Australia’s median abatement effort

Bang for the buck in emission abatement

The Pro­duc­tiv­i­ty Com­mis­sion is evi­dent­ly reluc­tant to make any defin­i­tive find­ing on either the costs of abate­ment in dif­fer­ent coun­tries or the effec­tive­ness of the “myr­i­ad” poli­cies affect­ing car­bon emis­sion prices. Their report relies on “rough esti­mates” in the absence of detailed data and the exten­sive (econ­o­my-wide) mod­el­ling that would be need­ed to make any firmer esti­mates. Accord­ing­ly, they reach very cau­tious, qual­i­fied con­clu­sions.

But, over all, it would be fair to say from their esti­mates that Aus­tralian poli­cies already make rough­ly the “medi­an” effort to abate car­bon emis­sions —con­tra­dict­ing the Gillard/Garnaut asser­tion that we’re “falling behind”—and that we are achiev­ing about as much as oth­er economies (more than some) in returns on those pol­i­cy-induced costs.

Here’s a pré­cis of the Com­mis­sions’ own sum­ma­ry: the key points in a cou­ple of hun­dred words…

The Commission’s esti­mates… are nec­es­sar­i­ly par­tial and sen­si­tive to a range of assump­tions.
  • The resources com­mit­ted by dif­fer­ent coun­tries to emis­sions-reduc­tion poli­cies in elec­tric­i­ty gen­er­a­tion are esti­mat­ed to vary as a pro­por­tion of GDP, with Ger­many being well in front of all oth­er coun­tries, fol­lowed by the Unit­ed King­dom, with Aus­tralia, Chi­na and the Unit­ed States ‘mid-range’. The cost effec­tive­ness of these actions in achiev­ing abate­ment has also var­ied wide­ly, both across pro­grams with­in each coun­try and in aggre­gate across coun­tries…
  • Price-based instru­ments (such as the Euro­pean Union ETS) appear to be rel­a­tive­ly cost effec­tive — at least where they are not crowd­ed out by oth­er poli­cies…
  • In some cas­es, a mul­ti­plic­i­ty of poli­cies appears sim­ply to be dri­ving up costs and reward­ing [ener­gy] pro­duc­ers for vir­tu­al­ly no addi­tion­al abate­ment.
While lend­ing empir­i­cal sup­port for the rel­a­tive cost effec­tive­ness of pric­ing approach­es, the esti­mates and analy­sis in this report pro­vide lit­tle guid­ance in them­selves as to what the appro­pri­ate start­ing price of an ETS should be. And while the Commission’s price uplift esti­mates are rel­e­vant to issues of com­pet­i­tive­ness and car­bon leak­age, they are high­ly pre­lim­i­nary. Sub­stan­tial­ly more infor­ma­tion would be required to make a prop­er assess­ment” Extract from the Pro­duc­tiv­i­ty Commission’s Car­bon Price Review

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