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SUBMISSION TO THE HOUSE OF REPRESENTATIVES ECONOMICS COMMITTEE

The minerals industry is Australia?s most globalised industry and a key pillar of the national economy. It accounts for around 7% of GDP, upwards of 20% of national investment and more than 50% of Australia?s exports of goods and services. The industry is also a large and growing contributor to Federal and State Government revenues in Australia under existing taxation and royalty arrangements.

PASSAGE OF THE CARBON TAX LEGISLATION

The passage of the world?s biggest carbon tax legislation through the Senate today is a missed opportunity to get the design of the scheme right. It is profoundly disappointing that the Federal Government has failed to harness the business sector?s determination to act on climate change with a scheme that simply imposes significant new costs on the economy for no environmental gain.

THE ECONOMIC IMPACT OF THE CARBON PRICING SCHEME

The MCA commissioned the Centre of International Economics to evaluate the economic costs of the proposed carbon pricing scheme in the (likely) event that action on climate change by other nations is patchy and fragmented. The study seeks to address one of the critical shortcomings in the Treasury modelling, namely the framing of its analysis around a single, highly optimistic scenario that assumes comprehensive global action by as early as 2016. The Treasury analysis also assumed that a world price on carbon will emerge by 2016 (through some unstated means) and that major developing nations would produce more emissions cuts than necessary in order to sell abatement to developed countries.

Greenhouse policy with incomplete global coverage

Current understanding of the broad economic costs of climate mitigation policies such as the carbon pricing mechanism included in the Securing a Clean Energy Future1 package mostly derives from simulations undertaken with a number of economic models. The model based analysis of the carbon price package undertaken by the Commonwealth Treasury is one of the best known of these modeling studies2.

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