The government’s push for a price on carbon has received a boost from the OECD.
Its economic survey of Australia says the setting of a price “sooner rather than later” is the “best option for cutting CO2 emissions”.
Julia Gillard repeated her commitment to a carbon price in a major speech on policy priorities last week, saying: “The best way to cut carbon pollution is with market-based tools.”
The OECD warns that attempts to cut emissions through regulatory and subsidy arrangements could be more than twice as high as the costs of market-based approaches.
“Past experience has also shown that using subsidies to reduce emissions would involve large and ongoing fiscal costs with substantial administrative and compliance costs to promote new genuine emission reduction activities,” the survey says.
However, it does not express a preference for a carbon tax or an emissions trading scheme.
The OECD also cautions that postponement of a carbon price is delaying energy investments, saying: “Potential builders of energy-efficient, low-carbon-emission, gas power plants are reluctant to invest because they are not competitive today, and there is no guarantee that an ETS or carbon tax will put them on competitive terms with coal in the next few years.”
Greens deputy leader Christine Milne said the survey backed her party’s position in their negotiations with the government on a carbon price, adding that it “puts Tony Abbott’s opposition to shame”.
Climate Institute chief executive John Connor said the OECD’s findings meant the Coalition needed to find a “dignified” way of abandoning its policy of direct action.
“They run the risk of being locked into the wrong side of history on this issue,” he said.
Opposition climate action spokesman Greg Hunt said the government’s “cash-for-clunkers” scheme was an example of subsidies slammed by the OECD. “At $394 a tonne of CO2 reductions it is arguably the most expensive emissions program in the southern hemisphere.”
