What carbon price is right to bite into, not bark at, climate change?

The following conclusions were derived by Dr Stanton based on the sensitivity in climate-economics-models on choices made in the mathematical model for discount rate (the discount rate is used to determine the equivalent present day value of future economic impacts), the degree of climate temperature-change sensitivity and the assumed relationship between temperature increases and economic damage:

· That "a $21 social cost of carbon is a bark, certainly, but it lacks teeth"; and

· That a $200 or higher carbon price is the kind of bite required for a serious emissions reduction policy that shouts to the world that government takes climate change seriously.

On this analysis, the government's carbon tax of around $23-$25 is merely barking at the problem for climate change. Also, the Federal Coalition's Direct Action Plan" has a modest target that may "lack teeth" for tackling climate change. Its goal is to reduce carbon dioxide emissions by 5 per cent by 2020 - but based on 1990 levels - not the 2000 levels adopted by the government.

The challenge for government for taking real action for climate change will be the period 2020-2050. The transition will require government to bite into the problem of climate change. Far more substantial carbon dioxide emission reduction targets will be needed. Continued reliance on carbon-trading systems may mean that the carbon price could soar to $200-$500.

In this situation, will the emissions trading scheme continue to be the most cost-efficient and environmentally-effective means for moving to a clean energy future – whilst ensuring Australia continues to have a strong, growing and diversified economy that is globally competitive?

It is possible that no single action may be clearly superior for tackling climate change when all the dimensions for resolving this environmental problem are assessed; that it may be appropriate to develop a hybrid action for climate change based on a number of alternatives.

Surprisingly, an alternative action to reduce carbon dioxide emissions that was consistent with the environmental concept of sustainable development has not yet been considered.

There is a major difference between action for climate change based on sustainable development and a carbon tax/ETS.

For any action taken for climate change to be consistent withsustainable development, the multiple and competing objectives for sustainability – ecological, economic, social and cultural – must all be considered equally. In contrast, carbon-market mechanisms, like the carbon tax/ETS, have an inordinate focus on economics.

The Kyoto Protocol contains two relevant obligations for reducing carbon dioxide emissions within the framework of sustainable development:

• to "achieve emission limitation and reduction commitments" using a mix of Kyoto Protocol"national measures" that "promote sustainable development"; the carbon tax and ETS are not Kyoto Protocolnational measures(Article 2); and
• to implement policies and measures in such a way as "to minimize adverse effects, including the adverse effects of climate change, effects on international trade, and social, environmental and economic impacts…" (Article 3).