The government’s threats of a $400 a tonne climate price are hollow. Their only purpose is a new election scare campaign.
In a continuation of the climate wars, the Morrison government in 2019 weaponised economic modelling to support its claim that decarbonising the Australian economy would be a disaster. But in a dramatic about turn late on Friday, the government released modelling purportedly showing its pursuit of zero net emissions by 2050 would create up to 100,000 jobs and put $2,000 in the pockets, purses and nappies of every man, woman and child in Australia.
No, we will not enjoy peace in our time; the climate wars are about to escalate.
In fact, the only change in Coalition thinking since it blocked carbon pricing in 2009 and scrapped the emissions trading scheme in 2014 is the threat to leafy Liberal-held Melbourne and Sydney seats from well-funded, progressive independents.
Energy minister Angus Taylor escalated the climate wars when on Friday he told the Australian Financial Review https://www.afr.com/politics/federal/technology-v-taxes-coalition-releases-net-zero-modelling-20211112-p598e that If Labor didn’t adopt the government’s policy the only alternative was a $400 per tonne carbon tax.
Not $100 lamb roasts, not a Whyalla wipeout, but a $400 carbon tax on everything.
The Morrison government’s latest scare campaign is not supported by the modelling. The $400 figure comes from a scenario in which no advances in technology occur before 2050 and a prohibition is placed on the use of additional land for carbon storage and on international trading in carbon credits. Under this imaginary, implausible scenario, an extremely high carbon price is left to do all the emissions-reducing work.
Nowhere in recent Labor utterances or in past practice has such a prohibition on carbon storage and trading in carbon credits been considered.
On the contrary, the previous Labor government introduced the carbon farming initiative and promoted international trading in carbon offsets against the Coalition’s virulent opposition.
Ongoing restrictions on carbon farming are, in fact, Morrison government policy https://www.afr.com/policy/economy/how-morrison-stifles-carbon-market-forces-20211031-p594s8
Labor’s climate change minister, Greg Combet, made good progress in negotiating bilateral agreements for the sale of Australian carbon credit units. But the incoming Coalition government ended that when it scrapped Australia’s market-based carbon price.
At Glasgow, as foreshadowed here https://www.afr.com/policy/energy-and-climate/australia-s-clean-little-carbon-secret-20210808-p58gwv agreement was reached on establishing rules to operationalise Article 6.2 of the Paris Agreement to enable international trading in carbon credits that can be counted towards achieving countries’ Paris targets.
While the media demands economic modelling, its usefulness in predicting economic impacts in 30 years’ time takes us into the theatre of the absurd where tickets are free.
Economic models are machines not clairvoyants. They cannot predict the future. There’s no wizard living inside them.
Yet during the 2019 federal election campaign the Morrison government approvingly referenced modelling whose author concluded that Labor’s 45 per cent cut in emissions by 2030 would push up electricity prices by 50 per cent, cost workers up to $9,000 a year and wipe $472 billion from the economy.
That’s the same 45 per cent emissions-reduction target for 2030 that modelling released last month by the Business Council of Australia estimated would boost the economy by $890 billion and create 195,000 jobs.
When we were studying macroeconomic models in my economics honours year at Sydney University, we were warned about GIGO – garbage in, garbage out.
Rather than predicting the future such as pandemics and asteroid strikes, economic modelling depends crucially on assumptions made about another acronym: BAU, or business as usual.
In Australia’s case, what is business as usual? If the modellers are urged to produce a big hit to Australia’s GDP from decarbonisation, they might assume we would still be generating electricity from coal-fired power stations if it weren’t for a zero net emissions policy. But who is going to fund new coal-fired power stations in Australia?
The modelling done for the federal government legitimately assumes that if Australia were to refuse to commit to zero net emissions by 2050, a large risk premium would be attached by international investors to the country’s debt and equity financing, crushing jobs and incomes.
The new modelling assumes the 2050 car market will be dominated electric vehicles that Prime Minister Morrison warned in 2019 wouldn’t tow your trailer, your boat or get you to your favourite camping spot.
In fact, the latest government modelling seeks to quantify the boon to the Australian economy from developing its deposits of lithium and other metals used in the manufacture of batteries for electric vehicles.
Instead of weaponising departmental and McKinsey modelling to frighten voters into believing a Labor government would introduce a $400 carbon tax, the government should rely on basic economic principles as a guide to emission reductions.
Australia has a comparative advantage in renewable energy, in the production of batteries for electric vehicles and households with rooftop solar panels, and in the storage of carbon in soil and vegetation.
We would be mugs to turn our backs on that advantage for the crass political purpose of continuing the climate wars.
Craig Emerson is managing director of Emerson Economics. He is a distinguished fellow at the ANU, director of the APEC Study Centre at RMIT University and adjunct professor at Victoria University’s College of Business. He is also chair of the McKell Institute.