Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Hansard source

In relation to the CIE modelling, it was commissioned and released by the Minerals Council of Australia, an organisation that has a very clear view about the carbon price and has a well-known position in opposition to it. It is entitled to hold that position, but it is important to recall the context of this. In the government's view, the report released by MCA on the impact of carbon pricing on the Australian economy significantly overstates the costs of carbon pricing. The modelling is driven by unrealistic restrictive assumptions on international carbon trading. This is why the carbon price projected by the modelling is higher than Treasury projections. For example, the analysis projects that the carbon price will be significantly higher in 2020 than the Treasury modelling, $36.10—and this is in 2010 dollars—in 2016, growing to $43 in 2020. That compares with the Treasury modelling of $24.60 in 2016, rising to $29.40 by 2020.

The MCA assumed that international action is restricted by lower demand for carbon permits due to lower international ambition. The assumption is also made that sources of relatively cheap supply are disallowed from international carbon trading. This contradicts reality, as relatively cheap internationally tradeable abatement is already being generated through the Clean Development Mechanism and this is set to expand. To assume that this abatement is no longer available, as the modelling does, simply ignores reality and therefore creates modelling that significantly overstates the impact of a carbon price.