Press release by:

**The Viscount Monckton of Brenchley****Gillard's tax on 'carbon pollution': the facts**

If the Australian Government’s proposal to oblige 500 big “polluters” to engage in what the City of London calls “

**trading hot air**” were to achieve its stated aim of cutting

**5%**of Australia’s CO2 emissions

**by 2020**, and assuming HM Treasury’s

**3.5%**pure-rate-of- time-preference commercial discount rate for inter-temporal investment appraisals –

> By 2020, CO2 in the air would be

**411.987**parts per million by volume, compared with**412**ppmv if no action were taken.> Global warming forestalled by 2020 would be

**0.00007 C**°: i.e.**1/14,000 C°**.> 0.00007 C° is

**1/700**of the threshold below which modern instruments and methods cannot detect a global temperature change at all.> At this rate, total cost of the carbon tax/trade policy will be not less than

**$127****billion**between now and 2020, not counting gasoline and power price hikes.

> If all the world’s measures to cut greenhouse-gas emissions were as cost- ineffective as the Australian Government’s proposed policy, forestalling just 1 C°

of global warming would cost the world

**$1.7 quadrillion**.> Forestalling all of the

**0.24 C**° global warming predicted by 2020 would demand**almost $60,000**from every man, woman and child on the planet.

> That cost is equivalent to

**almost 60%**of global GDP to 2020.> That is

**22 times**the maximum estimate of the welfare loss from doing nothingabout the climate, which is just

**2.7% of global 21st-century GDP**.> It is

**83 times**the minimum welfare-loss estimate of just**0.7% of GDP**.> Garnaut’s

**1.35%**and**2.65%**inter-temporal discount rates are very low by usualeconomic standards, artificially making the cost of action seem less costly

compared with the cost of inaction than it really is. However –

> Even at Garnaut’s artificially low discount rates, the cost of the Gillard policy

would be

**7.6 to 15 times**the cost of doing nothing about climate change.> At the

**5%**discount rate recommended by President Dr. Vaclav Klaus of the Czech Republic for climate-related appraisals, the cost of doing what Gillard proposeswould be

**36 times**the maximum cost of doing nothing.> For most Australian households, the

**$10.10/week**benefit from the Gillardscheme will exceed the

**$9.90/week**cost, providing no disincentive to emit.> For 500 big “polluters” (CO2 is not a pollutant, but plant-food to green the

planet), compensation plus higher prices provide

**no disincentive to emit**.> Thus, all the above calculations

**overstate**the scheme’s cost-effectiveness.> Bottom line:

**It is many times more costly to try to prevent global****warming by Gillard‟s methods than to adapt in a focused way to the predicted consequences of global warming.**

**Conclusion**: Mitigation policies cheap enough to be affordable will be ineffective: policies costly enough to be effective will be unaffordable. It is unlikely that any policy to forestall global warming by regulating, reducing replacing, taxing or trading greenhouse- gas emissions will prove cost-effective solely on grounds of the welfare benefit foreseeable from global-warming mitigation. No such benefit is discernible.

**High abatement costs**, and the

**negligible returns**in warming forestalled, imply that

**focused adaptation**to the consequences of such future warming as may occur will prove more cost-effective than any attempted mitigation. The

**opportunity cost**of diverting trillions of dollars to mitigation is heavy. Therefore, the question arises whether mitigation should be attempted at all.

**Background information**

The following pages of background information demonstrate how the above results were determined. For full references, caveats, and a thorough discussion, see –

Monckton of Brenchley, C.W., 2009, I

*s CO2 Mitigation Cost-Effective*? Lecture to the Prague School of Economics, May, 12 pp: obtainable from vc@nd.edu.au.**Definitions**

**Radiative flux**is a continuous flow of radiant energy at some surface, denominated

in Watts per square metre (W m–2).

**Radiative forcing**is a change in the net radiative flux at the tropopause, the top of the climatically-active region of the atmosphere.

The

**mitigation cost-effectiveness**of any policy intended to mitigate global warming by reducing CO2 concentration in the air is the cost of forestalling 1 C° of CO2-induced global warming, on the*assumption*that all measures to mitigate that warming up to a target year are as cost-effective (or cost-ineffective) as that policy.On the same

*assumption*, the**global abatement cost**of a policy is the cost (expressed as a percentage of global GDP taken as increasing yearly at 3% real, and discounted at some inter-temporal discount rate) of forestalling all warming from CO2 and other manmade climate influences up to the target year (in this case, 2020).**Base data (with sources)**

