The Economic Impacts of Deep Cuts to Australia's Greenhouse Emissions

By Dodds, Steve Hatfield | Ecos, December 2006 | Go to article overview

The Economic Impacts of Deep Cuts to Australia's Greenhouse Emissions


Dodds, Steve Hatfield, Ecos


There is an emerging consensus that avoiding dangerous levels of climate change will require high-income nations to reduce their greenhouse emissions footprint by 60-90% from current levels by 2050. While this is an enormous task, contrary to some views economic modelling of deep cuts in emissions suggests that sensible policy options can achieve reductions of this magnitude with only modest social and economic impacts. Steve Hatfiled Dodds explains why.

Economic modelling of a 60% reduction in emissions was undertaken for the Australian Business Roundtable on Climate Change (ACG 2006). This assumed that Australia begins serious reductions in emissions from 2013, as part of global action. Reductions in emissions are driven by tradable emissions permits, which are auctioned annually after a 10-year transition period.

This raises significant revenues, which are used to reduce personal income tax and company tax. The scenario assumes that the entire emission reduction is achieved within Australia (without 'buying in' credits from overseas), that carbon capture and sequestration is feasible and becomes cost effective between 2020 and 2025, and that nuclear electricity is not introduced.

Impacts on economic growth and real incomes

The headline economic result is that GDP grows at 2.1% per annum with early policy action, rather than 2.2% per annum without any further action--noting that the modelling does not take account of any possible direct impacts of climate change.

Living standards, meanwhile, continue to rise: private consumption per person rises 80% above inflation over the 45 years to 2050 with policy action, rather than increasing 91% without emissions reductions. Other economic modelling indicates broadly similar impacts, although details vary across models and scenarios (see EFF 2006, Grubb 2006).

Decoupling economic activity and environmental pressure

Introducing an emissions constraint gives economic value to emissions reductions and motivates action. Direct emitters, such as electricity generators, change their fuel mix (away from coal towards natural gas and renewables), and introduce new technologies such as carbon capture and storage as these become cost effective in light of a rising 'carbon price: Energy users --including consumers and other businesses--choose more energy efficient appliances and technologies, which can reduce energy use while maintaining or improving the underlying energy service provided (such as a hot shower or commuter travel). They also change consumption patterns over time towards products and services with lower embodied emissions and energy. The increased attention to emissions and energy efficiency also has an important role in supporting environmental awareness and helping to identify win-win opportunities to reduce costs and improve the efficiency of resource use.

Revegetation projects also benefit from the introduction of the carbon signal, which provides a new revenue source for biodiversity plantings and other 'carbon sinks' that offset emissions.

The modelling suggests these policies effectively decouple emissions and energy use from economic growth. As shown in Figure 1a, without further policy action these three key variables are all projected to rise substantially. Figure 1b shows that policy action effectively decouples economic activity from energy use and greenhouse emissions--resulting in static energy use (implying falling energy use per person) and very significant reductions in emissions, while maintaining strong economic growth. This decoupling is achieved through improved energy efficiency, adoption of low emissions energy technologies, and some reductions in demand for energy intensive goods and services.

[FIGURE 1 OMITTED]

It is worth contrasting the magnitude of the economic and environmental impacts of this set of policies. Annual emissions are 60% lower than current levels, rather than 77% higher. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Economic Impacts of Deep Cuts to Australia's Greenhouse Emissions
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.