The Australian Government's Department of Treasury used modelling to assess the economic impact of four potential targets for emissions reductions that may occur as a result of recommendations by the Garnaut Climate Change Review final report and the Carbon Pollution Reduction Scheme (CPRS) green paper.
Treasury estimated the beginning emission price under each of the targets to be:
- $23.00 if the target is a 5 per cent reduction by 2020 and a 60 per cent reduction by 2050, as outlined in the CPRS. This target would be consistent with a global agreement to stabilise greenhouse gases in the atmosphere at 550 parts per million (ppm).
- $32.00 if the target is a 15 per cent reduction by 2020 and a 60 per cent reduction by 2050, as outlined in the green paper. This target would be consistent with a global agreement to stabilise greenhouses gases in the atmosphere at 510 ppm.
- $30.00 if the target is a 10 per cent reduction by 2020 and an 80 per cent reduction by 2050. In his final report, Professor Garnaut recommended this target as part of a global agreement to stabilise greenhouse gas emissions at 550 ppm.
- $52.00 if the target is a 25 per cent reduction by 2020 and a 90 per cent reduction by 2050. Professor Garnaut recommended this as his preferred target as part of a global agreement to stabilise greenhouse gases in the atmosphere at 450 ppm.
The targets recommended by the green paper are preferred by Treasury over the recommendations of Professor Garnaut because these targets are set 'within a more realistic multi-stage global framework', according to Treasury.
Under this framework, developed countries will participate from 2010, while developing countries begin participating between 2010 and 2025.
Professor GarnautÂ’s recommendations are set within an international framework where national emission targets are based on a per capita allocation.
Revenue under the CPRS
During the first year of the CPRS, revenue raised will be approximately:
- $9.37 billion if each permit is $23.00 and all permits are auctioned, or $6.5 billion if 70 per cent are auctioned
- $12.9 billion if each permit is $32.00 and all permits are auctioned, or $9.03 billion if 70 per cent are auctioned
It is the Australian Government's preference to auction 70 per cent of permits, in accordance with the green paper's recommendations.
These figures use Australia's total emissions for 2006, which are 576 million tonnes of CO2. It is intended by the Australian Government that the CPRS will cover 70 per cent of Australia's emissions.
Future emission prices
Treasury's modelling expects that the price per permit will rise in real terms by 75 per cent by 2020 and by 475 per cent by 2050 under the 5 per cent reduction by 2020 and a 60 per cent reduction by 2050 recommendation.
Treasury expects the price per permit to rise in real terms by 78.5 per cent by 2020 and by 464 per cent by 2050 under the 15 per cent reduction by 2020 and a 60 per cent reduction by 2050.
Further information
