What the carbon caps will cost

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The Reserve Bank of Australia's quarterly Statement on Monetary Policy (6 Feb, 09) contains the latest estimate—using the Treasury model, is my guess:

"Overall, assuming an emissions permit price of $25 per tonne of CO₂-e, it is estimated that the net result will be to reduce GDP growth by less than 0.5 percentage points in total, spread over the first couple of years following the introduction of the CPRS, with a reduction of about 0.1 percentage points per year thereafter.4 These effects, however, must be considered against the longer-term costs of not taking steps to ameliorate the negative effects arising from climate change." extract from Statement on Monetary Policy

That may sound pretty modest…until you express the income loss in dollars and cents and ask yourself what we're buying with our money (and our childrens').

Based on the RBA's estimate of the traded contract price, the income loss is equal to about 7¢ in every the dollar of projected income in 2011 and 2012 and about 3¢ in the dollar every year thereafter. But for what benefit?

The targets proposed by the Rudd government (cutting CO₂ emissions by a quarter from the 2020 business-as-usual level), although modest compared to the crazy designs of the IPCC will be worthless gestures given that China, the world's largest carbon emitter (and growing) has declined to limit carbon outputs more than is required by productivity improvments?

Tags for this entry: trade climate policy carbon kyoto cap and trade emission