Emissions trading scheme won’t stop growth, but some sectors will be hit hard

The introduction of an emissions trading scheme will not halt Australia’s economic growth but some sectors will be hit hard, according to Treasury analysis.

The introduction of an emissions trading scheme will not halt Australia’s economic growth but some sectors will be hit hard, according to Treasury analysis.

At a press conference yesterday, Treasurer Wayne Swan and Climate Change Minister Penny Wong said Australia’s economy will remain competitive even with a trading scheme in place.

They also claim the GNP growth between 2010 and 2050 will only be one 10th of a percentage point less than normal under the scheme, while energy costs will amount to just an extra $1 per day.

”What the modelling shows is that Australian industries will remain competitive, and there are significant opportunities in us taking action on climate change, doing the economically responsible thing,” Wong says.

But while the Government claims sectors such as coal, iron, steel and livestock will maintain growth, the aluminium and petroleum sectors are likely to contract.

Coal-fired power stations are also set to be hit hard by the scheme.

But Swan says he is confident general economic growth will continue. “The Australian economy will continue with strong growth while we reduce emissions,” he says.

However, Heather Ridout, Australian Industry Group chief executive, says the Treasury has neglected transition costs and slow-to-move sectors such as manufacturing will suffer as a result.

“The modelling points to very substantial adjustments ahead for the Australian economy, and it serves to highlight the potentially damaging impacts on businesses and employees of moving too fast and too far ahead of the rest of the world,” she says.

Ridout also claims that the scheme’s 2010 starting date should not be set in stone if a more cost-effective solution can be found.

“The fact that the modelling has little to say about the transitional costs involved in adapting to the low carbon economy, mean that it has little to contribute to many of the issues at the heart of the current policy debate.

“These important transitional costs should not be neglected.”

The Government has been hit with criticism after its announcement. Opposition leader Malcolm Turnbull claims the analysis does not take into account the global financial crisis, while the Australian Chamber of Commerce and Industry “remains concerned” about how the scheme will affect businesses.

The Minerals Council of Australia has also criticised parts of the model, arguing the Government has not taken the actions of other nations into account.

“This is a substantial and critical shortcoming of the paper, and one that is hard to justify given the significant influence that comparable actions by others will have on the costs that will be borne by the Australian economy and by specific economic sectors,” it says.

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