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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