Climate plan ‘wrecking ball’ for economy

Labor would have to use credits from exceeding our Kyoto climate change targets to avoid a ‘proxy’ carbon price of almost $700 a tonne.

The Macarthur wind farm in western Victoria.

Labor would have to use credits from exceeding Australia’s Kyoto climate change targets to avoid a “proxy” carbon price of almost $700 a tonne under its plans for a 45 per cent emissions reduction target and 50 per cent renewables target by 2030, according to independent modelling.

This could lead to a 20 per cent loss in economic output from the manufacturing sector, up to a 16 per cent drop in activity in the construction sector and reduced output of more than 60 per cent in the thermal coal sector.

The Coalition would also be forced to adopt international trading of carbon permits to avoid a $263 shadow carbon price under its policy of meeting Paris targets and an emissions reduction of 26 to 28 per cent by 2030.

A final peer-reviewed modelling report by former government scientist Brian Fisher, the former head of the Australian Bureau of Agriculture and Resource Economics who served under the Hawke, Keating and Howard governments as a chief adviser on climate policy, will be released today.

Without trading of carbon permits, modelling shows the economic impact of emissions reduction ranges from $70 billion by 2030 and up to $1.2 trillion under the high-cost scenario.

“The economic impacts associated with emissions abatement result from the introduction of either an explicit or a shadow carbon price,” the report said.

“Australia’s effective carbon price out to 2030 will depend on the policies pursued to reduce our greenhouse gas emissions.

“The two main factors that influence the carbon price are the magnitude of the emissions abatement task and the availability and cost of abatement options.”

The modelling, peer reviewed by Stanford University economists and lead authors to the International Panel on Climate Change, examines six scenarios under both the Coalition’s and Labor policies.

Assuming Labor does not adopt a Kyoto carry-over mechanism or allow for international carbon trading, the implicit carbon price would be $696 per tonne. If it were to adopt both mechanisms, this drops to $97 per tonne.

Under the Coalition’s policy — including its $2.5bn emissions reduction fund — the maximum carbon price would be $263 per tonne. With carry-over, which it has committed to, as well as international carbon trading, this falls to $73 a tonne.

The report suggests Labor’s overall policy of a 45 per cent reduction target and a 50 per cent renewable energy target would constitute a carbon price not significantly greater than the Coalition. Labor, however, has yet to reveal whether it would use a Kyoto carry-over mechanism or carbon trading — the use of which are rejected by the Greens — in its overall climate policy.

Both policies imply a carbon price significantly higher than that projected under the scrapped Gillard government’s carbon tax, which began with a $15 a tonne floor price before being slated to move to a floating price pegged to the European market.

Energy Minister Angus Taylor seized on the report and claimed that, under Labor’s target, the agriculture, construction, manufacturing, coalmining, oil and gas production, and transport sectors would pay a heavy price.

“Regional economies that depend on industries like these will be hardest hit but no Australian will escape the impact of Labor’s economic wrecking ball,” he said.

“Labor’s targets will punish Australian families already struggling with cost-of-living pressures and destroy the industries that have made our economy strong.”

Opposition climate change spokesman Mark Butler said the report was fundamentally flawed.

“Labor utterly rejects this latest attempt at a climate change scare campaign. This isn’t an analysis of Labor policy and its conclusion about the impacts of our policy are not accurate,” Mr Butler said.

“The report assumed storage or firming costs for renewable energy are as high as $200/MWh when we’re already seeing Snowy offering firmed renewable contracts at $70/MWh and these costs are only expected to fall over time.

“This is just another fear campaign, led by the government and Mr Fisher, who prime minister Abbott appointed to his review to end the renewable energy target.”

Labor’s policy requires 1.3 billion tonnes of abatement to meet its 45 per cent emissions reduction target. The report concludes international carbon permit trading would be the only way to minimise significant economic disruption in meeting the targets.