Australians paying the price for climate war, says Productivity Commission chair Danielle Wood
The head of the Productivity Commission has warned that Australians are paying the price for second-best policies in tackling climate change, complaining that a carbon tax or emissions trading scheme would be better than policies proposed by the government or opposition.
Commission chair Danielle Wood also complained that decades of policy uncertainty caused by the country’s climate wars continued to increase the cost of tackling Australia’s greenhouse gas emissions.
Climate change policy has been one of the most contentious political debates of the last 20 years. For two decades, the Commission has been advocating for an economy-wide approach to reducing emissions through a carbon tax or emissions trading scheme.
Speaking in Adelaide, Wood said both options now looked “quite attractive” compared to the policies both sides of politics had put in place.
He said Australia had “no apparent appetite” to pursue the best and cheapest policies to tackle climate change. This meant that the commission tried to improve existing policies or cancel particularly expensive ones.
The commission recommended phasing out the government’s expensive subsidies for electric vehicles and fuel tax credits for heavy vehicles using public roads.
It also backed a 75 percent reduction in the amount of greenhouse gases that heavy industries can produce before they enter the government’s safeguard system, which forces affected businesses to reduce their emissions.
The long debate over climate policy has increased the cost of reducing emissions, Wood said.
“Fueling climate wars – continuing to push ‘if’ rather than ‘how’ – is far from bold truth-telling. The ongoing policy uncertainty created by these decades-long cyclical debates has and continues to increase the costs of action,” he said.
Wood said proponents of climate change policy need to recognize there is an economic cost, but inaction would come at a greater cost.
“Actions to reduce emissions constrain options and increase production costs, impacting economic activity and measured productivity growth,” he said.
“But climate change comes with significant economic, environmental and social costs. These are already being felt in Australia and will worsen dramatically without global action.”
This imprint reported on Monday that Australian businesses are doubling their planned spending on building energy-hungry data centers in the coming years.
Wood said Australia now needs to prepare for increasing electricity demand.
“The reality is that Australia needs to build much more generating capacity to replace its aging coal assets before it can meet growing demand from energy-hungry data centres. Whatever your favorite form of energy, this will be a costly exercise,” he said.
“The best evidence shows that battery- or gas-powered renewables are a cheaper way to deliver new energy over the next 25 years than new coal or nuclear power.
“But allowing the market to decide with appropriate signals on emissions and reliability is expected to yield the best results over time.”
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Shane Wright is senior economic correspondent for The Age and The Sydney Morning Herald.Connect with: X or email.
