Australian Economic Growth Little Hurt by Carbon Plan

By Jacob Greber

Oct. 30 (Bloomberg) -- Australia's annual economic growth rate will be little affected in the 40 years following the start of an emissions trading system, according to government modeling.

Gross domestic product per capita will grow at an average annual rate of 1.2 percent to 1.3 percent between 2010 and 2050 as Australia moves to reduce greenhouse gas emissions, a report by the Canberra-based Treasury Department shows. By comparison, growth will be 1.4 percent if no action is taken.

Australia's government aims to introduce a carbon-trading system in less than two years that will require about 1,000 businesses to buy pollution permits for each metric ton of carbon they release. Swan also said the government is sticking to its goal of addressing climate change amid the turmoil on financial markets.

``The Australian economy will continue to grow strongly as we reduce carbon emissions,'' Treasurer Wayne Swan said in a statement today. ``Delaying action, and then playing catch up, will deliver a sharper shock to the economy in the years ahead.''

The government modeling focuses on medium and long-term forecasts of policies to cut emissions, and ``not short-run fluctuations arising from events such as the current turmoil in global financial markets,'' the report said.

Hardest hit will be export industries that generate high levels of emissions such as aluminum and petroleum refiners, the report said.

Iron, Steel

Coal, livestock, iron and steel producers are likely to maintain or increase their share of global trade as they generate less carbon than comparable businesses in other countries.

``These sectors are expected to grow, albeit at a slower rate than they would in a world without emission pricing,'' the Treasury report said.

Australian households are also forecast to pay an extra A$4 ($2.70) to A$5 per week for electricity and A$2 a week for natural gas and other household fuels.

The modeling shows Australian incomes, adjusted for inflation, will grow 1 percent a year as carbon emissions are reduced, versus 1.2 percent if no action is taken.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net