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nationality, energy + the global economy « Previous | |Next »
March 4, 2009

The big miners, who once talked in terms of an eternal boom ensuring an Australian utopia, are now turning to Chinese capital in the form of direct investment to help them pay their debts in the face of falling demand for their products. The headline example is Chinalco's proposed $A30 billion investment in Rio Tinto that would give Chinalco an 18% shareholding in Rio. Chinalco's investment has to be approved by the Treasurer, who needs to consider whether the national interest will be harmed by the Chinese Government owning important Australian resources.

The context of this is the contraction of the Australian economy into recession and, with the global economy increasingly entering negative territory, that contraction or downturn will continue for some time to come.


Since the already deep US recession seems to be worsening as house prices and car sales continue to decline, the question is how severe will the contraction be and what will be its duration. That depends on the United States finding a new foundation for a resumption of growth, and that in turn, depends on its banking problems being resolved.

This turn to China is no different from the past in the sense that Australia has always depended on foreign capital to fund our capital expansion. Instead of the British, Americans, or Japanese, it is now the Chinese. Will the judgement about Chinalco's investment in Rio Tinto be judged in terms of needing to address climate change. Delaying until the rest of the world signs up to an international agreement would see us miss opportunities, as we have done already with areas such as renewable energy where other countries have stolen a march.

It is unclear whether the context means that energy is included in national security. It is the fossil fuel energy companies and the miners who write Australia's energy policy. Does the national interest include reduce carbon emissions as a goal, the need for cleaner energy and conservation technologies and environmental sustainability? Not according to the The Department of Resources, Energy and Tourism, which basically agrees with the miners in taking a denialist position on global warming.

These days it is unclear what the national interest actually means. Is it enlightened self interest of a nation state? So we have the tensions between sovereignty, national interest, and enlightened self-interest. Are concepts of sovereignty and national interest changing their meaning within the global economy and global warming? Enlightened self-interest means accepting shared sovereignty and multilateral commitment.

In contrast, the denialists work with both a narrow definition of the national interest and then reduces to that to assert the primacy of the interests of the coal-fired power stations and heavy energy issues.

| Posted by Gary Sauer-Thompson at 6:22 AM | | Comments (5)


What do I know, but is it not the case that only living things can grow, whereas the economy increases or decreases in size? Rivers, for example, do not grow, but their floods and contractions have downstream effects, which are real enough, as are the similar effects in the economy.

Mike Steketee in The Australian says that the response to those who claim that emissions trading scheme would export jobs and emissions to other countries is thatTreasury, together with Ross Garnaut and others are:

saying the risks of carbon leakage were low even before the Government substantially increased its offer to protect trade-exposed industries. Not that this stopped companies from complaining that they would all be rooned in what has become a rerun of the old import protection debate. Treasury estimates that putting a price on emissions will slow economic growth by little more than 0.1 per cent a year, which Climate Change Minister Penny Wong points out is one-fifth of the cost of population ageing.

He says that the economic upswing following a recession will provide a great opportunity for the investment that retools the economy to make it more energy efficient. Without a carbon price signal, such investment is less likely. A recent CSIRO study found that green jobs could boost employment by between 230,000 and 340,000 over the next decade.

The economy's 0.5 per cent contraction in the wake of the global crisis has exposed the limits of government spending to stimulate household consumption and boost effective demand. That highlights the limits of sovereignty.

The Australian economy has held up so far compared with the US (down 1.6 per cent in the quarter), Britain (down 1.5 per cent) and Japan (down 3.3 per cent).

Rudd said last night on the 7.30 Report that the economic downturn has already had the effect of reducing carbon emissions, like that's a good outcome. Then talking about the ETS he said it was important to prop up those same industries in the interests of protecting jobs.

Nothing at all about policy to lower emissions, rather, turning pollution into a tradeable commodity.