Early action on emissions pricing economically sound: report

Treasurer Wayne Swan and Climate Change Minister Penny Wong have released the results of one of Australia’s largest and most complex economic modellings of climate change policy.

The report, Australia’s low pollution future: the economics of climate change mitigation, estimates the national, sectoral and distributional impacts of the four emission reduction scenarios over the medium and long term.

Dismissing widely publicised arguments that the rushed introduction of emission pricing by 2010 would hamper the Australian economy, the report argued only early action could ensure the cost-effective transition to a low-emission economy and sustainable growth.
“Economies that act early face lower long-term costs, around 15 per cent lower than if Australia delays until internationally agreed action…Economies that defer action face higher long-term costs, as global investment is redirected to early movers,” the report said.

“Australia’s comparative advantage will change in a low-emission world. With coordinated global action, many of Australia’s emission-intensive sectors are likely to maintain or improve their international competitiveness.”

According to projections based on the Carbon Pollution Reduction Scheme (CPRS), carbon emission prices would be between $23 and $32 per tonne, with a rise in the consumer price index of around only one per cent in 2010.

Households can expect a rise of $4-5 per week on electricity and an additional $2 per week on gas and other fuels. The increased expenditure is expected to be offset by additional government assistance.

The report said while some high-emission sectors would be hit by the CPRS during the initial course of its implementation, the negative impacts would be minimised by complementary measures.  

“Emission pricing is expected to result in early retirement of some emissions-intensive plant and capital, and lead, at least initially, to slightly slower growth in wages and some redistribution of employment.

“However, these impacts are likely to be restricted to firms in a few specific industries…and could be managed through effective structural adjustment assistance,” it said.

It also said a structural shift driven by pricing emissions would accelerate the development and deployment of new low-emission technologies and renewable energy such as solar power, wind energy and geothermal energy.

The Government has set a Mandatory Renewable Energy Target of 20 per cent by 2020, with a long-term greenhouse gas emission reduction target of 60 per cent below 2000 levels by 2050.

The report and related information can be viewed here.

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