PM’s claim of ‘massive and unmanageable costs’ are laid bare by figures showing that a 45% emissions target would cut GDP by a maximum of just 0.7%

The Abbott government has released its own economic modelling of long-term greenhouse gas reduction targets, confirming that the prime minister’s assertions about the costs of more ambitious targets have been incorrect and overstated.

Two weeks ago, Tony Abbott unveiled a new long term greenhouse gas reduction goal of reducing emissions by between 26% and 28% of 2005 levels by 2030.

One day before that announcement, the Daily Telegraph revisited modelling done in 2013 for the Climate Change Authority of a 44% emissions reduction target, in a front-page story headlined “ALP’s $600bn carbon bill”. That dollar cost was based on a calculated 2% reduction in growth in 2030, and the paper argued this cost was attributable to Labor because the party has said it would base its long-term targets on up-to-date advice from the CCA. Labor has not yet announced its preferred 2030 target.

Abbott then used the same figure to claim Labor’s policy would “hit our economy with massive and unmanageable costs, massive increases in power prices, massive increase in the hit on families’ cost of living” and repeated the claim that growth in 2030 would be 2% lower.

He cited the government’s then unreleased modelling to claim its own plan would impose a far lower economic burden, shaving just 0.2% and 0.4% from Australian GDP in 2030, but did not answer questions about what his modelling had concluded about the cost of deeper cuts.

But when the modelling was finally released by the government on Friday it confirmed exclusive reports in Guardian Australia that it had found a 35% target would cut only 0.3% to 0.5% from GDP in 2030 and a 45% target would cut between 0.5% and 0.7%.

Last week, the head of the independent climate change authority and former Reserve Bank Governor Bernie Fraser described the prime minister’s claims about a $600bn hit and a 2% economic impact as “weird” and “misleading”.

Environment minister Greg Hunt issued a retaliatory statement, still claiming “the modelling clearly shows the cumulative hit to GDP from Labor’s carbon tax would be more than $600bn by 2030 in nominal terms”.

In an interview last week with Guardian Australia, Fraser insisted the government’s assertion was wrong and explained that it was derived by comparing a 44% cut with the unrealistic scenario of what economic growth would look like neither Australia nor any other country did anything to address climate change at all.

“Some people who don’t understand modelling draw inferences that really can’t be drawn,” he said. “This is a good illustration of the difficulties modelling can create when misinterpreted to derive misleading meanings.”

“This $600bn figure is not drawn from any logical process and it becomes weirder and weirder the more that you look at it. It compares a scenario where Australia has a 44% target by 2030 and the rest of the world is taking very strong action, with a scenario where Australia has no target and does nothing and the rest of the world does very little, almost nothing at all. It is the inferred cost difference between those two scenarios.

“If you wanted a figure with some logical credibility or relevance you would model the cost of the government’s 26% target and a 40% target for 2030 and look at the difference between those two.” This is effectively what the government’s own modelling had done.

The government’s modelling, done by leading economist Warwick McKibbin, compares a 26%, 35% and 45% target with the costs of doing nothing more after achieving Australia’s 2020 emissions reduction target.

Stated another way it found that, with a 26% target, the economy would grow by an average 2.14% a year between 2020 and 2030, under a 35% target it would grow by 2.12% and under a 45% target by 2.09%.

It found that Australia and Canada face larger economic impacts from acting on climate change than other developed economies, including the United States and European Union and that the Australian sector hardest hit would be coal production, which would decline by 14.3% by 2030.