Emissions growth will cut economic growth and push up inflation - but only by a small amount.
Comprehensive Treasury modelling released today found that even with an ambitious scheme to slash greenhouse gas emissions, the economy would continue to grow - but at a slower rate.
Without emissions trading, GNP per capita would expand by 1.2% each year. With emissions trading, it would gain 1.1%.
In the long term, emissions trading would cut GNP per capita by between 9 and 11%.
GDP per capita would grow at between 1.2 and 1.3% with emissions trading, compared with 1.4% without it.
The modelling found emissions trading, due to start in 2010, would result in a one-off spike in the consumer price index of between one and 1.5%, higher than previous estimates.
But there's bad news for heavy polluting industries - emissions trading will cut their growth at a faster rate.
The modelling casts a positive light on the impact of emissions trading on the economy.
"Even ambitious goals have limited impact on national and global economic growth,'' it said. "Many of Australia's industries will maintain or improve their competitiveness under an international agreement to combat climate change.''
Treasurer Wayne Swan said the modelling provided fresh evidence that early action to tackle climate change would sustain growth, create new jobs and protect the economy into the future.
"It shows that taking early action will allow an orderly and gradual adjustment to a low-carbon economy,'' Mr Swan said. "However, delaying action, and then playing catch up, will deliver a sharper shock to the economy in the years ahead.''
Mr Swan said the modelling indicated that economies that acted early faced lower long-term costs - around 15% lower - than if they delayed until internationally agreed action.
"Putting in place the necessary economic reforms through the Carbon Pollution Reduction Scheme will also allow Australia to capitalise on emerging opportunities and gain a competitive advantage.''
Households will pay more under emissions trading.
Average households will pay an extra $4 to $5 a week for electricity, and an extra $2 a week for gas and other fuels.
Household incomes would still grow under emissions trading, but at a slower rate - 1%, compared with 1.2% without emissions trading.
Emissions trading would have a greater impact on poorer households, the modelling found.
AAP
