The Economic Impact of the CPRS and Modifications to the CPRS
Frontier Economics (Australia) has released a report that provides independent modelling of the Government’s proposed Carbon Pollution Reduction Scheme (CPRS), and which models an alternative set of policy options.
Frontier’s work was commissioned by the Coalition and by the Independent Senator for South Australia Nick Xenophon to consider whether an Emissions Trading Scheme (ETS) could be implemented in a manner that maintained or increased unconditional reductions in carbon output, was more efficient and less costly, and reduced the expected negative impact on employment across Australia.
Our analysis uses the same model utilised by the Commonwealth Government to determine the economy wide impacts of the ETS, along with our suite of electricity market models that have been successfully used to model electricity market outcomes in Australia and internationally.
Our report shows that, with amendments in the detail of how the ETS is applied, it is possible to:
- double the Government’s unconditional emissions reduction target to 10% reduction on 2000 emissions by 2020
- a reduction in the net present value of the economic costs of the scheme over the next 20 years from $121 billion to $72 billion – a $49 billion improvement.
- limit household power bill increases to less than 5 per cent in the near term rather than the immediate 25 per cent price increase under the CPRS
- reduce job losses overall, and share the burden of job losses more evenly between capital cities and regional centres
- improve incentives to invest in new technology and infrastructure.