There’s remarkable unanimity among Australia’s largest businesses about the impact of the Federal Government’s emissions trading scheme.
All agree on the need to comprehensively address climate change (well, except the Australian Retailers’ Association, which doesn’t think global warming is real). All agree that an emissions trading scheme is the most appropriate approach to doing so. All agree the scheme should be as broad as possible in its coverage. And all are certain it spells doom for their sector unless they are given preferential treatment.
Put their assessments together and only one conclusion is possible: an emissions trading scheme — even the wimpy, no-polluter-left-behind model cooked up by Kevin Rudd and Penny Wong, will wreck the Australian economy. Catastrophe looms. It’s the Book of Apocalypse, the Gospel According to Rentseekers.
The most comprehensive “analysis” so far of the impact of an ETS remains the rubbish cooked up for the BCA by Port Jackson Partners. We’ve previously explained just how badly flawed this effort was, which purports to show that 3 out of 14 trade-exposed business would be forced to close and another four would be forced to “fundamentally review their operations”.
“There can be no doubt these outcomes would also apply more broadly across the relevant industry sectors,” the BCA declares. That is, 20% of trade-exposed businesses would close and another 29% would be in strife. Which means, on a conservative basis, an instant 5% drop in Australia’s GDP, and the loss of 350,000 jobs.
But don’t worry about that, we’re just getting warmed up. The paper products industry body A3P warned an emissions trading scheme would render the entire industry unviable, although Visy said it would only have to close two plants. So leaving aside Visy, you can scratch a $2.4b industry and 5,600 jobs.
The Australian Workers Union says the entire aluminium industry will be driven offshore. That’s 15,000 jobs and a $5b industry. But let’s ignore them, because aluminium is covered by the BCA, and it’d be double counting.
Bluescope Steel also reckons local steel production will cease. That’s 75,000 jobs and (using old figures) at least $21b.
And then there’s agriculture. Agriculture won’t even be in the ETS, but farmers’ groups are crying poor. The dairy industry has warned it faces up to a 60% reduction in profits, and AgForce produced modelling showing farmers faced cost increases of 15-40%. But they’re nothing compared to Mick Keogh at the Australian Farm Institute, who produced figures showing most farming sectors faced cost increases of over 100%. That is, total wipeout.
So let’s be a little conservative and say we lose 40% of the agricultural sector, meaning 4.8% GDP loss and 640,000 jobs.
How are we tracking? So far we’re looking at a 12% fall in Australian GDP and the loss of 1.1 million jobs.
And then there’s the flow-on effects of what is supposed to be the draconian effect on the electricity industry, which seem to have no difficulty passing on price rises at the moment but which will mysteriously be unable to pass on those from a carbon price.
An analysis for the electricity sector by ACIL Tasman showed retail tariffs rising by 28 percent under a 20 percent emissions reduction target, although that’s actually only 14% extra on top of what would’ve been the tariff rise anyway. ACIL Tasman evidently didn’t try hard enough, because “independent consultant” in the energy sector, Duncan Seddon, declared in the AFR last week that electricity prices would more than double.
And then there’s the LNG sector, led by the biggest sook in corporate Australia, Don Voelte. They too commissioned “independent” modelling from ACIL Tasman — showing a 30% fall in profits that would “seriously threaten the competitiveness of the multi-billion dollar Australian LNG industry.”
In fact, Woodside admitted that its forecast impact of the ETS was so massive there wouldn’t be enough money in the scheme to compensate them, which presumably means the ACIL Tasman model has a giant black hole in it where all Woodside’s permit acquisition payments would go. The sector also hired Concept Economics to show that there’d be a 37% fall in LNG production over “business as usual” by 2020.
Concept Economics crops up elsewhere as well. Which is not unexpected, because it is run by the former chief accountant to the greenhouse mafia, ex-ABARE head Brian Fisher, Henry “let the planet cook” Ergas and some former advisers to John Howard.
Fisher, a critical bureaucratic supporter of the Howard Government’s greenhouse denialism and an enthusiastic advocate of land clearing, is also on record as saying an ETS will “crucify” Australian farmers, which rather puts Mick Keogh’s doomsday predictions in the shade.
Nightmare stuff. Imagine how bad it would be the Government had actually proposed a serious effort to reduce our carbon emissions?
This is one reason why we won’t have an EFT. No matter how hysterical our journalists become, we can’t afford it now.
Another potential reason is that the “science” of GW is looking less convincing by the week. Should there be no new supportive data by 2010 pressing ahead would be madness.
Then there is the proposed scheme itself. Agriculture gets lots of mentions in this article, so why is agriculture not included in the EFT? Why does the proposed EFT refuse to account for the carbon harvesting in agriculture? Agriculture is one of the very few industries which actually removes carbon, lots of it, from the atmosphere, but the EFT does not admit this. Why?
Bernard, too much of your research has been done at the bar and too little at the library.
Bernard Keane, if you left out the emotive pathetic phraseology in writing about people whose views are different from yours, your writings might achieve a little credibility. Use of phrases like “sook” “mafia” ‘ “wimpish” and so on it goes, does nothing other than whip up the drama queens, who come in every time, but who themselves show not even your degree of knowledge about this whole question, which many of us need to understand and quickly. Our futures – environmentally, economically, politically and ……. rely on solutions being sought and found.
It just might be the case that already there is nothing at all we can do to limit climate change – what we must do concurrently is commit our resources and our minds to managing the conditions that it will bring.
The economic modelling used by Treasury and most other mainstream economists is fundamentally flawed and cannot even model the past let alone predict the future. The underlying idea is called the General Equilibrium State of the Economy which says that if you change one price in one part of the economy then it will affect every other part. Seems reasonable but is not the way to model a dynamic system. That is the General Equilibrium model is essentially a modelling a static system.
To change to a low emissions economy we need to invest. An investment scenario is one where you invest money and you get back more than you put in. Modelling this sort of scenario means treating a country more like an investment opportunity rather than as a steady state in equilibrium economy where spending money in part of the economy takes it from another. Spend money to generate more money and you get a different result.
If you assume an investment model then you will come up with quite different results.
Take a look at http://cscoxk.wordpress.com/2008/09/23/financing-renewables-and-solving-the-financial-crisis/
We can reduce emissions and we can do it quickly and we will all be wealthier. It will create jobs not destroy them. Our economists need to start to think like entrepreneurs rather than like cost accountants.
“History teaches us that men and nations behave wisely once they have exhausted all other alternatives”. Abba Eban
http://www.soilcarbon.com.au
Bernard’s comments on the modelling carried out for agriculture bear no resemblance to what the modelling actually concluded, so one can only presume he has not actually read the research report. If his comments on other modelling are similarly wrong, then it is obvious his piece is nothing more than blind advocacy. Presumably he is a member of the miraculous emissions trading club, which seems to believe that simply by implementing an ETS with tough targets Australian emissions will automatically decline and it won’t hurt a bit! This was the line fed to Canadians and New Zealanders, which they have now discovered to their cost was completely wrong. A better approach would seem to be to take a realistic approach to the potential costs and to urgently implement agressive research investment to find solutions.