You can count the cost and it is terrifying

Labor’s climate change spokesman, Mark Butler, is just wrong when he says it’s impossible to cost Labor’s climate change policies.

Sure, it’s hard and assumptions have to be made, and it’s probably best to present a range of estimates rather than a single point.

However, to bring the Parliamentary Budget Office into the argument is disingenuous. The role of the PBO is to model budgetary implications of particular policies. It doesn’t assess the economy-wide costs of policies.

So what do we know?

Labor is running with a 45 per cent emissions target by 2030 and does not intend to use the Kyoto carry-over. This means Labor’s carbon abatement budget is 1.3 billion tonnes by 2030. This is not disputed by Butler.

The Coalition’s target is much lower — 26 to 28 per cent — and uses the Kyoto carry-over. This means the Coalition’s carbon abatement budget is just over 300 million tonnes. It’s plain that Labor’s ­policy will impose much bigger costs on the economy than the ­Coalition’s. There may be benefits in terms of avoided climate change-induced economic damage, but this works only if every other country in the world meets or exceeds its Paris targets.

Only a handful of countries are on track to meet commitments. And China and India are not required to cut emissions before 2030.

One of the dopier things Bill Shorten said in the early stages of the campaign was that the cost of Labor’s climate change policies, all 1.3 billion tonnes of abatement, were the same as the Coalition’s just over 300 million tonnes because Labor would allow companies to purchase international carbon credits.

But here’s the thing: if every country is seeking to meet its Paris targets — and Labor must assume this is the case — then the price of these international carbon credits will rise and probably steeply.

We have already seen the price soar as the EU rejigs regulations that apply to these credits. They are currently trading above $40.

Former executive director of the Bureau of Agricultural and Resource Economics Brian Fisher has undertaken a comprehensive modelling exercise on the costs to the Australian economy of different emission reduction targets.

What his work shows is the ­Coalition’s policies do impose some economic costs but they are manageable. This is hardly surprising given the relatively modest target as well as the use of the Kyoto carry-over. When it comes to Labor’s proposal, the costs blow out. Real wages fall by 8.5 per cent over the period, there are 340,000 fewer jobs and the cumulative loss of GDP is close to $1.2 trillion.

The key is what is called the marginal abatement cost curve, which plots costs associated with emissions reduction targets. Initially there are some low-hanging fruit and the costs are not too high but there comes a point when costs start to escalate. The point of inflexion is around the 30 per cent emissions cut mark.

Labor might want to dispute Fisher’s figures but to do so credibly it has to offer alternative estimates and not prattle on about the use of international carbon credits. Voters deserve to know what they are in for.