**3.4 C**°: cent.est. of 21st-century manmade warming: (IPCC, 2007, p.13, table SPM.3).

**8 W m–2**: cent.est. of 21st-century radiative forcing (IPCC, 2007, p. 803, fig. 10.26).

**5.35**: CO2 radiative-forcing coefficient: (Myhre et al., 1998; IPCC, 2001 & 2007: A2).

**280 ppmv**: Estd. CO2 concentration in the air in 1750 (IPCC, 2001 & 2007: A2).

**390 ppmv**: Measured CO2 concentration in 2010 (NOAA; ESRL).

**22 ppmv**: Projected CO2 concentr. growth, 2011-2020 (IPCC. 2007, A2 scenario).

**836 ppmv**: Projected CO2 concentration in 2100 (IPCC, 2007, A2 scenario).

**5%**: Proposed cut in Australian emissions by

**2020**. (Gillard announcement, 2011).

**1.2%:**Australian CO2 emissions as % world emissions (from Boden et al., 2010ab).

**$10.1 bn/yr**: carbon trading cost (23/26 x $11.5 bn given in Garnaut, 2011).

**$0.9 bn/yr**: renewable energy support ($9.2 bn over 10 years: Gillard, 2011).

**$1.6 bn/yr**: administration costs (Wong, 2010).

**$0.3 bn/yr**: costs of coal & steel support averaged over 10 years (Gillard, 2011).

**$60 trillion**: Global annual GDP (World Bank, 2011).

**51%**: CO2 forcing as a proportion of all 21st-century manmade forcings (IPCC, 2007).

**0.1%**: Pure rate-of-time-preference inter-generational discount rate (Stern, 2006).

**1.35%**& 2.65%: Pure rate-of-time-preference discount rates (Garnaut, 2008).

**2.75% & 3.22%**: Pure rate-of-time-preference discount rates (HM Treasury).

**3.5%**: Standard pure rate-of-time-preference discount rate (HM Tsy Green Book).

**5.0%**: Pure rate-of-time-preference discount rate (President Dr. Vaclav Klaus).

**The true cost of putting a “price” on carbon dioxide**

Using the base data and HM Treasury’s 3.5% discount rate, we determine –

First, the CO2 concentration in 2020 if Garnaut’s proposal is fully implemented:

First, the CO2 concentration in 2020 if Garnaut’s proposal is fully implemented:

412 ppmv minus 25% of 1.2% of 22 ppmv =

Secondly, the radiative forcing the policy forestalls over the 10-year period:

**411.987 ppmv**.Secondly, the radiative forcing the policy forestalls over the 10-year period:

5.35 x the natural logarithm of (412/411.987) =

Thirdly, how much warming Professor Garnaut’s proposal will forestall by 2020:

**0.00017 W m–2**.Thirdly, how much warming Professor Garnaut’s proposal will forestall by 2020:

3.4 / 8 x 0.00017 =

Fourthly, the cost of the carbon-trading policy in year 1:

**0.00007 C°**, or about**1/14,000 C°**.Fourthly, the cost of the carbon-trading policy in year 1:

($10.1bn + $1.6 bn + $0.9 bn + 0.3 bn) =

Fifthly, the total cost of carbon-trading policy from 2011-2020:

**$13 bn**.Fifthly, the total cost of carbon-trading policy from 2011-2020:

$13 bn increased by 3%/year & discounted at 3.5%/yr: total

Sixthly, the amount of CO2-driven warming over 10 years if we do nothing:

**$127 bn/10yr**.Sixthly, the amount of CO2-driven warming over 10 years if we do nothing:

3.4 / 8 x 5.35 x the natural logarithm of (412/390) =

Seventhly, the mitigation cost-effectiveness of Australia’s carbon trading policy:

**0.125 C°**.Seventhly, the mitigation cost-effectiveness of Australia’s carbon trading policy:

$127 bn / 5% of 1.2% of 0.125 C° =

Eighthly, total global GDP from 2011-2020:

**$1.7 quadrillion/C° forestalled**.Eighthly, total global GDP from 2011-2020:

$60 trillion/year in 2010, hiked by 3%/year: total

Ninthly, the global abatement cost of the policy:

**$708 trillion/10yr**.Ninthly, the global abatement cost of the policy:

(100 x $127 bn) / 5% of 1.2% of 51% of $708 trillion =

Tenthly, the global abatement cost of the policy per capita of world population:

**58.4% of GDP**.Tenthly, the global abatement cost of the policy per capita of world population:

58.4% of $708 trillion divided by 7 bn world population =

**$59,000/head.**Table 1 summarizes the effect of various inter-temporal discount rates. The action/inaction ratio compares the action cost with the upper-bound inaction cost.

TABLE 1 Stern Garnaut #1 Garnaut #2 Treasury Klaus

ROTP discount rate 0.1% 1.35% 2.65% 3.5% 5.0%

Policy cost $153 bn $142 bn $132 bn $127 bn $117 bn

Mitigation cost-effect. $2.1 qd/C $2.0 qd/C $1.8 qd/C $1.7 qd/C $1.6 qd/C

Abatement cost/head $71,500 $66,500 $62,000 $59,000 $55,000

Global abatemt. cost $499 tr $465 tr $433 tr $414 tr $383 tr

Abatemt. as % GDP 70.4% 65.6% 61.1% 58.4% 54.0%

Global inaction cost 5-20% 2.2-8.6% 1.0-4.1% 0.7-2.7% 0.4-1.5%

Abatement cost/head $71,500 $66,500 $62,000 $59,000 $55,000

Global abatemt. cost $499 tr $465 tr $433 tr $414 tr $383 tr

Abatemt. as % GDP 70.4% 65.6% 61.1% 58.4% 54.0%

Global inaction cost 5-20% 2.2-8.6% 1.0-4.1% 0.7-2.7% 0.4-1.5%

**Action / inaction 3.5x 7.6x 15x 22x 36x**M of B: 10 July 2011

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