The Mad Monk’s modelling mockery

Tony Abbott has tried his hand at modelling the economic costs of carbon emissions reduction. The results are a little disturbing. Unless Abbott was being deliberately, deceptively simplistic in order to appeal to the burn-the-elitists demographic of Australian society, he truly doesn’t have a clue what he’s talking about:

He says given a 5 per cent reduction in greenhouse gas emissions will cost Australian taxpayers $120 billion, the cost of the emissions trading scheme’s 10-year aim of a 25 per cent reduction will be much greater.

“The Federal Government has never released the modelling,” Mr Abbott said.

“Now if there is modelling that shows the costs of a 15 per cent and a 25 per cent emissions reduction, let’s see the modelling, let’s release the figures.

“I think it’s reasonable to assume in the absence of other plausible evidence that five times that reduction, a 25 per cent reduction in emissions, might cost five times the price – half a trillion dollars, 50 per cent of Australia’s annual GDP.”

I’m no economist, but I suspect the experts might shy away from confidently predicting that 5 times the reduction implies 5 times the cost. We’re talking about billions of dollars flowing through all the intricate structures that make up the economy. There are feedback mechanisms, economies of scale, and the little fact that a “5%” reduction in CO2 is relative to 2000 levels but the projected cost is based on 2020 levels (because that’s when it’s happening). Even a “0%” change from 2000 levels represents a substantial cut in what our 2020 CO2 emissions would have been, but according to Abbott’s model this scenario would cost nothing.

Why even have economists if a constant factor is all it takes to convert a percentage CO2 reduction into a dollar amount? If Tony, our alternative Prime Minister, thinks it’s “reasonable to assume” such things, perhaps we can get him to try out this approach to economic modelling in a controlled environment where he can’t hurt anyone else. Say, in a padded cell with Monopoly money.