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Wild weather to hit insurance premiums

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Insurance premiums paid by Australian businesses and consumers are likely to be driven higher by extreme weather caused by global warming, a new report has found.

An issues paper prepared by Ross Garnaut, the man charged with advising the Rudd Government on its carbon emissions trading system, says insurance premiums will rise due to the increase of frequency and severity of cyclones, floods, bushfires and hail storms.

Rising sea levels could also heavily affect insurance premiums paid by owners of coastal property, the report says.

Greater information on potential dangers of extreme weather and possible changes to building and other regulations to diminish the damage caused by such events are recommended by the report.

On the broader question of what form a carbon trading system will take, Garnaut told The Australian Financial Review that he does not support firm interim targets for greenhouse gas cuts.

While the ultimate goal of a trading regime should be firm, interim goals should act only as guides in setting-up the carbon trading market and may not be achieved from year to year.

“What matters to the environment is the amount of emissions that are put into the atmosphere over time, not the amount that happens to go into the atmosphere in any one year,” Garnaut says.

“If the goal is to achieve an environmental objective at minimum cost to the economy, you would specify the total emissions budget and let the market determine when permits were used.”

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