a place to rant about energy, environment and all things John Howard

Tuesday, August 22, 2006

Howard attacks Labor's 'hidden' plan for a carbon tax


John Howard was out attacking sane and reasonable policy again last week with this press release:

LABOR’S CARBON TAX PLAN

Australians would pay more for electricity while jobs and investment would be exported offshore under Labor’s plan for carbon taxes in Australia.

The emissions trading plan released by the Labor states and territories would impose significant costs on the Australian economy and have zero impact on global emissions and climate change. It also exposes Mr Beazley’s weasel words about the impact on Australian families of his commitment to cut Australia’s greenhouse gas emissions by 60 per cent compared with year 2000 levels by 2050.
He prattles on about jobs in his beloved coal industry for a while, then baits Beattie with this:
...he must unconditionally repudiate this emissions trading plan and Mr Beazley’s hidden plan for a carbon tax.
He then makes this startling claim:
The notion that a $12-$14 carbon tax would have only a ‘small’ impact on the Australian economy is simply wrong.
Ok, lets look at what the ABARE report actually says. As discussed here the ABARE report describes six scenarios. The most likely scenario (were a sane government to be elected) is 2b where early action is taken to reduce GHG emissions, no Carbon Capture and Storage is available (because, lets face it, its nonsense) and no nuclear power is available.

Below is a chart showing the carbon tax imposed and the resulting reduction in GDP from ABARE's business-as-usual reference case:
You will note that a carbon tax of $22/tonne is imposed in 2020 which results in GDP that is 0.71% lower than the reference case. In other words, GDP will be 0.71% less than it otherwise would have been in 2020, a reduction of just 0.05% per year spread over 14 years. If John Howard does not think 0.05% is 'small' then what exactly is his definition of small?

Extending this to 2050, ABARE predicts a reduction of GDP of 3.17% over 44 years (or 0.07% per year). This is despite the carbon tax being ramped up from $22/tonne in 2020 to $157/tonne in 2050.

Howard continues...
One of its scenarios would see coal-fired power generation reduced by 37 per cent over the period 2010-30.
Mr Howard, that is the whole point of a carbon tax, to reduce power generation from CO2 intensive sources such as coal.

Then Howard goes on to quote the impacts of ABARE's scenario 2d, again implying this is the most likely scenario when in fact it is very unlikely that "Australia unilaterally undertakes deep emissions cuts" described.
It found that a 50 per cent cut in Australia’s 1990 emissions level by 2050 would lead to a 10.7 per cent fall in GDP, a 20.8 per cent fall in real wages and a carbon price equivalent to a doubling of petrol prices.

Under this scenario, the cost of carbon would translate into a staggering rise in electricity and gas prices

Interestingly the "600 per cent rise in electricity and gas prices" claim has disappeared, probably because a Howard staffer made it up, or got horribly confused between percentages and dollar values.

Howard then quotes this from the summary of the ABARE report:
Unilateral action to achieve deep cuts in Australia’s emissions is estimated to cost the Australian economy signifi cantly more than not undertaking that action and offers no perceptible additional benefits to the rest of the world — neither in economic terms nor in terms of global environmental benefits...
but neglects to include the rest of the paragraph, that reads:
...(scenario 2d vs scenario 2a, table C). Even under a high carbon tax regime as modeled under the smaller international coalition (scenario 3), Australia is projected to be less worse off when compared with the ‘deep cut’ abatement regime analysed in the report (scenario 2d). Output from key energy intensive industries, nonferrous metals and noncoal energy (oil and gas), is projected to fall by 75 per cent and 60 per cent respectively in scenario 2d, relative to the reference case at 2050. Activity in the agriculture sector would also decline significantly, with output falling by 44 per cent relative to the reference case at 2050.
So again, the nasty economic impacts he quotes in the first part of the paragraph actually refer to the high carbon tax regimes 2d and 3 with carbon taxes in 2050 of $623/t and $525/t respectively (which is a tad more than the $12-$14/t Labor is apparently proposing)

The reality is, Howard has decided (based on ABARE's modelling) that it is better to act late than act early (see ABARE's scenario 1). In other words, let the rest of the world do the hard work of conserving energy and investing in renewables while Australia profits from climate change by exporting millions of tonnes of coal. Makes you proud to be an Australian, doesn't it?

Howard concludes with:
Through initiatives such as our Low Emissions Technology Fund, the Australian Government is pursuing a technology-driven strategy to combat growth in greenhouse emissions. This approach does not sacrifice Australian jobs, investment and export income in advance of an effective global response to climate change. In contrast, Labor simply does not understand the basic realities of Australia’s national interest.
Which in effect says, we are spending taxpayers money to 'pick winners' while those crazy socialists (such as Anthony Albanese) are proposing a market based approach of carbon taxes, cap and trade, and Mandatory Renewable Energy Targets.

What a strange old world we live in.

32 Comments:

Anonymous Tim Burrows said...

I really think that he's lost the plot on this one.
How interesting to see that the 600% reference has been deleted. You picked it!
The frustrating part is that a carbon trading system would also result in "technology-driven strategy to combat growth in greenhouse emissions", but it doesn't limit the response to this.
I'm a technologist at heart rather than a politician, but I get very frustrated when I see politicians bending the truth like this.

Wed. Aug. 23, 09:47:00 pm

 
Anonymous Anonymous said...

Emphasising the costs of doing something about global warming as if there won't be any economic costs to doing nothing about it is a grand deception. Whilst it must be difficult to put numbers to the economic costs of global warming the potential is there for it to be enormous - famine, major loss of arable land, dislocation of large populations and major international conflict are not amenable to the kinds of number crunching that ABARE can do with, say, increasing a tax on particular commodities or types of business.
Ken

Mon. Aug. 28, 08:39:00 pm

 
Blogger Odddmonster said...

I emailed one of the authors of the ABARE report about how the carbon tax was spent in the model. It wasn't used for investment in renewable energy infrastructure, it was returned to taxpaers.

I'm sure that the GDP (if that is truely your measure of performance) would actually be ahead of business as usual if this reinvestment occured, even at a reduced rate.

Mon. Oct. 23, 03:28:00 pm

 
Anonymous Anonymous said...

Does anyone know what the ABARE reference case is for real wages at 2050? That would help put the claims of a 20% "fall" in real wages in context.

Michael

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