Economists: Carbon price "Necessary and desirable" for Australian economy
They said it was critical that any price mechanism covered as many high-carbon producing sectors of the economy as possible, saying a price on pollution - preferably an emissions trading scheme - was the best way to reduce carbon emissions.
The group of high-profile Australian economists includes former ANZ chief economist Saul Eslake, Westpac's Bill Evans, former Liberal Party leader John Hewson, Citigroup Global Markets' Paul Brennan, Lowy Institute visiting fellow Stephen Grenville, and Macquarie Bank's Richard Gibbs.
In an open letter, the economists said implementation would be critical to the success of any carbon scheme, and that a properly designed price mechanism would provide an effective incentive to shift the economy over time to more low-carbon, energy-efficient patterns of consumption and production.
"Consumers and businesses alike require a clear pricing signal, a price on carbon that will drive a shift in relative prices, and so shift economic behaviour towards lower carbon and more energy efficient options," said Richard Gibbs, Global Head of Economics and Chief Economist, Macquarie Bank Limited. "Australia has a long and successful history of formulating and implementing bold and innovative macroeconomic structural reform. Carbon pricing is, and should be, no exception."
"By recycling the revenue from putting a price on carbon emissions, there need not be a material financial impact on companies and households," said Paul Brennan, Head of Economics, Citigroup Global Markets, Australia. "The change in relative prices will encourage new investment in, and consumption of, more sustainable sources of energy."
"The move to more efficient, cleaner energy through a well designed market mechanism to price carbon is a major and desirable structural and economic reform which will help Australia competitively position in a global low carbon economy," said Bill Evans, Chief Economist, Westpac. "A key feature of successful policy reform is the inclusion of mechanisms to enable industry to successfully make a smooth transition to the new policy framework, a transition which should take considerable time and by its very nature is unlikely to be costless. Governments should see the cost of ensuring that smooth transition as a justifiable investment in Australia's future and should not feel constrained by any fixed notions of 'budget neutrality' in the short term in managing this transition."
Former Leader of the Liberal Party, Dr John Hewson said, "It is important to get the economics right. Australia needs to take substantive, urgent and apolitical action on carbon pricing for the sake of our economy and our environment. The failure of our generation to act will cost future generations dearly."
"The window for limiting future costly climate change is rapidly closing. A carbon pollution price, in particular an emissions trading scheme, is the most economically efficient and environmentally effective way to reduce carbon pollution," said Dermot O'Gorman, CEO of WWF, who facilitated the economists' open letter.
The letter also calls for the price mechanism to be administered by an independent authority.
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