BAEconomics modelling had been used by energy minister to claim workers face a pay cut of $9,000 under Labor
— Lifting Australia’s emissions reduction target from 27% to 45% by 2030 would increase the implicit carbon price by as little as $24 a tonne, according to new modelling.
The BAEconomics modelling, released on Tuesday, was leaked to the Australian and then used by the energy minister, Angus Taylor, to claim workers face a pay cut of $9,000 under Labor.
However, the study does not model Labor policy because it assumes emissions must reduce by the same amount year-on-year.
The modelling will nevertheless add pressure on Labor to clarify whether it will use carryover credits for Australia beating its Kyoto targets, as the government intends to. Labor has been reluctant to commit to using carryover credits for fear of a backlash from the environmentalist lobby, which regards them as distorting emissions targets.
Labor’s climate spokesman, Mark Butler, told Radio National on Tuesday the opposition is “not interested in dodgy accounting tricks” and wants to achieve “genuine decarbonisation”.
But he again refused to rule out the use of carryover credits, promising only to announce that detail before the election.
The peer-reviewed modelling by the BAEconomics managing director, Brian Fisher, purports to estimate the difference between a business-as-usual scenario, a 27% emissions reduction by 2030 as the Coalition accepted in the Paris climate agreement, and Labor’s policy of a 45% reduction by 2030 with a renewable energy target (RET) of 50%.
The modelling states that it “does not attempt to estimate the possible economic consequences linked to climate change itself”, implicitly ignoring the benefits to Australia of mitigating climate change through stricter targets.
The modelling concludes that reducing annual emissions by 27% by 2030 will cost $263 a tonne per tonne of carbon dioxide.
That cost falls to $92 if carryover credits are used and $73 with carryover credits and international permit trading, which allows Australia’s targets to be met with abatement overseas.
A 45% emissions reduction target by 2030 and 50% RET would cost $696 a tonne, dropping to $326 with carryover credits and just $97 with those credits and international permit trading.
Labor has long supported international credit trading, including them in its policy the last election, and has not ruled out using Kyoto carryover credits.
According to BAEconomics, wholesale electricity prices would be $20 more expensive per megawatt hour if the 45% target were adopted instead of 27%, assuming carryover credits and international trading in both scenarios.
The modelling assumes that emissions reduce linearly year-on-year from 2020 to 2030 and that all Australian domestic sectors contribute to the emissions reductions task.
However, Labor’s policy does not assume a year-on-year reduction and gives it leeway to set a less strict target for 2025 then ramp up with bigger reductions towards 2030.
The modelling also does not account for new policies released by the Coalition to boost its environment credentials, including the $1.38bn capital injection to the Snowy 2.0 pumped hydro project.
Labor says that project will reduce the cost of firming renewable energy to $70/MWh instead of the $200 calculated by the Australian Renewable Energy Agency, the estimate used by BAEconomics.
As Malcolm Turnbull suggested in a draft speech, leaked to Guardian Australia in December, the cost of meeting a 45% reduction target by 2030 “may not be as high as it would appear” if Australia is allowed to start slowly and accelerate emissions reduction towards the deadline year of 2030.
“There is some modelling already from Frontier Economics which suggests that Labor’s 45% target will not result in higher prices,” the early draft said.
In December, Turnbull said the remarks were an incomplete draft, released without authority.
That modelling commissioned by the Australian Council of Social Service (Acoss) and the Brotherhood of St Laurence found that power prices for households would fall by 2030 under four scenarios up to an including an emissions reduction target of 65%.
Similarly, research from the Australian National University suggests the Paris targets can be met at zero cost because renewables are now cheaper than fossil fuels.
The Coalition says it will achieve 200m tonnes of abatement with a 10-year $2bn injection of funds to the rebadged “climate solutions” fund, which pays polluter to reduce emissions.
Butler told Guardian Australia that Labor “utterly rejects this latest attempt at a climate change scare campaign”, likening it to claims the Gillard government’s interim carbon price would result in $100 lamb roasts and wipe out Whyalla.
“This isn’t an analysis of Labor policy and its conclusion about the impacts of our policy are not accurate.”
On Tuesday, Taylor said the BAEconomics modelling demonstrated that Labor’s policies “will have a far-reaching and devastating impact on Australia’s economy”.
“Labor has an aggressive, economy-wrecking target and no plan to get there,” he said. “While Bill Shorten continues to avoid these important questions, the Morrison government is getting on with the job of delivering emissions reductions in a balanced and sensible way.”
Current environment department projections show Australia’s emissions will reach 563m tonnes of carbon dioxide equivalent by 2030, which would equal a 7% cut on 2005 emissions levels. On that trajectory, Australia will only reach the Paris target with carryover credits.
Fisher said that “any significant reduction in emissions requires sizeable economic transformation and that will result in cost regardless of the policy approach”.
“The higher the abatement task and the less policy flexibility that we allow to meet our targets the higher the economic adjustment costs will be,” he said.
by Paul Karp | The Guardian