The Committee for Economic Development of Australia has called on the government to establish a social price on carbon as a foundation for policy and investment decision-making to mitigate climate change.
The Australia’s economic future: an agenda for growth report also identified climate change as one of the key areas that needs to be addressed to drive growth in Australia to 2020.
“CEDA has identified 10 key areas where action needs to be taken which are: innovation; competition policy; education; workforce participation; infrastructure; fiscal resilience; tax reform; federalism; workplace relations; and climate change,” CEDA chief executive Professor Stephen Martin said.
Policy actions the report recommends include long-term planning for infrastructure development and improving educational outcomes.
“To maintain Australia’s economic prosperity and ensure we continue to create high paying jobs of the future, Australia needs a genuine growth agenda to improve our competitiveness, increase economic flexibility and drive investment in economic infrastructure and our people,” Professor Martin said.
In relation to climate change, the report calls for the establishment of a National Risk Register that can determine strategies for both the public and private sectors.
“To make the largest contribution possible to mitigating climate change, a social cost of carbon should be determined and, along with an assessment of the real option value of alternative strategies, used as a basis for allocating public funds,” the report stated.
The social cost of carbon is defined as an estimate of the economic damages associated with a small increase in carbon dioxide and other greenhouse gas emissions in any given year. The dollar figure also represents the value of damages avoided for each tonne of emissions reduction.
The social cost of carbon is meant to be a comprehensive estimate of climate change damages and includes changes in net agricultural productivity, human health, property damages from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for airconditioning,” the report said.
It said the United States of America Environmental Protection Agency uses forecasts of the social cost of carbon emissions as the basis of setting regulations, some of which target carbon dioxide emissions, such as car and truck standards.
“Other regulations have set standards for conventional or toxic pollutants that indirectly affect carbon dioxide emissions, such as the final rule-making to control mercury and other toxic air pollutants from power plants. The EPA estimates that the social cost of carbon in 2050 could range from $26 through to $212 per metric tonne of carbon dioxide.”
The CEDA report makes a number of other recommendations, including endorsing a push to ensure that low emissions generation sources – including wind power and nuclear energy – gain a social license to operate.
It also called for a “real options investment approach” that can provide a “transparent and objective basis for comparing the costs and benefits of different policy approaches and enable the nation to maximise the net benefits (gross benefits less costs) of its actions”.
To implement this, it said the federal government should develop estimates of the levelised cost of energy for a range of energy sources, and forecast the future costs over time for greenhouse gas emissions to determine the net present value of alternative low greenhouse gas emissions technologies.
- Read the full report