Emission: Economics and Mitigation Action Essay

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Uncertainty
Australian producers who determines by emission-intensive goods and services will decrease their global demand. However there are many of emission-intensive trade exposed sectors (EITES) such as coal, non-metallic minerals, livestock, iron, steel and etc in Australia. These sectors are likely to increase and improve their competitiveness and advantage of global market. Australia will face losing competitiveness where these sectors are more emission intensive than other global competitors

Australian producers will face falling global demand for emission-intensive goods and services. Nevertheless, many of Australia’s emission-intensive trade-exposed sectors (EITES), such as coal, non-metallic minerals, livestock, and iron and steel, are likely to maintain or improve their competitiveness and share of global trade. These sectors are either less emission intensive or energy intensive than comparable sectors in competitor countries. Overall, these sectors are expected to grow, albeit at a slower rate than they would in a world without emission pricing. Australia is likely to lose competitiveness where its production is more emission intensive than its competitors, such as for aluminium and petroleum refining. These sectors may contract. In the absence of unified global action, an emission price may distort the international competitiveness of Australia’s EITES. There is little evidence of carbon leakage.

Abatement cost is relying on the nature, horizon and target of global equalization. The key object of emission price mechanism

Mitigation costs vary depending on the nature, horizon and stringency of the global stabilization target, and the emission pathway travelled to reach it.
The global environmental objective is the key determinant of emission prices and aggregate global costs. Lower stabilization levels, which reduce the risks of dangerous climate change, generally increase mitigation costs. Global costs at 2020, as a share of gross world product (GWP), increase by 50-100 per cent as the stabilization goal shifts from 550 ppm to 450 ppm; however, this premium narrows over time, so that by 2050 the costs of achieving 450 ppm are around 30-60 per cent higher than those of 550 ppm.
From 2010 to 2050, real GWP grows at an average annual rate of 3.3-3.4 per cent in the policy scenarios, compared to 3.5 per cent in the reference scenario. By 2050, emissions are 65-80 per cent lower than in the reference scenario, while GWP in 2050 is 2.7-4.3 per cent lower Box 3.3: Setting targets in an uncertain world

The ultimate global environmental objective is uncertain. Even if a stabilisation target is agreed as part of the post-2012 international framework, it may change in the future as understanding of the costs and benefi ts of mitigation action improves. Stronger mitigation action in the short term helps preserve the option of pursuing lower stabilisation levels, and could be cost-effective strategy in the face of uncertainty.
Stronger global mitigation action accelerates cost reductions in low-emission technologies,

which helps reduce future costs, even if stabilisation goals are relaxed. In contrast, weaker global mitigation action produces higher short-term emissions, which then require faster emission reductions if stabilisation goals are subsequently strengthened. This suggests economic benefi ts may fl ow from setting low stabilisation goals at the global level. Weaker global action may prove costly in the long term. This result accords with previous studies of the option value’ of stronger mitigation action (Yohe et al, 2004)

3.2.3 Australia’s marginal costs and international permit trade Whether, and how much, international trade in emission permits is allowed will affect Australia’s costs in achieving any given
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