What if the climate alarmists are right and the global average atmospheric temperature emerges from its current pause to climb at a sustained rate that is unprecedentedin the past century and a half? Headed for an increase of, say, 4° celsius by 2001? How will the Gillard Carbon Tax help avoid that outcome? The short answer is: not at all.
Even if we assume that the proposed tax actually leads to the government’s target of a 5% cut in Australian carbon-dioxide emissions and we assume the U.N. scenarios for a large positive climate sensitivity to emissions is correct (implausible), a 5% cut in our 1% share of global emissions will shave three-quarters of one-thousandth of a degree from the global temperature by the year 2100 (the time-frame of U.N. estimates). Details of my estimate over the fold. UPDATE: Dr David Evans, formerly a carbon-accounting modeller for the Australian government has released a more sophisticated estimate that arrives, however, at the same value as I do (about 0.0007°C)
Although useless, Ms Gillard’s carbon tax might not have a huge impact on Australians’ economic welfare in the short term. But there is a much more important long-term loss that concerns me.
A compensated tax will comprise transfers between Australian income groups (depending on the design of the tax-funded consumer offsets) and from households to firms if the pricing behaviour discovered in Europe also applies in Australia. These transfers are socially unnecessary but cannot be counted as an economic loss.
Actual economic losses are likely to comprise transfers from Australian manufacturing and farm/food sectors to foreign competitors whose imports will be untaxed; the tax on resources exporters that they will not be able to pass-on to customers and may or may not be restored in the form of compensation and, inevitably; disproportionate transaction costs owing to wasteful lobbying, bureaucratic empire-building, collection costs etc. etc.
But the biggest costs of Ms Gillard’s u-turn on a carbon tax may be that it diverts government focus at a crucial point in our economic history. The carbon tax debate is frittering away political energies that should be devoted to urgently needed growth reforms on indulgence of a mad Greens’ agenda that can only make us poorer and less able to meet the real demands of the future.
A rough estimate:
Cut in Australian emissions: 0.05
… and global emissions (given our 1% share): 0.0005
Assuming (with the U.N.) a climate sensitivity of 3°C to a doubling of CO2 equivalent, the impact of the Australian emission cut on global temperatures : 0.0005/2 * 3 = 0.00075degrees.