Carbon Pollution Reduction Scheme - Treasury Report On The Economics of Climate Change Mitigation

Treasury Report On The Economics of Climate Change Mitigation

The Australian Treasury's report on the economics of climate change mitigation was released on 30 October 2008. The report was a key input in determining the structure and targets for the Carbon Pollution Reduction Scheme.

The Treasury’s modeling demonstrated that early global action to reduce carbon emissions would be less expensive than later action and stated that a market-based approach allows robust economic growth into the future as emissions fall.

The report also stated that:

• many of Australia’s industries would maintain or improve their competitiveness under an international agreement to combat climate change
• even ambitious goals would have limited impact on national and global economic growth
• Australia and the world can continue to prosper while making the emission cuts required to reduce the risks of dangerous climate change.
• Households would face increased prices for emission-intensive products such as electricity and gas, however real household income would continue to grow.
• Strong coordinated global action would reduce the economic cost of achieving environmental objectives, reduce distortions in trade-exposed sectors, and provide insurance against climate change uncertainty.
• There are advantages to Australia acting early if emission pricing expands gradually across the world: economies that defer action face higher long-term costs, as global investment is redirected to early movers.
• Australia’s aggregate economic costs of mitigation are small, although the costs to sectors and regions vary. Growth in emission-intensive sectors slows and growth in low- and negative-emission sectors accelerates.
• Allocation of some free permits to emission-intensive trade-exposed sectors, as the Government proposes, eases their transition to a low-emission economy in the initial years.
• Broadly based market-oriented policies, such as emissions trading, allow the market to respond as new information becomes available.