Report on economic impact of carbon abatement challenged

A new report from BAEconomics investigating the potential economic impact of an aggressive carbon abatement program as the country moves to rapidly decarbonise has been criticised for its assumptions and modelling methodology.

The report estimates a cumulative gross national product loss of anywhere between $80 billion and $1.2 trillion by 2030, depending on whether less or more aggressive abatement targets are set.

Examining Labor’s more ambitious target of carbon reduction of 45 per cent by 2030 of 2005 levels, the report details significantly lowered jobs growth.

“Jobs growth is projected to be lower under all policy scenarios with the most serious curtailment in jobs growth under a 45 per cent reduction target with no policy flexibility in the way in which the target is met. Under the reference scenario real wages are projected to grow at 1.95 per cent each year over the decade to 2030,” the report concludes.

The report also details stagnant, and at times decreasing, wage growth.

“Given a 45 per cent reduction target and no policy flexibility in meeting that target, real wages are projected to fall each year over the decade to 2030. The latter result is modified substantially if policy flexibility is adopted,” the report found.

Shadow Minister for Climate Change Mark Butler offered a rebuke to the report, claiming that it assumed a constant price for renewable energy generation and storage.

"The report assumed storage or firming costs for renewable energy are as high as $200/MWh, "when we’re already seeing Snowy offering firmed renewable contracts at $70/MWh, and these costs are only expected to fall over time", he said.

“The report makes no mention of the huge carbon abatement potential on the land, through policies like the Carbon Farming initiative introduced by the last Labor Government,” Mr Butler said.

The Australia Institute also criticised the report's modelling, saying that it is based on ‘flawed assumptions and its conclusions are not valid’.

“While there is legitimate debate on the best climate policy for Australia, it must be based on facts,” said Richie Merzian, Climate & Energy Program Director at The Australia Institute.

“The Energy Minister has the entire public service at his disposal. It is strange that he prefers the work of a consultant to the Minerals Council to the research of his own department.”

“BAEconomics assume firming costs for renewable energy up to $200 MWh when the Government-owned Snowy 2.0 is offering firmed renewable contracts at $70MWh,” said Rod Campbell, Research Director at The Australia Institute.

The BAE report can be found here.

The full BAEconomics report can be found here

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