Ergas does it again

So many questions, so few answers, Julia

I am not an economist, but Henry Ergas, yet again, raises serious doubts about the Gillard governments’ carbon di-oxide tax.

The government has not allowed anyone to examine its model and therefore assess its assumptions. It reckons the USA will reach emission reduction targets without having to bother with a market-based mechanism. Apparently, as Ergas says:

its officials have discovered a way of getting the benefit of a carbon tax without actually having one.

The story gets worse.

THEY DON’T COUNT CLOSING HAZELWOOD

the model does not provide for the mandated decommissioning of the Hazelwood and possibly Yallourn power stations in Victoria. These generators have low operating costs and even with a rising carbon price would operate until at least 2025. Replacing them sooner requires substantial investment in generating plant and transmission. That will need to be paid for. But when?

OVERSEAS PERMITS THAT CAN’T BE USED

The model also assumes unlimited access to permits overseas. Those permits provide two-thirds of our mitigation to 2020, “resulting in lower economic costs”. But the government has now said it will cap purchases of foreign abatement at far less than that.

BORROWING … JUST LIKE GREECE

The modelling assumes emitters can borrow permits from the future. And borrow they do, on a scale that puts Greece to shame.

Yet again. When will we be able to rely on journalists to ask the questions that these facts pose?

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