$1 a day to save planet

Australian
Friday 31/10/2008 Page: 1

THE Rudd Government has moved to ease fears about the impact of its emissions trading scheme, releasing Treasury modelling showing the scheme is affordable, with households paying up to $7 a week more for electricity and gas and no industries forced offshore.

Long-awaited Treasury modelling released yesterday assumes a modest cut in Australian emissions of between 5 and 15 per cent by 2020, and critically that next year's UN summit in Copenhagen succeeds in reaching a climate change agreement under which developed countries immediately begin to reduce their emissions and developing countries join in the global effort over time.

But industry groups and the federal Opposition expressed immediate concerns that the modelling did not reveal the costs of Australia pressing ahead with a domestic carbon price in the event the world does not reach such an agreement. The modelling finds the carbon price would start at between $23 and $32 a tonne in 2010, depending on the emission reduction target, rising to between $115 and $158 in 2050, and that the trading scheme would cut average annual growth by 0.1 per cent.

Wayne Swan described the imposition on growth as "a whisker". The Government has been facing increasing calls from the Coalition and some affected industries to delay the planned 2010 introduction of the emissions trading scheme until 2012, amid concerns about the impact of the global financial crisis. But the benign forecasts contained in the Treasury modelling were seized on by the Government yesterday to bolster its arguments for proceeding as planned in 2010.

The modelling forecasts that electricity prices will rise by between 17 and 24 per cent and gas prices by between 11 and 15 per cent, but points out that these increases would have a modest impact on household budgets, with electricity bills rising by between $4 and $5 a week and gas bills by $2 a week. Real disposable income grows by 1 per cent a year, under the model, rather than the 1.2 per cent that could be expected if there were no ETS.

Petrol prices would not rise for the first three years because the Government has promised to offset the cost with an excise cut. And it has pledged compensation to help low-income households with their power bills. The Government used the modelling to argue that it was economically responsible to press ahead with emissions trading in 2010, despite the immediate effects of the global economic slowdown.

"What this modelling absolutely shows is there is a way ahead which is both pro-growth and pro-jobs," the Treasurer said. "The Australian economy will continue strong growth while reducing emissions. The earlier Australia acts, the cheaper the cost of action, and many of Australia's industries will become more, not less, competitive. .

It is the case at the moment there are substantial challenges out there in the short term. What we are on about here is the long-term health, wealth, prosperity and sustainability of the Australian nation." But Malcolm Turnbull criticised the modelling because it did not take into account a scenario where Australia engages in an emissions trading scheme and cuts its emissions significantly but the rest of the world does not follow suit." And the Minerals Council of Australia had similar concerns.

"Treasury has modelled the world as we'd like it to be, not how it is. It would be great if developed countries signed on in 2010, if China acted in 2015 and India in 2020. If our global leadership achieves that result they'll be handing out Nobel Peace Prizes. But that is not likely to be the reality," said MCA chief executive Mr Mitch Hooke.

The modelling outlines dramatic global economic changes. But it says this will be because of the long-term impacts of the cost on carbon and not because of short-term decisions by individual industries to move offshore. Fears of such "carbon leakage" are unfounded, it says. The modelling finds that industries such as coal and iron and steel will maintain or even increase their global market share. Industries such as forestry thrive in the new carbon constrained world but aluminium and petrol refining lose global market share. aluminium output in 2050 will be at least 45 per cent below what would be expected in a carbon costless world and 7 per cent below current production levels.

Conservation groups said the modelling showed relatively small differences between the costs of the scenarios to cut emissions by 5 or 15 per cent in 2020 and the Garnaut report's most ambitious scenario of cutting emissions by 25 per cent, and urged the Government to opt for the tougher emissions reduction targets for the sake of the environment.

Only one of the four scenarios modelled by Treasury the one that looks at a 25 per cent cut in emissions by 2020 would give our natural icons like the Great Barrier Reef any chance of survival," said ACF executive director Don Henry. The Treasury modelling confirms that a 25 per cent cut by 2020 is affordable and achievable." The modelling assumes that developed countries reach an agreement to make "comparable efforts" to cut their emissions from 2010, that "high-income" developing countries, including China, agree to cuts from 2015, middle-income developing nations such as India by 2020 and low-income countries by 2025.