OPINION: News Weekly
Labor's carbon tax will destroy our advantage
, April 16, 2011
The Gillard Government’s climate commissioner, Tim Flannery, has blown the whistle on both the futility and stupidity of Australia unilaterally introducing a carbon tax.
He has conceded that if the whole world shuts down all emissions tomorrow, we may not see any reduction in average global temperature for 1,000 years.
Labor’s determination to impose a carbon tax before any global agreement is economically irrational as it will destroy the comparative advantage we enjoy.
If you want to reduce global emissions in the most economically responsible manner, you need a global agreement.
It is basic economics, but you wouldn’t know it from the gobbledegook about the markets we are hearing from Julia Gillard and her colleagues.
The key flaw in the Gillard Government’s decision to impose a $11.5 billion tax a year on Australians is the failure of the rest of the world, and in particular our major competitors, to come with us, to act in unison.
The Australian economy has been underpinned by affordable power from our abundance of coal. Imposing a carbon tax in the absence of international action removes this advantage.
If we waited for a global agreement, Australia’s comparative advantage could be maintained for decades to come.
Under a global scheme, basic economics would dictate that those countries with higher-cost emissions than Australia would phase out their less efficient and uneconomic power plants years before ours. With our cheap coal, we could be one of the last countries to shift from coal-fired electricity generation, instead of the first under Labor’s carbon tax.
This would occur because if a global emissions trading scheme (ETS) or carbon tax was in place, the world’s emissions would be cut fastest and at least cost by the likes of Australia buying emissions permits from the big emitters.
Our comparative advantage of more affordable electricity could be maintained for 30-40 years.
Instead, the Gillard Government will force the scrapping of our coal-fired power generation perhaps decades before time, driving up electricity prices in the process, which will cascade through the entire economy in the form of higher prices for consumers.
It will result in our industries being shut down or sent overseas — our lead smelters, our zinc smelters, our steelworks, our aluminium smelters, our cement works, on many of which whole towns and communities rely.
It will cost tens of thousands of jobs and the relocation of our emissions to countries with less efficient industrial practices.
It would be like putting a carbon or some other big tax on Victoria and no other state and then all standing around scratching our heads wondering why hundreds of jobs and lots of industries are moving into NSW, South Australia and Queensland.
The same thing will happen on a much bigger and more damaging scale with a carbon tax. Instead of jobs and industries moving interstate, they will be going to China, Indonesia, Malaysia, Thailand and India as our competitors around the world get a free run.
The Europeans have learnt this the hard way with their flirtations with emissions trading. Since 1990, the Europeans’ emissions from manufacturing have been flat. Some are running around patting themselves on the back.
But Europe’s consumption of carbon has gone up by 44 per cent. What we have seen is a hollowing out of manufacturing in Europe, and it has all gone to China, along with the production emissions.
This carbon tax will see a hollowing out of manufacturing in this country, too.
It will also represent a capital tariff on Australia, a massive disincentive for international investment, and increasing sovereign risk, which has risen under the Rudd-Gillard Government.
The worst part is this carbon tax is not being driven by any economic rationale, but cynical, self-serving politics. It is the price Julia Gillard is prepared to pay for a single Green vote in Parliament to cling to power.
Labor’s unilateral action ignores the fact that the market it endlessly parrots on about is a global market, not one confined to Australian borders.
Andrew Robb MP is the opposition spokesman for finance, debt reduction and deregulation. This article originally appeared in The Australian, April 5, 2011.