The report issued yesterday by Professor Ross Garnaut is emphatic that man-made climate change is real and that Australia must do its part to slow global warming.
However, there is no agreement among the key stakeholders about how we approach that goal, with the result that the Government must act cautiously in the national interest.
Garnaut was criticised by the environmental lobby for using his draft report to recommend a 10 per cent cut in Australia's greenhouse gas emissions from 2000 levels by 2020.
His final report stays with that recommendation but suggests Australia should ''play its full part'' in the more ambitious target of a 25 per cent reduction by 2020 and 90 per cent by 2050.
He maintains that the overall cost to the Australian economy of tackling climate change under either scenario is manageable and in the order of 0.1 to 0.2 per cent of annual economic growth to 2020. He warns that Australia would be the worst-hit developed country if efforts are not made to reduce climate change, but it has the most to gain from global mitigation.
He recommends that the emissions trading scheme, the centrepiece of Australia's mitigation policy, should be established in 2010.
A conference will be held in Copenhagen next year to discuss the next global agreement on climate change, for the post-Kyoto period from 2013. The only chance of containing emissions to necessary levels will be gaining agreement at this conference from all the major economies.
Obviously that is very difficult, as shown by past negotiations. The developing countries resent being told to curb their ambition to achieve the higher living standards in the West.
Garnaut argues that the international mitigation can be done without threatening rising standards of living. He emphasises that any agreement must be practical and he points out the scale of the problem.
The 25 per cent reduction target involves a ''major change'' in the structure of the Australian economy. Consumers would pay more for goods and services as businesses passed on the extra costs. The biggest rise would be for electricity, with the price expected to escalate by 37 per cent by 2020 if the deeper emissions cut mooted was made.
As expected, Garnaut's discussion of deeper targets has alarmed the business community, particularly in the current environment of global market instability. Of particular concern to employer groups is the impact of higher energy costs from an emissions trading scheme on small business.
The question that overshadows the discussion is what impact can Australia make, practically and symbolically.
John Howard was a climate change sceptic until close to the end of his reign. Kevin Rudd's first action was to ratify the Kyoto protocol on climate change. He is promising action that is environmental and economically responsible. This balancing act is posing a difficult political task to all world leaders.
Australia is a relatively high per capita user of energy but a small contributor to emissions on a global scale, whereas China and India have huge populations and are expanding their economies to increase the standard of living.
Australia must take action as a responsible global citizen but our role is complicated by our heavy reliance on coal-fired power stations for electricity and on coal exports worth $25billion a year.
As a middle power reliant on coal, it is not surprising that Australia is taking a lead to try to speed up global efforts to commercialise carbon capture and storage. If proven, this technology would allow coal to continue to be used as an energy source.
Garnaut's suggestion of a deeper cut in emissions has won praise from the environmental lobby which says taking tough action is affordable.
The next step is the issuing of Treasury modelling later this month, which the business community hopes will examine the full distributional impact of climate change measures on sectors such as trade exposed, smaller enterprises and households.
The Government will take into account Garnaut's report as it designs an emissions trading scheme which will be introduced by 2010.
However, the Opposition says the Garnaut report shows that it is reckless to bring in the scheme by that date. It also warns against finalising details of the emissions trading scheme before next year's Copenhagen climate summit or without knowing the policies of the next United States president.
If the Federal Government needed any further warning about taking a cautious approach, that has been delivered by the global financial meltdown.