Dr Peter Martin of the Centre for Excellence in Outdoor and Environmental Education at La Trobe University, writes: The science and economics behind a carbon trading scheme are complex, but the basic ideas are not.As the Government moves to convince Australians it has taken appropriate action on climate change, it’s tricky to unravel the facts from the political spin - where facts can get twisted.Fortunately, knowledge of the impact of atmospheric pollutants on climate is rapidly advancing throughout the world, due to unprecedented concern and funding for research.The dominant scientific view worldwide is that carbon and other human-produced gases are polluting our world and causing our climate to change.Eleven of the past 12 years have yielded the hottest global mean temperatures ever recorded.Australia is one of the hottest and driest continents on Earth, so we stand to be severely affected by climate change.Governments worldwide are acting to curb climate change.The United Kingdom and European Union have already instituted a carbon trading scheme.Roughly 200 years after industrialisation in the Western world, countries such as Australia are now conceding that the price of prosperity may well be irrevocable environmental damage.Australia is a nation that has grown rich from resource exploitation and, like other countries, has until now dumped industrial pollutants cost-free into the atmosphere.The Government’s carbon pollution reduction scheme, to be phased in from July 2010, will start to put a price on that pollution.How does the carbon pollution reduction scheme work, and why is there so much argument about the targets to be reached?The Government’s pollution reduction scheme includes investment in renewable energy, carbon capture technology, and strategies for increasing energy efficiency. However, the core of the scheme is a cap and trade on greenhouse gas emissions, often expressed as tonnes of carbon equivalent gases.The cap means that the Government establishes an upper total limit on how much pollution is dumped into the atmosphere on a yearly basis.The amount of pollution firms produce will be monitored, reported and audited.Having set a total limit on atmospheric pollutants, permits allow industry to pollute provided they have sufficient pollution permits to do so.The permits are either sold or given to industries as a subsidy - the details of which are yet to be fully determined.Permits will initially cost $25 per tonne of carbon equivalent pollutants.An enterprise can then decide what it does with its pollution permits.If an industry can reduce its pollution for less than $25 per tonne, it will no doubt sell its permits to those who can’t contain their pollution emissions.If there are many companies that emit more than they have permits to cover, then permits to pollute will become hot property and supply and demand forces will drive up the price of the permits.Initially, the Government has set a maximum tradeable price of $40 per tonne.Ultimately, how valued the permits become is a function of the cap placed on pollution emissions.In light of the global financial meltdown, the Government fears the cost of a strict pollution level will be financially crippling, forcing industry to pass on higher costs to consumers and squeezing economic health.This is why the Government’s white paper released on December 15, and the press that followed, was so intent on ensuring Australians understood that for many sectors of the population, any increased costs would be compensated.The money for such compensation comes from the sale of the carbon permits in the first place. Pensioners, seniors, carers and people with disabilities will receive additional support, with even Government analysts suggesting such support will overshoot any real cost increases of a lower carbon future.The Government has pledged to protect motorists from higher fuel costs by “cent for cent” reductions in fuel tax for at least the first three years of carbon trading. Vehicle emissions make up eight to 10 of all carbon emissions in Australia.By ensuring fuel prices are unaffected by the scheme, the Government has effectively removed any incentives for motorists to consume less fuel.Central to the scheme is the Government’s belief that in a lower carbon future, consumer behaviour will change.Goods and services that are emissions intensive will cost more, ultimately shifting consumer sentiment to lower more sustainably produced goods and services.Green groups and many eminent scientists, such as Australia’s Tim Flannery, argue that a lower cap and minimal subsidies are essential.A low cap simply limits the quantity of greenhouse gases dumped into the air but, a low cap also provides a demand for permits and so carries added incentives for enterprises to seek new ways to minimise emissions.There is some evidence from existing international schemes that pollution abatement effectiveness has been limited due to over allocation of permits.It’s the argument over the pollution cap that has this week attracted the most attention from industry, politicians and green groups.The Government has proposed a 5 per cent cut in carbon equivalent emissions below 2000 levels by 2020.Australia will only make further cuts to emissions - another 10 per cent - if other developed countries agree to similar measures. It’s in fixing a figure that opinions diverge - largely for two reasons.We all agree that dangerous climate change should be avoided, but what constitutes dangerous change is contestable.Is it okay if most of Victoria’s western district wetlands are dry now?Does it matter that the days of boating on Eppalock are largely gone, or we are arguing among ourselves about who gets to use the limited water from our northern catchments? Is it a general concern that in the past few years the Grampians and Alpine national parks have been razed, that building in lower lying coastal areas is now prohibited, or that storms are increasingly wreaking havoc, fuelling insurance hikes?The Australian Government’s Department of Climate Change reports that a one degree rise in temperature in Australia by 2030 will generate: Up to 20 per cent more drought-months; Up to a 25 per cent increase in the number of days of very high or extreme fire danger; and Increases in storm surges and severe weather events.A two degree rise will certainly mean the end of the Great Barrier Reef, Kakadu wetlands, 80 per cent of current habitat, and will reduce our agricultural productivity by 40 per cent.The second reason fixing an emissions cap is difficult is that we are entering new territory.Scientists are finding it hard to predict warming rates, and hard to accurately predict how much atmospheric greenhouse gases will increase warming.To date the science has tended to underestimate the rate of warming, and underestimate the environmental influences. This makes the setting of a modest cap all the more contestable and ultimately risky.There is a 50/50 chance that without serious intervention we will experience a plus two degree warming in the next 50 to 100 years, a level of warming that would be catastrophic for Australia’s environment. However, this uncertainty gives governments wriggle room.The challenge for the Rudd Government on climate change is more than political: get it wrong and we risk reaching what scientists call the tipping point - a level of global warming that sets up a series of ecological changes that irreversibly speed up the rate of warming.The Rudd Government’s commissioned Garnaut report on climate change preferences a 25 per cent reduction in pollution emissions from 2000 levels. Many scientists agree this is a minimum level needed to stabilise our climate.The Government has chosen to soften the reduction target is as a consequence of the financial crisis.It has chosen to pay attention more to the acute pain bought on by a credit-addicted economy.In so doing it has ignored the chronic illness of a society running on ecological credit and nearing a point of environmental foreclosure.What remains to address this is the power of individuals and communities, such as local sustainability groups, to reshape a way of living more within the carrying capacity of the planet - and it seems it is this mechanism of climate change abatement that will now be most sorely tested.