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Have you seen the Treasurerís copy?

By Michael Hitchens - posted Friday, 10 June 2011


Perhaps the Treasurer has a different version of the Productivity Commission’s report, Carbon Emission Policies in Key Economies, to that published on the Commission’s website, but nowhere can I find two of the results that the Treasurer claims are key.

The first is the Treasurer’s claim that the report debunks the myth that the rest of the world is doing nothing. Well to a certain extent he is right, since among just 8 of 197 countries that could possibly have been examined there are well over 1,000 policies and programs. Australia alone has 237 of them.

However, surely the Treasurer did not miss the central point that the Productivity Commission made — that all these policies were costing a lot and doing bugger all in terms of emission reduction. So for example, in the electricity sector, on the most optimistic estimates, the Productivity Commission shows that all these policies are saving just 210 million tonnes of CO2-e for a total cost, as measured by subsidy equivalent, of over $18,000 million per annum.

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Yes there is lots of light, sound and movement out there, and here in Australia, but it is not evidence that the world is yet serious about reducing emissions.

Second, the Treasurer finds somewhere in the report evidence that Australia is in danger of falling way behind the rest of the world. In my reading of the report, I could not help noticing how painstakingly often the Productivity Commission warned that nothing in their report could be used to conclude that Australia was ahead, behind or average when it comes to measuring current comparable effort let alone future effort. Indeed, the question of future effort was outside the terms of reference.

To quote the Commission, the partial estimates of effort reported “are not compared with any desirable ‘yardsticks’ about what each country should be doing”.

So what are the take-away messages for Australia?

  • Australia is about average in terms of the amount of money it is wasting on bad policies, Germany is way ahead of everyone on this score.
  • Economy-wide emissions pricing is likely to be the least-cost solution, but no-one yet has adopted this approach.
  • If an economy-wide pricing approach is taken in Australia, the majority of the 237 other policies need to be got rid of otherwise there are likely to be perverse outcomes whereby some of these policies actually increase emissions or at best negate the carbon price.
  • The estimates in the report are of limited use in assessing impacts on the competitiveness of individual firms, and should not be used to water down the amount of assistance required for trade-exposed industry to effect a trade and investment neutral outcome for Australia.
  • Nothing in the report points to Australia being a laggard compared to other countries, nor that our pledge of -5% per cent of 2000 emission by 2020 should be increased.

The Productivity Commission’s report is a very good, independent basis for policy formulation, but already the Government seems intent on ignoring its messages.

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Article edited by Jo Coghlan.
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About the Author

Michael Hitchens is the Chief Executive Officer of the Australian Industry Greenhouse Network.

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