Medium Term Prospects for the Australian Economy and the Impact of Kyoto-Compliance

On June 5, 2002, the Prime Minister, The Hon John Howard, stated in Parliament that it was not in Australia's interests to ratify the Kyoto protocol. Subsequent to this statement, the Government has committed itself to work outside the Kyoto process to limit emissions to 108% of their 1990 levels over the 4-year period 2009 to 2012. The purpose of this article is twofold: 1. to produce a basecase set of forecasts for the Australian economy and for Australia's greenhouse emissions covering the years through to the end of the Kyoto commitment period, 2012, and 2. to examine the economic impacts on our basecase of a domestic trading scheme for greenhouse gas emissions designed to deliver Kyoto-compliance in each of the 4 years, 2009 to 2012. Included in the basecase are current measures to reduce energy usage and greenhouse gas emissions. Information from the basecase allows one to gauge the size of the likely gap between actual emissions and the Kyoto target in the target period. This gap is the abatement task to which the emissions trading scheme is calibrated