NATIONAL AFFAIRS: by Joseph PoprzecznyNews Weekly
Who stands to gain from the Gillard-Greens gravy-train?
, August 6, 2011
The big winners of the coming Gillard-Greens carbon dioxide (CO2) emissions tax will be high-earning accountants, lawyers and merchant bankers.
The reason that accountants will profit from the tax is that they will be the ones consulted by businesses primarily to help evaluate various implications of the forthcoming new tax as well as to assist in minimising outlays on the new tax.
Firms will also be seeking advice on how to cash-in on a range of promised Canberra hand-outs on their usage of costly non-coal derived energy.
According to a special IBISWorld report, accountants and financial advisers will be the first major beneficiaries of the new tax, along with lawyers.
All three professions will receive yet another boost to their businesses after July 1, 2015, when the fixed tax rate for CO2, at $23 per tonne, is transformed into tradable emissions permits that companies will be compelled to buy before they are allowed to engage in emission-causing economic activity.
When this occurs, bank-based permit-trading desks will move in to reap ongoing commissions.
The IBISWorld report says: “Big banks and other financial institutions will be actively involved in the operation of the carbon market through the trading of carbon permits, while demand from polluters and other businesses to hedge their carbon exposure and speculate on the carbon price will drive the development of a range of new derivatives products.
“Financial institutions will also be involved in trading Australian carbon credits in other markets, notably the European Union.”
However, the IBISWorld report overlooks another major beneficiary group, Canberra’s ever-growing bureaucratic empires, which are set to acquire even more personnel and to exercise more control over business activity.
Adam Creighton, research fellow at the Sydney-based Centre for Independent Studies, warns: “The carbon dioxide tax will raise another $8.5 billion a year for government, but barely a third will go towards cutting other taxes. And the revenue will ratchet up year after year as the carbon dioxide ‘price’ climbs, while inflation steadily erodes the tax cuts.
“Treasury estimates that by 2015, the price of carbon dioxide will rise to $29/tonne, increasing the burden on the weekly shopping bill by $13.40.
“The bewildering array of new programs and quangos that accompany the CO2 tax betray a government deep in the pocket of Big Bureaucracy, with a blithe disregard for public money.
“The Department of Climate Change was a mere entrée of fiscal excess.
“Australians will soon savour the Clean Energy Finance Corporation (replete with a cool $10 billion to ‘invest’), a Clean Energy Regulator, the Climate Change Authority, and the Australian Renewable Energy Agency.”
Also in the pipeline are additional big-spending bureaucratic bodies, such as an Indigenous Carbon Farming Fund, a Biodiversity Fund, Carbon Farming Skills Initiative, and the Land Sector Carbon and Biodiversity Advisory Board.
And there’s to be a Clean Technology Investment Program and the Clean Technology Innovation Program as well as Energy-Efficiency Information Grants, the Clean Technology Food and Foundries Investment Program, and the Clean Technology Focus for Supply Chain Programs.
Although supporters of the scheme insist that CO2 emissions-trading will ensure that the CO2 price level will be set by market forces, critics doubt this.
Retired Sydney law academic, Professor David Flint, says: “This is not a real market but an artificial construct concocted by bureaucrats and academics to be rorted by merchant bankers.”
Tamra Gilbertson, a founder of Carbon Trade Watch and co-author of Carbon Trading: How It Works and Why It Fails, has warned against people pinning too much hope on the promised benefits from emissions trading.
She says: “Perhaps the bigger scam is that the European Union’s trading scheme has unequivocally failed to reduce emissions, yet countries intend to replicate this failure.”
IBISWorld’s claim that foreign traders would reap benefits from trading in Australian CO2 emissions permits was foreshadowed in October 2009 in a Wall Street Journal article written by former New York City lawyer, Kirsten Gillibrand. Gillibrand replaced Hillary Clinton as senator for New York State after President Barack Obama named Clinton secretary of state.
In 2009 Senator Gillibrand wrote: “According to financial experts, carbon permits could quickly become the world’s largest commodities market, growing to as much as $3 trillion by 2020 from just over $100 billion today.
“With thousands of firms and energy producers buying and selling permits to emit carbon, transaction fees for exchanges and clearing alone could top nearly half a billion dollars.
“If Congress establishes proper oversight of a carbon market, New York’s financial talent, expertise and institutions are uniquely suited to provide the tools and innovation for a new commodities market of this size.
“Firms wishing to invest over the long-term will need to turn to our financial sector to create the emerging products and provide the capital that would allow them to make green energy investments.
“An infrastructure is already beginning to form, as entities like the New York Stock Exchange, J.P. Morgan Chase, Goldman Sachs, and the new Green Exchange are developing carbon-trading platforms or expanding their environmental trading desks.
“There are nearly 100 funds already focused on green investments.”
Only time will tell what the future will hold for this global trading in what is essentially a legislatively-enforced price on trillions of dollars of CO2 emission permits.
If such a trade were to collapse in the alarming way that the Wall Street-inspired global financial crisis unfolded in late 2008, then Australia’s banking sector could scarcely escape the consequences.
Joseph Poprzeczny is a Perth-based historian and writer.