The Productivity Commission keeps talking about the efficient carbon price for Australia.
They say that Australia’s efficient carbon price in a world without a ‘global’ carbon scheme would be less than one third of western Europe’s efficient carbon price.
At the same time the hit to Australia’s economy would be one-third bigger.
The Commission’s work to date poses the question of why some international body such as the Organisation for Economic Cooperation and Development is not calculating “effective” and “efficient” national carbon prices in the absence of a global deal.
I’ve done a search to try to find a definition of ‘efficient carbon price’ so far without success.
Here’s another term they use: ‘These measures will facilitate comparison of the [u]cost-effectiveness[/u] of different measures within and across countries.’
‘For example a country that adopts more inefficient (and hence high cost) abatement opportunities may be given greater ‘credit’ than a country that achieves the same abatement at a lower cost.’ Productivity Commission
So if one country spends more to achieve exactly the same result as another country (carbon emissions from the same type of vehicle reduced by the same amount costs US$120 in one country and US$100 in another country say) then the Productivity Commission is saying that the country paying more (less efficient) would get more ‘credit’.
Is this how it works? Is it the cost or the reduced emissions that are compared internationally. Surely the international community is demanding reduced emissions.
The Productivity Commission also compares the effect on an economy:
‘A high explicit carbon tax or abatement subsidy does not necessarily indicate that a country experiences a greater proportionate impact on its economy or emissions than others.’
So country A may have a carbon tax of 10% and country B a carbon tax of 5% but the effect on country A’s economy may be the same as country B’s. And also even by setting the carbon price at twice that of country B it does not mean that country A will achieve twice the carbon abatement.
In fact it almost seems like the Productivity Commission is unable to come up with any way of estimating the abatement that would be achieved by any particular level of carbon price for any particular country. They do make the point over and over that the methodology for this research is very complex to try to get a grip of what measures to use.
Trying to understand how we measure things like carbon emissions and what pricing mechanisms result in what changes is a very important part of the challenge.
Here is a ratio the Productivity Commission refers to:
Average cost uplift for electricity per MWh / Carbon intensity of baseload generation
They say this does not equal the figure you’d set for a carbon price to achieve the same level or cost of abatement.
I don’t feel much wiser if at all!
Gary Banks in charge of the Productivity Commission study finishes: ‘Strolling past the office of one of the team members engaged in this work I overheard the comment ‘this stuff is doing my head in’.’
I can understand why. The report does not make it much clearer although it does highlight some of the problems. It seems to use a lot of undefined terms – NOT a good thing.
There never was any definition of ‘efficient’ carbon price given in the report. NOT good to introduce vague undefined terms into the language where they get used without ever having a clear meaning in the first place.