Senate Rural and Regional Affairs and Transport Legislation Committee, , 8:46:06 to 8:50:17
Comparing ABARES and Treasury carbon price estimates, historical modeling impacts on agricultural land, and the role of shadow pricing in policy.
Topics: Carbon farming, Emissions reduction, Agricultural productivity
Speakers: Speaker 8, Speaker 14, Speaker 5, Speaker 12
>> I might have I might be repeating Senator Copic. I just was distracted for a second. But my he's raised a really really good question. So if the shadow carbon price is around that $300 a ton and in your model what did you get up to? >> 1096 >> $106 a ton. >> Doesn't that mean that in the uncapped world people will do more carbon >> sequestration? So so the 119 million tons seems a massive underestimate by Treasury of how much we'll will do of
carbon farming. It will depend again and this is getting out of my area of expertise Senator Canavan and I'm not sure if colleagues can add but it will depend on the policy mix and it will depend on kind of the various other policy mechanisms that are in place to incentivize
>> direct treasuries factor that in their modeling presumably to get to the $300 carbon price. So I'm saying in equilibrium in an equilibrium state without you put a binding constraint on not being more than 119 million tons of carbon farming without that constraint which we don't have as we've discussed in the real world in equilibrium you'd expect the prices to converge wouldn't you because it's arbitrage
>> I I think it still does depend on the way that that's and and the best
treasury how the the >> don't worry I definitely will have they
get the 119 You can in terms of a residual you know in in taking a case substracting away from the modeling that was done if you've got a mix of responses you know different interventions some of them uh regulatory requirements and some of them do allow for offsets you'll get different and you'll get different you know shadow prices in different parts of the economy and so forth and so there's a whole range of policy choices that will drive that to Senator Gbeck's point and market design as well and so I think the takeaway way that we would say is that the market design's important as as you've mentioned um and you know we've put put forward some of the the relative
trade-offs. So, is there another way to look at this process? Um, and and I'm thinking back to 2008 in this room in this respect when Abez did some work back then on this. It was based on a range of price points. um and they had varying greater impacts as the as as it went through the system. Is it possible to look at this in that context? Because that's the reality of how the market is going to work, isn't it? >> Unless there's some parameter put around or a limit put around.
>> I would answer that question by yes, anything's possible. Um and then the question is um you know how do how would you make credible judgments about different prices and so forth and ideally you know you would have a different way I think
>> I mean like like happened back then there was some speculation about what the market price might be >> and I think it started at something like 36 bucks and went up to >> whatever it might have been and had and a range of impacts. >> Yeah. Um and um that had significant changes in what might be occurring in certain areas. And I remember it very vividly because you talked about something in the initial report you tal I shouldn't say you but Abears talked about something like 60% of Tazzy's agricultural land going into trees >> and then there was no that's not right and a remodeling done for me. So yeah, points points points for you guys cuz you did the and and they came back and had another look at it, but but that's what the driver is going to be. That's the reality of how the market's going to work. I mean, appreciate the list, but
>> and and we do make the observation say when you put those limits on, so 20% limit, there's an increase in that price by $8 per ton at a 20% limit goes up to 49. So there's both demand and supply >> y >> aspects to that that price question.