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the politics of a carbon price « Previous | |Next »
May 5, 2011

In The industries that cried wolf Richard Denniss argues that many of the claims being made by industry about the likely impact of a carbon price are exaggerated. The industry line ---coupled to the attacks on renewable energy as being way too expensive and merely a niche player---is endlessly repeated in the media and exaggerated by The Australian into a crisis for Labor, who are unfit to govern.

The introduction of a carbon price in Australia in July 2012 will raise more than $10 billion per year, help influence industrial and household decision making and, inevitably, increase the costs and reduce the profits of some businesses. Such increases in cost and the subsequent change in behaviour are, of course, the objective of introducing a carbon price. It is designed to shift Australia to a low carbon economy.

The response by many of the representatives of some of Australia's largest polluters are designed to leave their audience in little doubt that the introduction of a carbon price will destroy the Australian economy. Therefore tens of billions of dollars have to be transferred from taxpayers to polluters on the strength of industry claims about then losing their competitiveness.

It's a poor argument in policy terms since a carbon price will have less impact on these industries than the recent 30% rise of the Australian dollar. The dollar's rise hasn't destroyed their competitiveness.

The policy context for this kind of politics is that companies in Australia have for many years mounted arguments that unless their demands for low wages, low taxes and generous industry assistance (to ensure competitveness) are met they will be forced to shift their operations offshore.

Dennis says that:

The meaning of competitiveness implied by those who use it most seems, however, to relate to the capacity of Australian firms to be able to 'compete' with the costs of production by firms based in other countries. In relation to the introduction of a carbon price, for example, the argument appears to be that if Australian steel makers have to pay a carbon price and foreign competitors do not then the result will be that Australian steel makers will be priced out of the market, those buying steel will turn to foreign steel makers, and, as a result there will be a reduction in Australian exports and employment for no actual reduction in worldwide greenhouse gas emissions. This transfer of pollution from Australian steel makers to foreign steel makers has become known as 'carbon leakage'.

While it is theoretically possible for such a chain of events to occur, in practice a far more likely outcome is for Australian manufacturers to continue selling steel, albeit at a slightly lower rate of profit.

| Posted by Gary Sauer-Thompson at 4:24 PM | | Comments (2)


"the introduction of a carbon price will destroy the Australian economy."

and it will send us back to the caves and to a hunter gather lifestyle!

The answer? Build lots nuclear power stations along Australia's seaboard.

The federal government has been couching its amendments to the solar credits (its reducing the solar credit multiplier from 4 to 3 from July 1) as a panacea to rising electricity prices, even though solar only has netration rate of 2.7 per cent of the residential market.

Australian households have responded exactly as the policy intended. What is needed is a national feed-in tariff – one that outlines a sensible path to the point of grid parity, when it will no longer need any subsidies.