The government’s decision to target net-zero emissions by 2050 will leave each Australian nearly A$2,000 better off by then compared to no Australian action.
That’s what we were told in a six-point summary of the government’s economic modelling released at a press conference on Thursday October 26, days before the prime minister left for the Glasgow climate talks.
Prime Minister Scott Morrison said at the time the actual modelling would be released “in due course”, later clarifying that it might not be released for a fortnight, after which the Glasgow climate talks would be almost over.
The 100-page government summary of modelling prepared for it by the consultancy McKinsey & Company was released on Friday afternoon as the climate talks were concluding.
The document tells us both how the result was arrived at and the question that was asked.
The question that was asked
McKinsey was asked to compare economic outcomes in 2050 after 30 years of “no Australian action” with economic outcomes in 2050 after 30 years of “the plan”.
“No Australian action” meant that every country other than Australia cut its emissions to net-zero by 2050, and that every country other than Australia did whatever else was needed to hold global warming to 2°C.
Australia would find it harder to raise money because of its reluctance to commit to net-zero (meaning its borrowing costs would incorporate a “risk premium”) and would get access to only those improvements in technology that were available elsewhere.
“The plan” involved Australia continuing “to invest in technological breakthroughs,” acting as an “enabler to support consumer choice and voluntary adoption of other technologies”.
Australia would adopt a target of net zero by 2050, escaping a risk premium.
The government would invest more than A$21 billion to support the development and deployment of low emissions technologies including clean hydrogen, ultra low-cost solar, energy storage, low-emissions materials, carbon capture and storage and soil carbon to 2030, and continue to play a “direct role” beyond that.
Otherwise, emissions would be reduced on “a voluntary basis”.
Importantly, and so the size of the voluntary action can be incorporated into the modelling, the voluntary emissions reductions are assumed to be the same as what would be expected if Australians faced a carbon price (or tax) that climbed to A$24 per tonne of carbon dioxide equivalent by 2050.
Emitters finding it hard to cut emissions as much as they or consumers or investors wanted would be able to buy international “offsets” (overseas emissions reductions) at a price that would climb to A$40per tonne of carbon dioxide equivalent by 2050.