The Gillard Government has today released updated modelling of the impact of a carbon price which confirms Australia's economy will continue to grow strongly at the same time as we cut pollution.
The modelling shows the impact of a carbon price starting at $23, and also includes elements of the Steel Transformation Plan and Jobs and Competitiveness Program that were not included in the initial report released in July.
As expected, the updated modelling shows almost no difference with the previous modelling exercise.
The economy continues to grow strongly under a carbon price, with real gross national income per person growing at an average rate of 1.1 per cent to 2050.
Jobs grow strongly under a carbon price, with national employment expected to increase by 1.6 million jobs to 2020.
Incomes grow strongly under a carbon price, rising by around $9,000 in today's terms by 2020.
Australia's domestic emissions under carbon pricing will fall to nearly half of what they would be without carbon pricing by 2050.
The updated modelling shows an extra 5 million tonnes in domestic abatement over the first three years because of the higher starting price. It also shows manufacturing grows slightly faster over the period to 2020 because of refinements to the Jobs and Competitiveness Program.
The updated modelling shows that the Government measure to apply an effective carbon price to fuel used by heavy on-road vehicles from 1 July 2014 will cut annual domestic emissions by a further 20 million tonnes in 2050. It will also make it cheaper to meet Australia's pollution reduction targets, adding around 0.1 per cent to gross national income in 2050.
The Strong Growth, Low Pollution report released in July already included detailed modelling of the impact of a $23 carbon price on consumer prices. There was no need to update this part of the modelling, which showed a modest price increase of 0.7 per cent in 2012-13. This is small compared to the increase of 2½ per cent as a result of the introduction of the GST. The design of the household assistance package also took into account the $23 carbon price.
The updated modelling covers the main impacts of the Clean Energy Future package on the Australian economy, however including all elements of the plan was not feasible. For example, the updated modelling does not include policies that provide investment and innovation grants, such as the Clean Energy Finance Corporation, because the details of these programs are not yet finalised and cannot be rigorously quantified. Generally, these policies will lead to more investment and lower domestic emissions.
Putting a price on carbon will drive innovation and investment in clean energy technology, moving production towards less pollution-intensive processes. The Clean Energy Future Plan ensures the transition towards cleaner energy technology is achieved at the least cost and in the most effective way.
The updated modelling is available on the Treasury website.
21 September 2011