Updated ,first published
Australians are paying the price for second-best policies to deal with climate change, the head of the Productivity Commission has warned, lamenting that a carbon tax or emissions trading scheme would have been better than the policies on offer from the government or opposition.
Commission chair Danielle Wood also complained that decades of policy uncertainty caused by the nation’s climate wars were continuing to push up the cost of dealing with Australia’s greenhouse gas emissions.
Climate change policy has been one of the most contentious political arguments of the past 20 years. The commission has argued for two decades for an economy-wide approach to reducing emissions, through either a carbon tax or an emissions trading scheme.
Speaking in Adelaide, Wood said either option now looked “pretty damn attractive” compared to the suite of policies introduced by both sides of politics.
She said there was no “apparent appetite” by Australia to pursue the best and cheapest policies to deal with climate change. This meant the commission sought to improve existing policies or axe particularly expensive ones.
The commission has already recommended phasing out the government’s expensive subsidies for electric vehicles and the fuel tax credits for heavy vehicles that use public roads.
It also backed a 75 per cent cut in the amount of greenhouse gases heavy industries can produce before they fall within the government’s safeguard mechanism system, which forces affected businesses to reduce their emissions.
Wood said the long debate over climate policy had pushed up the cost of cutting emissions.
“Stoking the climate wars – continuing to push the ‘if’ not the ‘how’ – is far from brave truth-telling. The ongoing policy uncertainty created by decades of these circular arguments has, and continues to, increase the costs of action,” she said.
Wood said proponents of climate change policy had to acknowledge there was an economic cost, but added there was a greater cost from taking no action.
“Actions to reduce emissions constrain choices and increase the costs of production, impacting on economic activity and measured productivity growth,” she said.
“But climate change comes with significant economic, environmental and social costs. These are already being felt in Australia and will get dramatically worse without global action.”
This masthead reported on Monday that Australian businesses have doubled their planned spending for building energy-hungry data centres over coming years.
Wood said Australia needed to prepare now for the growing electricity demand.
“The fact is that Australia needs to build a whole lot more generation capacity to replace ageing coal assets. That’s before we even get to meeting growing demand from energy-hungry data centres. Whatever your favourite type of energy, this will be a costly exercise,” she said.
“The best evidence suggests renewables with battery or gas firming is a cheaper way to provide new power over the next 25 years than new coal or nuclear energy.
“But letting the market decide with appropriate signals for emissions and reliability would be expected to yield the best outcomes over time.”
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Shane Wright is a senior economics correspondent for The Age and The Sydney Morning Herald.Connect via X or email.