in the emissions trading system?

ROSS GARNAUT: Well, not especially petrol, you want to clue everything that you can, everything that you practically can, and if you start making some exemptions, there's no logical boundary to end the exemptions. Why exempt petrol any more than electricity or gas or a whole lot of other things? Also, we're trying to persuade developing countries that they should let the rise in oil price flow through into their own petrol prices. We've said that to the Indonesians, the Indians, the Chinese. The IMF have said that: OECD has said that and if we're not doing the same thing ourselves, then it blurs the message.

LAURIE OAKES: You've said this is, I think, an appalling policy dilemma.

ROSS GARNAUT: Diabolical.

LAURIE OAKES: Diabolical. That's right. It was a very good word but it presumably means it is harder to sell than the GST was or WorkChoices?

ROSS GARNAUT: I'm not only thinking of the domestic selling, I'm thinking of getting the policy right, because this is one question where you need international co-operation of a dimension and complexity beyond that which we normally have to deal with. It's harder than getting international co-operation on trade liberalisation. When we reduced our tariffs, we tried to negotiate with others and get others to do it at the same time, but with tariffs, you know that you're better off yourself if you liberalise whatever others are doing. You can't actually say that with this issue.

You need international co-operation for the solutions to work, and every country has got to be part of it. First of all, every developed country, or it all doesn't work. No country alone can solve the problem, but each developed country can block the problem, and for a while we were blockers.

LAURIE OAKES: Do you think that the Government, in a democracy, can actually implement a proper comprehensive emission trading system and be re-elected in the same year?

ROSS GARNAUT: I think they can, and the reason it can is that there's very considerable community support for dealing with this issue. Now, people can answer, "Yes, we want governments to do something about it," and at the same time not like the things that are done about it, but we've got a better community base, a better political base for firm action on this issue than we had, for example, on the trade reforms of the '80s.

The opinion polls were very solid, in support of old-style Australian protection, both before and after the liberalisation programs. On this one, you start with a majority of the community wanting to do something about it. So you've got a political base. Now, there's a lot of public education required to turn that very generalised feeling that something needs to be done into support for concrete actions, but I think with the right leadership, we can get there.

LAURIE OAKES: Well, you're Kevin Rudd's adviser on climate change. Political campaigns need a slogan. Give Kevin Rudd a slogan to sell this system.

ROSS GARNAUT: I think that there are other people better at slogans than me, Laurie, I'm trying to marshal the whole story, to explain to Australians the benefits of doing something about it, the risks of not doing something about it, they are considerable. Lots of things that Australians care a lot about will be damaged a lot if nothing's done, and I think by bringing home to Australians, concretely, some of those risks, will establish a firmer base for going forward.

LAURIE OAKES: You've known Kevin Rudd since he was a junior diplomat in the Australian embassy in Beijing where you also worked.

ROSS GARNAUT: A fine officer he was, too.

LAURIE OAKES: Fine officer, but is he a fine politician? Do you think he's got the political skills to sell this diabolical proposition?

ROSS GARNAUT: Well, there's a very challenging assignment, but he showed a lot of skill last year. In a year he came from the second ranks and ended up Prime Minister. You don't do that without a lot of political skill. They're the sorts of skills that are needed for this next step.

LAURIE OAKES: Does he have the political will? Is he strong enough?

ROSS GARNAUT: I think he does. My impression is that he does. He'll have to use all of that. He'll need a lot of support from a lot of other people, but I think the base is there to make this one a winner.

LAURIE OAKES: Are you disappointed that the Opposition has gone populist on this, that they're seeking to make political points out of it rather than getting behind your proposals?

ROSS GARNAUT: Well, its almost inevitable. It would be much better if there was a broad-base across the political spectrum for doing strong things on this. The chances of getting it right would be better if there was bipartisanship. The temptations for chipping away at the edges for political purposes are very strong. There's a lot of support within the Opposition for taking strong action and I've had good discussions with the Opposition spokesman on these things...

LAURIE OAKES: Greg Hunt...

ROSS GARNAUT: Greg Hunt and I don't think that the ball stopped rolling on Opposition attitudes, but certainly the chance of Australia getting it right, getting it right through the period of this government and getting it right through the period of the next government and the one after that are much better if we end up having bipartisan support.

LAURIE OAKES: Well, the Opposition's trying to frighten motorists. The NRMA has come out, also been critical of your report. Just about all our viewers are motorists. Would you like to look at the camera and just tell them why they should pay more for petrol?

ROSS GARNAUT: Aah. Yes. I think that the risks of continuing to allow greenhouse gasses to grow will end up imposing costs on Australia which are very much greater than the costs that we'll have to pay if we're to get the problem right.

LAURIE OAKES: OK. The Opposition's using several arguments, that's one of them, it's not the time to wack motorists but their second argument is that Mr Rudd's proposed starting date of 2010 is too soon, that if the scheme is rushed, the likelihood is it will be botched. Is that a fair enough criticism?

ROSS GARNAUT: As I said at the Press Club on Friday, it's a challenging timetable, but it can be done. We've got a good set of officials working hard on it now. They can deliver in time. They can deliver it right on time. There's no ideal time for a structural reform like this. Whenever you do it, there'll be transitional stresses until people get used to it, and that's going to be the case whether you do it in 2010 or 2012 or 2014. I think it can be done in 2010.

LAURIE OAKES: The third Opposition argument is that we shouldn't go it alone, that we should do this as part of a proper international scheme?

ROSS GARNAUT: Certainly, we need international agreement to get a solution, but we're not going first. There's others, amongst the developed countries, that are well ahead of us. We're about in the middle of the pack, and we certainly shouldn't be at the back end of the pack of developed countries because we'd be the biggest loser of all the developed countries if nothing is done about the problem. We're a hot and dry country to start with. A lot of the other developed countries aren't, so small changes hurt us more than others.

We're in a region of developing countries, a lot of them fragile developing countries and their problems from climate change would quickly become ours, and our export prices, our terms of trade would be hurt more by climate change going wrong than any other developed country's term of trade. So we shouldn't be at the back of the pack. We're about in the middle. All of the developed countries have agreed to take some steps first. The international process is that the developing countries will then come in. It is essential - and we say in the report it's essential - that China at least be part of a post-2012 regime of firm commitments, but we need all the developed countries to have signed on as a first step.

LAURIE OAKES: Professor, I know you're doing a series of town hall meetings across Australia on this. Good luck and we thank you.

ROSS GARNAUT: Thanks, Laurie. Good to be here.

Click here for a printer-friendly version.