The economics of net zero
Economic analysis provides a useful guide to think about the costs and benefits of policy actions designed to achieve net zero emissions.
Because climate change is created by global emissions, it requires a global solution in which countries each agree to reduce emissions without unintentionally increasing the emissions of other countries. Similarly, within Australia actions by individual states need to ensure that emission reductions within that state result in genuine net emission reductions for all of Australia.
Emissions abatement represents a national and global coordination challenge. Actions to reduce emissions are generally costly, and if global emissions are not genuinely reduced, then there is no benefit from these actions. Achieving net zero has both benefits and costs. Benefits arise in the long term through the prevention of increased global temperatures and in the short term through a range of co-benefits. Costs arise through the need for a change to production and consumption patterns that lead to net zero.
Sets out the economic approach to thinking through the costs and benefits of net zero policies that are now in place in all Australian jurisdictions.
David Pearce, BEc (Hons)
Principal, Centre for International Economics
Research Paper 6, 2024
David Pearce is an applied economist and principal at the Centre for International Economics.
Read the paper
Published: 27 June 2024