Australia will miss Paris goals even with a $US75 a tonne carbon tax: IMF

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Australia would fail to meet its Paris Agreement commitments to cut greenhouse gas emissions even with a $US75 carbon tax that would drive up Australia's electricity prices by 75 per cent over the next decade.

Research by the International Monetary Fund, released on Friday, shows Australia is still so dependent on coal and other greenhouse gas-intensive energy sources that even direct intervention to address climate change won't be enough for the country to reach its international commitments.

A $US75 a tonne carbon tax would drive up Australia's power prices by 75 per cent but still see the nation's emissions fall short of its Paris Agreement commitments.

A $US75 a tonne carbon tax would drive up Australia's power prices by 75 per cent but still see the nation's emissions fall short of its Paris Agreement commitments.Credit:BHP

The government has repeatedly said Australia will reach its Paris commitment to slice greenhouse emissions by between 26 and 28 per cent on 2005 levels by 2030, in a "canter".

Since the abolition of the carbon tax in 2014, Australia's greenhouse gas emissions have increased. Latest figures showed that in the 12 months to the end of March, Australia's emissions were up by 0.6 per cent.

The Labor Party is embroiled in an internal argument over whether to abandon its election commitment to cut emissions by 45 per cent by 2030 with some MPs arguing it should move closer to the government's position.

But the IMF said just to limit global warming to 2 degrees or less, ambitious action had to be taken now.

It said carbon taxes were the "most powerful and efficient tools" to deal with global warming which it described as a "clear and present threat" to the world.

Present actions and promises across the world had failed short of cutting emissions, adding that the longer nations took to act the "greater the loss of life and damage to the world economy".

The fund looked at the impact three rates of carbon tax, at $US25 ($37) a tonne, $US50 ($74) and $US75 ($111), to see how this would affect emissions from the world's 20 largest economies.

Across the 20 nations, emissions would be reduced by 19, 29 and 35 per cent respectively. But some nations would see much larger reductions while others, such as Australia, would struggle even with a very high carbon tax.

"Whereas a $US25 a tonne price would be more than enough for some countries (for example,
China, India, and Russia) to meet their Paris Agreement pledges, in other cases (for example, Australia and Canada) even the $US75 a tonne carbon tax falls short," it said.

In Australia's case, a $US75 a tonne carbon tax would drive up electricity prices by 75 per cent over a decade. Only two other countries, India and South Africa, would suffer larger increases in power prices.

Australian petrol prices would rise by 15 per cent over the same period.

There would be major health benefits apart from the reduction in greenhouse gases, with the IMF saying a $US75 carbon tax would save the lives of 720,000 people - mostly in China - from coal-related diseases.

The IMF said such a large tax would deliver the federal government billions of dollars in extra revenue that it would need to funnel back to taxpayers.

"To make carbon taxes politically feasible and economically efficient, governments need to
choose how to use the new revenue," it said.

"Options include cutting other kinds of taxes, supporting vulnerable households and communities, increasing investment in green energy, or simply returning the money to people as a dividend."

The fund looked at non-carbon tax alternatives to cutting emissions, including rebates or regulations covering emissions in power generation and vehicles and emissions trading schemes.

But these alternatives are both more costly than a carbon tax and deliver fewer reductions in emissions. In Australia's case, tighter regulations and rebates would deliver two-thirds the reduction and cost 50 per cent more than what would be achieved with a $US50 carbon tax.