Productivity Commission stumped by effective carbon price question

The Productivity Commission has essentially admitted it’s not possible to produce the credible estimates of effective carbon prices (i.e. dollars per tonne of CO2) in the world’s major economies – US, UK, Germany, Japan, China, and India – that the Government has requested of it. This will make the carbon tax harder to sell, because the Government won’t be able to point to credible numbers showing the rest of the world is truly acting on climate change and we’ll get left behind if we don’t.

The Commission’s Methodology Working Paper Emission Reduction Policies and Carbon Prices in Key Economies, which was released today, is highly technical and won’t provide the media with any embarrassing quotes, but the Commission is signalling that the estimates it ends up producing will be pretty unreliable.

On page 23 of the report, the Commission refers to “considerable measurement challenges”, which probably means the Commission will have to make a lot of assumptions and guesses in deriving its estimates. Also, the Commission notes “the estimates will not be true measures of total costs…” In such a highly charged and political debate as the one around the carbon tax, this question about the credibility of the effective carbon price estimates will render them useless.

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