Kevin Rudd and John Howard both made much of using some of the revenue from greenhouse emissions permit auctions to ensure low-income earners don’t suffer as a result of higher energy prices when Australia introduces emissions trading. But there is another group that could significantly benefit from some permit auction cash that both parties overlooked.

Norwegian finance minister Kristin Halvorsen has floated a proposal to Wayne Swan and fellow finance ministers in Bali that would direct a proportion of all revenue from permit auctions to climate change activities in developing countries.

“A small portion could be withheld from the national [emission allowance] quotas and auctioned by the appropriate international institution,” she told the finance ministers. The revenue could be used to help developing countries adapt to climate change and for other measures to reduce carbon emissions in these countries, she said.

While Norway’s suggestion might be a tough sell to implement at the international level, it is a definite trend at the national level – including in the US.

Ned Helme, president of the Centre for Clean Air Policy pointed out today that the Lieberman-Warner emissions trading bill now before Congress provides for 2.5% of permit auction revenue to go to forest protection measures in developing countries. It’s a small percentage but a lot of money, according to Helme.

The 2.5% would be likely to raise about $US5 billion a year, Helme said. “That’s what Nick Stern said we needed across the globe for deforestation. That’s a big deal.”

Helme said a similar provision would be “easy enough” for Australia to incorporate into the design of its domestic emissions trading scheme, expected to get under way in 2010.

“Let’s say you’ve got your cap-and-trade [scheme] and then you decide that some portion should be auctioned,” he said. “Take a chunk of that – 10% of that – and set it aside for adaptation and technology in developing countries and deforestation as a contribution.”

“It means the Australian program gets its reductions [and] a portion of the money goes and pays for additional reductions,” he said.

Meanwhile, a study released by the Centre for Clean Air in Bali – and presented to a working breakfast of trade and environment ministers at which Australia was represented – might dispel any concern that the developing countries shouldn’t get any cash until they start to more solidly pull their weight.

The report found that policies and laws already on the books in three key developing countries – China, Brazil and Mexico – would deliver far more abatement than the US Lieberman-Warner bill and more abatement than if the EU actually adopts the 30% cut it has flagged it is prepared to consider.

Helme acknowledged the study assumes full implementation – and in the case of China’s energy efficiency law for example that is a big ask – but even with partial implementation the scale of abatement they will achieve is very significant, he said.