The government can achieve its target five per cent emissions reduction through its direct action scheme at a cost of $7-10 billion, an economist says.
Danny Price, managing director of Frontier Economics Australia, said on Tuesday the task would depend on the difficult issues of scheme penalties and baselines which the government had yet to announce.
Initially the coalition proposed a $10.5 billion direct action fund out to 2020 but has now revised that down to $2.55 billion to 2018.
Mr Price said there would certainly be funds beyond this initial four year forward estimates period, although he couldn’t say just how much more would be needed.
“It will depend very much on where the government sets the baselines and the nature of the penalties that are applied, but in the order of $7-10 billion, but probably on the lower end of that range. That includes the $2.55 billion,” he told ABC television.
Mr Price is one of a small group of economists who favour direct action rather than a carbon tax to reduce carbon emissions.
He said a couple of years ago the then opposition invited Frontier Economics to review costings and assess whether their proposed range of abatement measures were consistent with the literature.
“In both cases we concluded that the costs were reasonable and the level of abatement was very consistent, probably on the conservative side of the evidence available at the time,” he said.
Mr Price said a carbon tax worked as a stick whereas direct action was a carrot.
But it also included penalties.
“Direct action comprises both a reward and also a penalty. So if any producer comes along and starts to emit at a much higher rate than they did before, that penalty could cut in,” he said.
“Very much, the focus is on encouraging greater quantities of cleaner energy or cleaner forms of production.”
