The debate between Mr Shorten and Mr Turnbull last night demonstrated an unsurprising level of consensus on greenhouse gas mitigation. The Prime Minister talked about the 26-28 per cent reduction of carbon dioxide equivalent emissions (based on 2005 emissions) that the government signed onto in Paris. Bill Shorten like Real Madrid’s Pepe rolled along the turf, howling in apparent agony after a confected foul because this was the same plan that Tony Abbott’s Cabinet had agreed.
Ostensibly, the two parties’ policies are similar – at least until 2030, after which Mr Shorten adopts The Greens policy and does the Full Monty of 100 per cent renewables.
In 2030, the Turnbull 26-28 per cent reduction means reducing emissions by 154-166 million tonnes per annum. Bill Shorten’s 50 per cent renewables means 105,000 megawatt hours of wind/solar electricity (plus 18,000 hydro; Labor continues to dine-out on having blocked the Tasmanian Dam proposal a quarter of a century ago and is unlikely to approve any major new hydro facility). A megawatt hour of coal based electricity equates to around one tonne of carbon dioxide.
Costs of emission reductions vary widely. In 2011 the PC put the cost for Australia at $44-99 per tonne. In 2014, Stern and Deitz put the necessary world price at $US 32-103, rising by 2035 to US$S82-260. In all cases the cost rises with the level of abatement.
If Labor could achieve its 50 per cent renewables at the present price of $80 per Gigawatt hour, the cost would come in at $8.4 billion a year. To this, another $1.5 billion would be needed in back up and grid strengthening in view of the intrinsic unreliability of wind/solar. Labour would also use the planning rules to prevent land clearing and thereby make further reductions, without, of course, providing any compensation for the property rights they thereby seize.
Under the Coalition’s Direct Action buy-outs of emissions, the auctions have averaged a $12.1 per tonne price, with 95 per cent of the reduction having been achieved by “vegetation” – de-rating agricultural land. If such a price could be sustained the 26-28 per cent reduction would be achieved at a relatively modest $2000 to $2,200 billion a year. But if the government believed that they would surely eliminate the renewables target which cost some $80 per tonne – that is they’d get rid of the renewables target if they thought they could get re-elected without the campaign funding provided by the renewable industry from the rents the policy creates. If the costs were $80 per tonne the Coalition program would come in at $12.3 to $13.3 billion a year.
And the Turnbull government is leaving little to chance. The new Safeguard mechanism sets the stage for the introduction of a cap and trade carbon tax by establishing a data base for the top 140 emitters (covering about half of existing emissions).
Most of these costs of emission reductions are hidden in inflated electricity bills. And there is a neat fantasy that the cost will be paid not by households but by business (or, better still, big business). But the costs remain costs and will fall on consumers/taxpayers irrespective of politicians’ hopes. Indeed it is better if they fell directly on consumers since, like the GST, this means a relative lack of economic distortion that undermines production, causing the departure of energy intensive businesses that would otherwise gravitate to Australia. The shift of these industries overseas, of course, means no net effect on emissions, just lower living standards in Australia.
To support their policies our leaders offer dire projections of costs of failing to act. Bill Shorten repeated the ALP policy canard that “extreme events” which once affected one per cent of the earth are now at 10 per cent and that the economic cost will shave one per cent a year every year from GDP. Such views too radical even for alarmists like Stern and Garnaut. The bottom line for costs of warming over the next fifty years according to the latest IPCC report range from 2.5 per cent (Nordhaus 2008) to 0.5 per cent (Bosello et al).
Unwinding this mess would be a bonus offsetting any of the more quirky policies of a Trump presidency.