NATIONAL AFFAIRS: by Peter WestmoreNews Weekly
"Carbon" tax an expensive fiasco
, April 30, 2011
As details of the yet-to-be-finalised carbon tax trickle out from the Prime Minister, Julia Gillard, and her Climate Change Minister, Greg Combet, the new tax is emerging as an expensive, confusing and contradictory mess which will ratchet up already soaring prices of gas, petrol and electricity, for no national benefit.
The Government needs to introduce the new tax to placate the Greens, with whom they are in alliance, and to raise the billions of dollars needed to bring the federal budget back from deficit into surplus, as Julia Gillard has repeatedly promised.
But the growing public backlash against the new tax has forced the Government to reverse one of the major recommendations of Professor Ross Garnaut’s report which proposed the new tax: that there should be few, if any, exemptions from it.
Garnaut, an academic economist from the Australian National University, argued that providing exemptions would transfer the cost disproportionately onto other taxpayers, distorting the economic effects and sending mixed signals about the need to cut use of fossil fuels.
However, to counter public alarm, the Prime Minister has been forced to promise that around half of the money raised from the new tax would be recycled back to low and middle income earners, while the Climate Change Minister has promised that so-called “big polluters”, such as the steel and aluminium industries, will be compensated for the effects of the tax, because they are exposed to low-cost imports.
The announcement of an array of exemptions and compensation is hardening resentment against the tax by those who will be forced to pay it — that is, individuals, families and businesses.
And to the extent that businesses such as electricity generators are being taxed, they will pass the cost on to consumers in the form of higher prices, hitting families even harder.
Among economists and economic commentators, the new tax is being greeted with incredulity.
Under the headline, “Combet’s carbon numbers don’t add up”, The Australian’s Matthew Stevens wrote, “So Greg Combet reckons a $20 a tonne carbon dioxide tax supported by a full 94.5 per cent assistance rate is going to add only $2.80 a tonne to the the price of an $800 tonne of steel and $18.70 to the cost of a tonne of aluminium.”
Stevens added, “Well, to believe that you really have to accept that Combet has his numbers right. And the fact is that few outside of the minister’s inner-circle will.”
Bluescope Steel’s CEO, Paul O’Malley, said, “We are at a loss to explain how Minister Combet has calculated a year-one carbon cost of $2.60 per tonne of steel. We believe this is a very selective use of the data and does not reflect the full impact of a carbon price on Australian steelmakers.
“Data provided by the minister’s department shows an estimated year-one cost of the order of $37 million. That comes after the company has just made a $55 million loss for the first half of financial year 2011.
“This is equivalent to more than $8 per tonne of steel (for Scope 1 and 2 costs) and based on our data, if you include Scope 3 costs (costs passed through from suppliers, including inputs such as coal) this figure would rise to more than five times the minister’s calculation for year one alone.”
Sydney Morning Heraldbusiness writer Paddy Manning interviewed Greg Combet in a feature article on April 16, under the sceptical headline, “There’s no such thing as a free lunch — or is there?”
Melbourne Herald Sun business editor Terry McCrann was positively scathing, “Just how stupid do the prime minister and her climate minister think you are? Pretty damn stupid has to be the answer.
“There they both were yesterday, saying we want to hit you with a $10 billion tax, to pretty quickly grow to a $20 billion or $30 billion one. And we promise to give you back half of it...
“You don’t need to worry about the $10 billion or $20 billion or more flowing to Canberra, because, as Gillard and Combet keep claiming, you won’t be paying it. No, only the big so-called polluters will be paying the tax.”
He added, “Believe that and I have an Opera House to throw in with the [Sydney Harbour] Bridge I’ve got to sell you.” (Herald Sun, April 14, 2011)
Terry McCrann also made the point that the Government was dishonest in claiming this was a carbon pollution tax, when it was taxing emissions of the gas CO2.
Writing after Greg Combet spoke at the National Press Club, McCrann said, “I don’t think I’ve seen any previous minister who has managed to so seamlessly combine the most basic stupidity and the most shameless dishonesty. While at the same time demonstrating he actually doesn’t have a clue that’s what he is doing!
“In his speech yesterday he used the word ‘pollution’ or a variant a total of 48 times, either directly or indirectly linked to the word carbon.
“In every case he was of course talking about carbon dioxide — not simply harmless but utterly necessary plant food.
“You’d have to conclude that he does know just how dishonest he was being to so repeatedly talk about carbon pollution — deliberately promoting an image of dirty bits of grit.”