If we could translate applause into words, the ovation received by Kevin Rudd in Bali yesterday would serve well as John Howard’s epitaph.

The relief in the world community at Australia coming to its senses is palpable and in his speech Rudd went out of his way to draw a line in history between the old and the new. As one long-term observer said: “It’s incredible to witness the end of Australia’s isolation”.

Setting aside the Prime Minister’s silence on the push for inclusion in the Bali mandate of a 25-40% emission target for Annex I (developed) countries, the speech was as bold a statement as one could expect.

Rudd chose a lot of strong language which he knows will be used against him in the future if he fails to deliver.

“Australia now stands ready to assume its responsibility … Climate change is the defining challenge of our generation … one of the greatest moral, economic and environmental challenges of our age.”

And he promised the assembled delegates that his Government is “prepared to take on the challenge, to do the hard work now and to deliver a sustainable future.”

It is a long fall from such a high peak. Yet, unlike his predecessor, Rudd cares deeply about what the international community thinks of him, and he knows that the hostility to the United States would be nothing compared to the contempt that would engulf Australia if it betrayed its new-found friends.

Privately the Japanese delegation was very worried that Rudd would publicly endorse the 25-40% target range, as it would have been forced to follow suit. But Rudd has left the door open and there are two days of the conference to run, reaching a fever pitch on Friday evening.

In his speech to the plenary session, Rudd committed Australia to supporting a post-2012 treaty with binding emission targets for developed countries as well as “specific commitments” from developing countries. Whatever is decided at Copenhagen, Australia’s signature will be on it.

The Prime Minister signalled a radical shift in the way his Government will approach the environment-economy trade-off.

“For too long sceptics have warned of the costs of taking action on climate change. But the costs of action are far less than the costs of inaction.”

The Prime Minister seems to understand that inaction has been justified by a cost-benefit approach to global warming, in which the economic costs of cutting emissions always seem bigger than the vague future benefits of avoided climate change. The Stern Review adopted the same framework but tried to reverse the numbers.

Stern got the politics wrong because the moral imperatives of global warming are trivialised when they are jammed into a cost-benefit framework.

Rudd’s comments yesterday flag a cost-effectiveness approach in which sets the environmental goal based on the science first, then uses policy to meet it in the best way. Rudd backed this by saying that, after the Garnaut review, the Government will set “robust targets” in the short and medium terms that “critically” will be “informed by the science”.

The emissions trading system will aim at reaching the long-term target of 60% below 2000 levels by 2050. If you start drawing curves, that means Australia’s emissions must peak and turn down in the next few years.

Intended for a domestic audience too, Rudd’s speech signalled to industry lobbyists that they can no longer expect to find a sympathetic ear in Canberra for special pleading. Most of the business community will welcome that.

Rudd is a chess-player; he sees a few moves ahead. He knows that climate change will only get worse and the science more certain and more frightening. Unlike Britain’s Tory leader David Cameron, who knows that his best bet is to be more hairy-chested than Labour on climate change, Brendan Nelson has foolishly reverted to the old scare tactics. Rudd must be laughing.

In declaring at Bali that “the generations of the future will judge us harshly if we fail”, Kevin Rudd knows that those generations will include Australian voters in three years time.