Responsible between them for 42 per cent of the world’s carbon dioxide emissions, the United States and China on Tuesday announced a major deal, which John Quiggin calls the century’s most significant: the US will double the rate at which it reduces emissions (so that its overall emissions will be at least 26 per cent below 2005 levels by 2020), and China will stop its own emissions growth by 2030 and increase the non-fossil fuel share of its energy mix to 20 per cent.

Until now, the Abbott government has used what it claims has been the inaction by the world’s major polluters to justify its own unwillingness to commit to more than a 5 per cent reduction (on 2000 levels) by 2020. The US-China agreement represents what should be a game-changer for Australian policy. Environment Minister Greg Hunt said the government will take the agreement into account in considering higher targets. But its so-called Direct Action scheme – even if it works – doesn’t lend itself to higher targets: more ambitious targets require greater investment, but the Emissions Reduction Fund draws from the budget to pay polluters (unlike the previous carbon price, which provided market-based incentives for companies to undertake their own reduction projects).

The deal threatens to make Australia, with its “nonsense” Direct Action policy (Paul Keating’s word) look decidedly silly at this weekend’s G20 leaders’ meeting, where despite its best efforts to keep climate change off the agenda it may now be front and centre – or a very large elephant in the room. The Abbott government remains steadfastly committed to coal and gas despite the conclusion of the fifth IPCC report – and now there are real risks that China will stop importing Australia’s coal in the foreseeable future. And its stubborn commitment to slashing the Renewable Energy Target risks a real freeze in investment in renewable technologies and, ironically, higher power bills.

Russell Marks