Australia Will Fail to Meet Paris Target, says IMF

Australia will fail to meet its Paris agreement emissions reduction target even with a carbon price of US$75 a ton, the International Monetary Fund has warned. The IMF made the observation in a report on mitigating climate change which concluded that a carbon tax is still a more cost-effective solution than “feebate” models, which impose fees on activities with above-average emissions and subsidise those with below-average emissions. In Australia the Morrison government’s emissions reduction fund pays polluters to cut greenhouse gas emissions but has been criticised for rapidly diminishing returns and widespread exemptions to limits on emissions elsewhere in the economy.

Despite Scott Morrison claiming that Australia will meet its Paris target of 26 per cent to 28 per cent emissions reduction by 2030 “in a canter”, Australia’s greenhouse gas emissions have risen for five years since the Abbott government abolished the carbon price in 2014.

In a separate report the IMF warned that companies cannot afford to ignore environmental and social goals because they have a “material impact on corporate performance”, in part because of investor pressure and potential “large losses from climate change”.

The paper implicitly rejects the view expressed by senior Coalition figures that business should not speak up on social issues, interpreted as an attack on one of Australia’s biggest resources companies, BHP, for its efforts to reduce emissions.

The first IMF paper found that if G20 countries imposed uniform carbon prices of $25, $50, and AU$75 a ton emissions would fall by 19 per cent , 29 per cent, and 35 per cent respectively for the group. Although a AU$25 price would be “more than enough” for some countries – such as China, India and Russia – to meet their targets, even with a AU$75 a ton price Australia and Canada would fail owing to differences in the stringency of targets and the price responsiveness of emissions.