Carbon debacle

As you know, the purpose of the carbon tax puzzles me. Because to reduce carbon emissions. Of course – we have to stop using it.
"The vast majority of Australian households won't pay a cent as a result of the price on carbon," Ms Gillard told ABC Radio on Monday morning (June 27th 2011).
So where are we heading with this? One can only imagine that this is a symbolic move to be seen to be doing something. Others would suggest it is an ideological agenda to redistribute wealth and enlarge government.

The tax will be paid by the big polluters they claim. Yes, sure, I agree with this, and they will simply increase their prices to maintain profits and pass this on to consumers who will have more redistributed wealth so will not make any changes to their behaviour – ho hum and off we go.

Here is Julia Gillards explanation as to why this tax will work on Q & A (March 14th 2011);

“Well, the effect is that in the shops when you come to buy things, products that are made with relatively less carbon pollution will be cheaper than products that are made with more carbon pollution. So you're standing there with your household assistance in your hand. You could still keep buying the high carbon pollution products if you want to or what you're far more likely to do is to buy the cheaper, lower carbon pollution products. That means that the people who make those things will get the consumer signal, gee, we will sell more, we will make more money if we make lower pollution products. That drives the innovation. So I want you to have that household assistance in your hand but I also want you to see price effects which make cleaner, greener things cheaper than high pollution commodities. That's why it works.”

Great explanation! And in a fantasy world of Australian Utopia it could almost work. Problem is, we live in a global economy. So to pick apart the argument the Prime Minister puts forward, the first most glaring omission is that it ignores the rest of the world (i.e. imports). Imports will not have a carbon tax and will therefore most likely be much cheaper – indeed, our manufacturers are already struggling under the pressures of cheap Chinese goods and a high Australian dollar. So given this, the consumer will buy the third option Julia failed to mention – the cheap imported good – made from coal that we exported!

The other glaring omission is that clean green power is still prohibitively expensive and not practical. By putting this price on carbon - $20 a tonne, $30 a tonne – whatever, Clean Green power will still be non economical. Unless Australia embraces a clean green scalable energy source – such as nuclear power, we are just kidding ourselves (by the way, because we have an abundance of cheap coal, Nuclear Power is not viable in Australia without a carbon price of $40 a tonne or higher). As a result – Australians will still buy the good produced with Carbon Dioxide intensity.

Indeed, the major problem of this argument is that government intervention does not “drive innovation”. It never has and never will. Minimal government interference in the movement of capital and investment will promote innovation.

So, what is the point? Australia as a nation should not feel guilty for our abundance of cheap coal. Indeed, we should not think that we are somehow acquitted of this guilt by imposing a carbon (dioxide) tax whilst at the same time exporting our coal to China, Japan and South Korea who will happily consume our folly and return it to us in cheap manufactured goods. For those of you frightened by the prospect of a “world heating dangerously”, take heart in recent data that suggests that “climate change” is simply a permanent feature of our planet and that Carbon Dioxide increases in our atmosphere over the past 10 years has not resulted in any increased warming as predicted by IPCC models.

The current Prime Minister and her Government should indeed stop the “Alarmist” predictions and give the Australian population a little more credit than they have in the past 12 months. Their continued indifference to this may be highly destructive to our economy and future.