Archives for May 21, 2012

Dear Members of Parliament and Senators

Why is the government insistent on implementing a CO2 price, given that it will not make any difference to the climate, or to sea levels, and most certainly will not “lead the world by example” (as has been so clearly demonstrated at the Copenhagen, Cancun and Durban conferences)?

If the government had been given sound, objective advice it would realise that there is no point in implementing a CO2 price unless the whole world participates. Renowned world leader in all matter to do with CO2 pricing, Yale economist Professor William Nordhaus, says in his 2008 book “A Question of Balance” [1], p19:

“We preliminarily estimate that a participation rate of 50 percent, as compared with 100 percent, will impose an abatement-cost penalty of 250 percent. Even with the participation of the top 15 countries and regions, consisting of three-quarters of world emissions, we estimate that the cost penalty is about 70 percent.”

Treasury estimates [2] suggest the Government’s CO2 pricing scheme will cost about $1,350 billion cumulative to 2050 (undiscounted), or $390 billion (discounted at 4.35% per annum, the rate used in the Nordhaus Yale-RICE model (2012) [3]). This cost may be an underestimate; for example, the compliance cost for CO2 measuring and monitoring apparently has not been estimated.

However, the benefit of the Government’s CO2 pricing will be virtually nil.

Why is the Australian Government so insistent on damaging our economy (and our wellbeing) for no environmental benefit?

Peter Lang

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References:

1. William Nordhaus (2008) “A Question of Balance”, p19,
http://nordhaus.econ.yale.edu/Balance_2nd_proofs.pdf

2. Treasury (2011) “Strong Growth, Low Pollution – Modelling a Carbon Price”, [Chart 5:13]
http://archive.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter5.asp

3. Nordhaus, Yale-RICE Model (as of March 20, 2012)
http://nordhaus.econ.yale.edu/RICEmodels.htm