Carbon tax cost to Aussie economy: $30 billion by 2018

Australia's economy with the carbon tax

But who cares when you’re “saving the planet”? The fact that the European carbon price is less than half of Gillard’s starting point is brushed aside. The fact that whatever emissions reductions Australia makes will have no effect on the climate whatsoever is ignored. The pleas from businesses to reduce the initial carbon tax to something much lower (or preferably zero) go unheeded and rebuffed by the arrogant likes of Swan and Combet.

AUSTRALIA faces a $30 billion hit to growth by 2018 if domestic carbon prices remain higher than the European price, according to new economic modelling that will add to business pressure to bring the $23 starting price closer to Europe’s $10.

The modelling, by the Centre for International Economics consultancy, warns that keeping the $23 fixed price regime and the floor price of $15 a tonne – key elements of the current package – will have almost twice the impact on economic growth by 2018 as allowing the Australian price to track international prices.

A higher price in Australia than in comparable international markets could also cost the mining industry a cumulative $4bn and durable manufacturers $1.5bn over six years, the CIE modelling predicts. In a blow to the Coalition’s direct action policy alternative, leading CSIRO researcher Michael Battaglia has warned that the abatement figures in Tony Abbott’s alternative policy are “ambitious”. The centrepiece of the policy – sequestering 85 million tonnes of carbon in soil by 2020 – might only achieve abatement of between 5 million and 20 million tonnes, he said yesterday.

Which is why the Coalition should abandon their direct action policy at the same time as scrapping the carbon tax. Put the funds towards adaptation when required.

The CIE research, commissioned by the Minerals Council of Australia, comes amid projections that slow growth in Europe will mean international carbon prices will not rise significantly above the $10 around which they are currently sitting.

When Australia’s carbon package was announced, Treasury assumed an international carbon price of between $29 and $61. But the European credit crisis caused prices to slump. The research will amplify calls by key business backers of carbon pricing, including the Australian Industry Group’s Heather Ridout and the Business Council of Australia’s Jennifer Westacott for the policy to be rewritten. (source)

Fat chance. Labor doesn’t care about business (or about the climate). They only care about sucking up to the Greens to stay in power and creaming off the revenue from the tax to plug the massive hole in the budget caused by their reckless spending and waste.

Remainder of the article follows.

Last week, Ms Ridout said the difference between the Australian and European prices was effectively “a tax on industry”, while Ms Westacott described the disparity as a concern for the competitiveness of Australia’s industries.

Kevin Rudd, during his failed leadership challenge to Julia Gillard, reignited the debate last month when he said if he again became prime minister he would examine the implementation of the carbon tax within six months and that the scheme should move to a floating price as quickly as possible.

The CIE modelling said that, if global carbon prices remained low, there was a risk the Australian fixed price or the Australian minimum price (in the subsequent three years) would be above the accessible international price and this would have “important implications for the cost effectiveness of the Australian scheme”. “An important consequence of this is that the cost of abatement in Australia could be higher than necessary as the administrative arrangements do not allow the use of relatively low cost international abatement,” the report says. “In 2018, for example, the Australian GDP loss is around two times higher with a fixed and minimum price in place compared with what it would have been without the minimum price (-0.9 per cent compared with -0.5 per cent)”.

Treasury modelling last year as part of the government’s Clean Energy Future Package put the reduction in GDP compared with business as usual at -0.3 per cent in 2020.

Minerals Council of Australia chief executive Mitch Hooke said the CIE modelling “further confirms Australia will have the world’s biggest carbon tax and that the proposed system is a long way from least cost abatement”. “The current carbon tax is being introduced at the wrong time and is the wrong design for our economy,” Mr Hooke said. “It is simply a revenue churn that imposes massive costs without reducing global . . . emissions.”

A spokesman for Climate Change Minister Greg Combet said the initial fixed-price period would provide certainty before the transition to an emissions trading scheme, under which carbon prices would be determined by the market. “The government is including a price floor and ceiling for the first three years of emissions trading to avoid sharp price spikes or plunges,” the spokesman said. “This will reduce risks for businesses as they gain experience in having a market set the carbon price.”

The government was providing a multi-billion-dollar Jobs and Competitiveness Program to provide aid to firms that emitted a lot of pollution and faced strong competition from imports or on export markets, the spokesman said.

“It shields those industries from the full carbon price; in fact, the most emissions-intensive, trade-exposed industries will only face an initial effective carbon price of $1.30 a tonne once you take this assistance into account,” he said.

Opposition climate action spokesman Greg Hunt said the $30bn hit was “an extraordinary indictment of the government’s approach”.