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 failure to align the carbon tax with international efforts to reduce emissions means that the environmental benefits of the scheme will be illusory, while the costs on all Australians will be very real.

The design of the world’s biggest carbon tax and the modelling on which it is based is deeply flawed.

The Government’s modelling on the impact of the carbon tax rests on the heroic assumption that there will be a global carbon price and international emissions trading in place by 2016. No-one except the Australian Government believes this is likely to happen any time soon.

All the key outcomes of the Government modelling on the impact of the carbon tax are turned on their head when economic modelling assumes that global action will be patchy and difficult rather than universal from 2016.

Rather than a $32 billion reduction in GDP as claimed by the Government – there will be a $180 billion reduction compared with business as usual by 2020. Real wages will decline by $11,360 not $5110 and electricity prices will have jumped by nearly 30 per cent by 2020 – not the 10 per cent claimed by the Federal Treasury.

The carbon price will rise to $36.10 when the flexible price phase commences in 2016, increasing to $43 by 2020. This compares with a projected carbon price under Treasury modelling of $24.60 rising to $29.40 by 2020.

Under the carbon tax, Australia will spend $105 billion reducing domestic emissions by 59 million tonnes and purchasing 100 million tonnes in offshore abatement permits between 2012 and 2020.

China is projected by the Federal Treasury to be emitting 49 million tonnes a day in 2020, extinguishing Australia’s emissions reductions in exactly 28.5 hours.

The Minerals Council of Australia will continue to push for a package that is better aligned with international carbon pricing schemes.

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