Lead Story
Issue No. 61 - October/November 2011
Trading on uncertainty
by Professor Richard Blandy
The main analysis supporting the carbon tax/ emission trading scheme proposed by the Gillard Federal Government is economic modelling undertaken by the Australian Treasury, published on Treasury’s website under the title: Strong Growth, Low Pollution: Modelling a Carbon Price.
Treasury’s modelling is based on the assumption that the world is taking collective action sufficient “to stabilise greenhouse gas concentration levels at around either 550 ppm or 450 ppm by around 2100” (p.2) in order to meet the Copenhagen objective of limiting global warming to “below 2 degrees C above preindustrial levels”. Following Cancun, Treasury’s report says, “89 countries have pledged action, covering 80 per cent of global emissions and over 90 per cent of the global economy” (p.3).
The analysis then proceeds on the basis that a convoy of the nations of the world exists (or will be formed) of sufficient coherence and will to reach one or other of the specified greenhouse gas concentration goals.
The Government’s proposals are analysed only against this backdrop, the “baseline” or “reference” case, in which a global convoy takes the necessary action to prevent climate change, whether we participate in it or not. There is no discussion of why Copenhagen failed to produce such a global convoy with appropriate enforcement powers, nor whether the country pledges that have subsequently been made are likely to be robust or not, nor why commitments in Europe and America, far from strengthening, have moved sideways - or even backwards.
Ross Garnaut’s cost-benefit analysis (Garnaut Climate Change Review, Final Report, Chapter 1) provides one reason why countries may be unwilling to enter into ...
