Modelling for the government by economist Warwick McKibbin finds a more ambitious target of 35% by 2030 would increase economic costs only slightly

This article is more than 5 years old

This article is more than 5 years old

Australia could meet tougher greenhouse gas emission targets without extra economic pain, according to the modelling used by the Abbott government to decide on post-2020 emission reduction targets that have been labelled “pathetically inadequate”.

Modelling for the government by leading economist Warwick McKibbin is understood to have found the Abbott government’s target – to reduce Australia’s greenhouse gas pollution by between 26% and 28% below 2005 levels by 2030 – would reduce gross domestic product by around 0.2% or 0.3% in 2030 if the government dropped its ban on allowing businesses to buy international carbon permits. If the government sticks to the current ban on international permits the 2030 GDP cost would double – to between 0.4% and 0.6%.

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The analysis also modelled a more ambitious target of a 35% emission cut by 2030 and found it would increase economic costs only slightly.

Leading analysts have questioned whether the government can meet even the lower target using its Direct Action policy.

The Climate Institute thinktank has calculated Australia would have to find between $16bn and $37bn a year by 2030 from the federal budget to reach the new emissions reduction targets with Direct Action policy.

The new targets do not require Australia to contribute its share of a goal to limit global warming to 2C.

The Climate Institute has calculated the 2030 cost of the pledge would be $16bn if the government was paying $60 a tonne for emission reductions by 2030 and $37bn if it was paying $135 (as the CCA said would be needed by 2030 to meet a 25% reduction). The first Direct Action auction paid $14 a tonne, but costs increase substantially over time.

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Australia will take the target to the United Nations conference in Paris in December, where other developed countries will make more ambitious pledges. Abbott took the Monday night cabinet decision to the Coalition party room on Tuesday, arguing that it was both domestically achievable and internationally respectable.

But conservationists and climate campaigners said the pledge was “pathetically inadequate”.

Guardian Australia understands that McKibbin, commissioned by the department of foreign affairs, modelled the domestic costs of doing no more than the current 2020 pledge, cutting emissions by 26% of 2005 levels by 2030, by 35% and by 45%. The GDP impacts of 26% and 35% were broadly similar.

The government’s 26% pledge is lower than those made by comparable developed nations including the United States, the European Union and Canada, but the government argues it is proportionate because of Australia’s higher population costs and the higher economic costs of global climate action on coal exports.

Australia will offer 26% cuts as a minimum, with the possibility of a 28% target as the economic costs become clearer.

The US has promised cuts of between 26% and 28% by 2025, or around 41% by 2030; the European Union 40% of 1990 levels by 2030 (around 34% based on 2005 levels); Canada cuts of 30%; and the UK cuts equivalent to 48%. Japan – struggling with the impact of the Fukushima disaster on its nuclear industry – has promised a cut of 25% on 2005 levels. The average of developed nation emission reductions, using the 2005 base year, is about 36% by 2030.

Abbott government's 2030 emissions target dubbed 'pathetically inadequate' Read more

The target is also well short of the cuts that the independent Climate Change Authority recommended as Australia’s fair share of a global effort to limit global warming to 2C.

The CCA recommended a reduction of 40% to 60% on 2000 levels by 2030, which equates to a 45% to 63% reduction from the higher emissions in the 2005 base year.

Labor’s national conference promised to listen to advice from bodies like the CCA, but Labor has not yet committed to a specific target.

Labor has said it will listen to the advice of bodies like the CCA, and wants a target in line with meeting the 2C goal.

“We want to see the modelling before we make a decision, but 26% certainly puts us well towards the back of the pack compared with equivalent countries,” Labor’s environment spokesman, Mark Butler, said.

The chief executive of the Climate Institute, John Connor, said 26% would be “pathetically inadequate” and still leave Australia as “the highest per capita emitter in the world.”

“All the research shows we can reduce our emissions by much more, even with higher population growth,” he said.

Australian Conservation Foundation chief executive Kelly O’Shanassy said “the target proposed by the government is bad news for life in Australia, out of step with other countries and inconsistent with the global commitment to keep global warming below 2C.”

“It’s a defeatist target that shows no faith in the ability of Australians to adapt, innovate and make the transition to a clean economy.”

Both major parties committed to a cut of between 5% and 25% by 2020. Australia is likely to meet a 5% target, primarily because of lower electricity demand and the closure of heavy manufacturing.

The pledge will focus attention on the coalition’s Direct Action policy, which most analysis suggests cannot meet deeper emission cuts without significant modification – particularly to the so-called “safeguards mechanism” which is supposed to ensure that industrial emissions do not undo the abatement purchased by the government with its emissions reduction fund.