05/05/2019

Coalition Is To Blame For Uncertainty Over Climate Costs

SMH - Editorial

For the fifth election in a row, Australia is facing a campaign in which the Coalition is demanding the ALP come clean about the cost of its policies to fight climate change. Yet it is the Coalition which should be under pressure to explain why, after six years in government, it has no plan at all.
The esoteric debate over the minutiae of macroeconomic modelling of climate policy has resurfaced this week after a former executive director of the Australian Bureau of Resources and Agricultural Economics, Brian Fisher, now a consultant, published a 23-page document comparing the economic impacts of the ALP's target of cutting emissions to 45 per cent below 2005 levels by 2030 and the Coalition's plan to only cut by 26 per cent.

Climate change protesters outside Scott Morrison's office. Credit: John Veage
The rather unsurprising conclusion was that the ALP's more ambitious target will probably cost more.
Economic modelling has a place but it can be confusing. While the estimate of the cumulative cost over 11 years of a particular climate change policy may sound like a very big number, often it turns out to be more like a rounding error compared to Australia's $1.9 trillion annual economic output.
Former Reserve Bank of Australia board member Warwick McKibbin, who is just as handy with a model as Dr Fisher, has said the costs would only be a "small fraction" of the economy.
In any case the forecasts of such a complicated decade-long transformation are no more accurate than other long-term economic predictions  and the results will depend entirely on the assumptions put into the modelling machine, which are highly controversial.
One major criticism of Dr Fisher's model is that it assumes that renewable energy is still far more expensive than coal-fired power. That was true a decade ago but technology and mass production have leapt ahead and the cost advantage for coal over a combination of renewables and battery storage has narrowed and on some estimates has even disappeared.
The other crucial omission in Dr Fisher's work is that it fails to attach any economic cost to allowing climate change to go unchecked.  It refers to numerous economic studies but not to the landmark United Nations International Panel on Climate Change report last year, based on thousands of peer-reviewed scientific papers, which predicted that, unless the rise in global temperatures is kept below 1.5 degrees Celsius, the coral of the Great Barrier Reef will die by the end of the century. That would destroy an asset worth about $1 trillion to the economy, not to mention a natural wonder that defines Australia.
Voters will have to choose whether they want the ALP's more ambitious target for reducing emissions or the Coalition's but it is the Coalition which should be ashamed of failing to come clean on the costs of its policies.
For the past six years it has used double speak about the cost of taking action and rising power prices as an excuse for doing nothing at all. It has been paralysed by fear of stirring up the embers of the hostility between its climate denialist right wing and centrists who accept the scientific consensus.
While Prime Minister Scott Morrison has had the chutzpah to accuse the ALP of failing to come clean on the costs of its policies, despite his control of all the bean-counting resources of Treasury to crunch numbers, Mr Morrison has failed to make public a coherent, costed climate policy himself.
After killing off the ALP's carbon tax and then its own National Energy Guarantee plan which enjoyed widespread backing last year, the Coalition belatedly announced a Clayton's climate change policy just before calling the election. The centrepiece is an Emissions Reductions Fund of $2.6 billion over 15 years which would pay for things such as growing trees to absorb carbon. But it is barely more than a thought bubble and there is no modelling or detail.
Mr Morrison continues to claim that Australia will meet its commitments for emissions cuts under the Paris climate treaty "at a canter" even though on official government figures emissions are currently rising. Modelling would provide a reality check on whether the paltry $170 million a year Mr Morrison has allocated in the budget to the ERF will come close to what is required to compensate for that growth and then reduce Australia's emissions down to the required 26 per cent reduction.
Rather than spreading a smokescreen of false rigour to mask its own incoherent policy, the Coalition should explain in detail how its plan will hit the Paris targets and what that will cost. Without that,  Australia could face a sixth election where the same tedious claims about economic modelling take up valuable time that could be better used solving the real problem.

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