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Restructuring the Australian Economy to Emit Less Carbon - A Grattan Report PDF Print E-mail
In April, the Grattan Institute released ‘Restructuring the Australian Economy to Emit Less Carbon’. This is a comprehensive report into the impact of the carbon price and associated  compensation and so-called ‘free’ permits under the proposed Carbon Pollution Reduction Scheme (CPRS) assuming a 5% target and therefore a $35/Tonne carbon price (based on Treasury modelling).

At the fundamental level of economic restructuring, the report finds that there is no reason to delay the introduction of a carbon price and that in fact the impact of the proposed carbon price on jobs and business costs would be significantly less than the introduction of the GST or tariff reductions in the 1980s and 1990s.

However, the Grattan report also finds that the free carbon permits and subsidies are largely unjustified - that $20b of these subsidies is a waste and will delay the adaptation of the Australian economy to a carbon-constrained future.

The report finds that:
    * There are large costs to the community of subsidising alumina refining, LNG production and most coal mining as proposed under the CPRS
    * Assistance is justified for the steel and cement industries due to their potential to move offshore to locations without a lower carbon footprint - but that border tax adjustments are likely to be a more effective economic instrument than free permits
    * Targeted assistance for individual workers and communities in the aluminium and oil refining industries - as these industries may move offshore to lower carbon economies.

Despite the lobbying and lines used by many Trade Exposed Emissions Intensive industries, the report uses industry data to show that many of the recipient companies will be internationally competitive even if they receive no free permits. The compensation and free permits currently proposed impose large costs on other Australian taxpayers. The report also notes that ‘“Compensating” these producers is contrary to general principles that industry is not compensated for changes to environmental or health and safety regulation.

LEAN has used this report in a letter to the Prime Minister, Climate Change, Energy and Environment letters to call for the introduction of a robust carbon price.

 
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