While the global financial crisis and the US election have monopolised attention for the last couple of months, the climate change crisis hasn’t got away, and most of the news has been bad. It’s now pretty widely agreed that any global policy that doesn’t stabilise atmospheric greenhouse gas concentrations around 450 parts per million (CO2 equivalent) runs a real risk of environmental disaster. The only plausible policy of that kind This is a contract and converge scenario where all countries accept a common emissions entitlement per person, to be reached over coming decades. That in turn means big reductions in emissions entitlements for people in developed countries.

The Australian Treasury has just released estimates of the cost of an measures to reduce greenhouse gas emissions, most importantly an emissions trading scheme. Of course, there have been quite a few exercises of this kind, but what’s striking about this one is that it looks at a much wider (and more realistic, if we want to save the planet) range of options, going all the way to a 90 per cent reduction in emissions relative to 2000 levels, achieved by 2050.

Treasury estimates that, under this scenario, GNP per person in Australia will average $78 000 in 2050 compared to $50 000 at present. By contrast in the reference scenario which has an 88 per cent increase in emissions, 2050 GNP is estimated at $83 000, or about 6 per cent higher (I don’t think this takes account of environmental and other damage costs avoided through climate mitigation, which will much more than offset the cost of mitigation in the long run).

When I get a bit of time, I’ll report more on the details and assumptions. But the quibbles coming from predictable rentseekers, and their tame consultants, look like just that, quibbles. It’s striking how many supposed advocates of the free market think we’ll all be rooned unless we continue to subsidise industry (and households) by allowing them to dump their garbage into the atmosphere free of charge.

Treasury’s estimates are, not surprisingly, quite consistent with the arguments I’ve made for a long time. That’s because any competent economist doing the analysis must come up with estimates of a comparable order of magnitude. If you want to make the case that saving the planet requires reducing living standards, or even a big reduction in the rate of growth of living standards, you need either to invent a whole new economics or wave your hands vigorously enough to conceal the fact that you don’t have any economic analysis to support you.