The Australian Government’s carbon tax just passed the senate.
The accompanying Treasury modeling assumes that the rest of the world acts this decade, and finds that the policy will lower real wages by around 6% by 2050 – that means the average income will be about 10k lower, at around 120k per year.
I cannot think of a microeconomic reform that ever promised an equivalently large increase in real wages, over such a long period. Because this is a global problem, and because Australia’s emissions are only a tiny fraction of global emissions, it is not possible to say how much ‘green GDP’ we obtain by lowering our standard of living in this way.
Given the difficulty of concluding the Doha round – something experts agree will increase standards of living and is in each nation’s self-interest – I think that there is basically no chance of co-ordinated global action on this matter. As a result, where abatement measures are taken, they will be driven by local politics in the large nations.
With the global economy wobbly, I expect that most nations will follow Canada’s lead, and indefinitely postpone action. Green jobs are a myth – you cannot tax yourself rich.
This scheme is an expensive fashion statement. If we have a half decent recession, even the ALP will ditch this dog.