The national climate change adviser, Ross Garnaut, has damned the Rudd Government's carbon policy as a threat to the environment, the national budget and global prosperity.

Professor Garnaut has called on the Government to make urgent changes to the policy that the Prime Minister, Kevin Rudd, announced this week.

Writing in today's Herald, Professor Garnaut urges the Government to keep open the option of a more ambitious cut to carbon emissions to keep alive the prospect of averting dangerous climate change.

While Mr Rudd has limited Australia to a maximum cut to emissions of 15 per cent by 2020, Professor Garnaut writes "the Government should keep the 25 per cent option on the table".

He argues: "Australia cannot play a strongly positive role in encouraging the global community towards the best possible outcomes if it has ruled out in advance its own participation in strong outcomes."

The Government could restore this option without unpicking its overall package, he says.

But Professor Garnaut reserves his toughest criticisms for the Government's plan to compensate the biggest polluters.

"There is no public policy justification for $3.9 billion in unconditional payments to [electricity] generators in relation to hypothetical future 'loss of asset value'.

"Never in the history of Australian public finance has so much been given without public policy purpose, by so many, to so few."

The cost to the taxpayer was likely to blow out further over five years, posing "a large risk to public finances", he writes.

Professor Garnaut is even more alarmed at the dangers posed by the Government's decision to issue free carbon permits to industries exposed to international competition, such as steel, chemicals and paper and pulp.

He writes that this is an act of protectionism that threatened to provoke other countries to follow suit.

He likens the potential to the notorious US protectionism that deepened the Great Depression of the 1930s.

http://www.smh.com.au/news/environment/carbon-plan-fuels-meltdown/2008/12/19/1229189886133.html