There’s a reason why the steel industry has suddenly gone very quiet about the carbon price scheme, after being the loudest whingers about it.
Referring to the EITE and steel industry package in the Fin Review, Bluescope head Paul O’Malley said it “materially reduces the overall cost of the carbon tax on Bluescope.”
“Materially reduces”? Who is O’Malley kidding? The steel package significantly overcompensates the steel industry – not merely will it face no net financial impact from a carbon price, it will actually come out tens of millions of dollar ahead.
That’s because, under the guise of a carbon pricing package, the Government has reverted to old-fashioned protectionism and is pumping hundreds of millions of dollars into an industry under threat from imports.
According to Graham Kraehe, the Australian steel industry – basically Bluescope and OneSteel – produce around 17m tonnes of CO2 emissions a year. Under the EITE assistance arrangements, they’ll receive 94.5% of permits free. At the starting price of $23 a tonne – that’s before indexation or the transition to a market price – that’s $369m worth of taxpayer handouts a year.
There’s still the remaining $21.5m cost of permits for the industry each year. For context, last year Bluescope earned over $8b in revenue.
But Bluescope and OneSteel will also get access to a $300m assistance package over five years. At $60m a year on average, that means the industry comes out ahead to the tune of nearly $40m. The steel industry’s getting overcompensated, like pensioners and welfare recipients.
Of course, the price won’t remain at $23. Let’s scale up the price to $27 over the five year period. The EITE handout become $401.6m , the gap becomes $23.4m on average over the period, meaning Bluescope and OneSteel make just over $35m a year on top of the carbon price.
But wait, there’s more.
Under the EITE assistance plan, free permit levels reduce 1.3% a year. But “the Steel Transformation Plan” will be complemented by a small increase in free permit allocation for the steel industry from 2016-17 onwards, when the Steel Transformation Plan runs out. This is despite the PC reviewing levels of assistance for industry. In fact – the press release of Kim Carr and Greg Combet yesterday makes explicit this contradiction – the PC will review assistance, but steel assistance is going to increase anyway.
Hang on, it isn’t finished. There’s a $1.2b Clean Technology Program aimed at improving energy efficiency in manufacturing. There’s even a specific component, called the “Food and Foundries Investment Program”, which is possibly the first program in Australian public policy history to be designed on the basis of alliteration, under which metal forging and foundries will get $50m.
At least that program will be based on co-contributions from industry.
All this for an industry that employs, according to ABS data, 6,200 workers. Assuming the industry supports the same number of jobs again (its own claim that it “provides employment” for 91,000 people strains credulity), we’re talking about spending around $60,000 per job.
Thank you taxpayers.
Still, when it comes to such rank protectionism, at least the steel industry can claim it was competitive until the dollar went past parity with the US dollar and the minerals boom sent input prices soaring. Ken Henry and Glenn Stevens have warned that it shouldn’t be the role of governments to get in the way of the economic restructuring or try to protect industries punished by it, but they’ll do that anyway, particularly when the industry is one that is heavily unionised and in heartland Labor seats.
What’s the excuse for the coal industry, which is enjoying its biggest boom in history?
The coal miners are outside the EITE assistance framework, but will get $1.3b over six years from a “Coal Sector Jobs Package” and a “Coal Mining Abatement Technology Support Package”. Only the second one, costing $70m, will be on a co-contribution basis, although the first is dependent on emissions reduction initiatives.
According to the industry it employs 37,000 people directly and another 100,000 indirectly (amazing what employment multipliers are to be found in industry publication, ain’t it?). That’s at least $10,000 a job, and realistically double that.
The problem with the coal industry of course isn’t its emissions here, but the impact of the use of exported coal overseas – particularly thermal coal, which is even more emissions intensive than coking coal. Australia is one of the key dealers feeding the world’s addiction to cheap energy and steel, which is why I suggested elsewhere that giving it assistance under a carbon pricing scheme was like compensating a drug dealer as part of a law and order crackdown.
The analogy is actually useful, however, because like the drug trade, prohibition isn’t the answer, but better regulating it. A coal export tax, based on emissions intensity, could provide the start of a sovereign wealth fund designed to enable future generations to adapt to inevitable climate change. Or to use a more socially equitable approach, it could provide the basis for foreign aid assistance to enable developing countries to deal with climate change. The best place to start is our own backyard, given our Pacific neighbours are already dealing with climate change impacts like poorer water quality due to sea level rises.
Still, let’s not be ambitious. A good start would not be blowing $1.3b on an industry that is making money hand over fist.
Bernard, wouldn’t this $1.3b be seen in a different light, a better investment as it were, if viewed by someone like Ken Henry as ‘buying reform’ such as this carbon price plan? Particularly if one accepts that Australia must join global efforts to cope with climate change now when failure to do so could jeopardise our economy, to say nothing of our environment.
Judging by the outcry from the coal industry et al the sweeteners offered by the carbon pricing plan aren’t tempting enough. Mind you Liberal governments were never going to let them accept any kickback, no matter how big. O’Farrell is already catastophising about the security of power supply in Victoria with the ‘threats’ to Hazelwood.
Rank protectionism? Certainly. But nothing compared to the renewable energy rorts to come.
Job in the wind “industry” cost around $1 million each. Not to mention the balance of payments damage – all the technology is imported, except some low-tech tower sections.
The power consumer and the taxpayer pay wind subsidies.
Current renewables cost jobs. You can’t strip billions from the economy without employment consequences.
What’s happened to the share price of speculative projects now underway? Look at Flannery’s geothermal fantasy, which has already swallowed $100m in public money (2010) and has less than $30m left…it’s gone from 20 cents a fortnight ago to 33 cents last Friday to 43 cents today. Same for similar companies.
Just because they’ve got a sniff of the $13 billion of renewable energy promised by Gillard.
But market analysts are very pessimistic about Geodynamics. Severe technical problems. Another reason to throw the bulk of the money at useless wind turbines.
This is the key fraud of the “carbon tax” – not the haggling over tax “compensation”.
Abbott and Joyce were in the Hunter today trotting out their weary slogans again, but the one that nearly had me choking on my coffee was Abbott’s: “the designers of this tax should apologise to the coal industry”. Amongst the utter drivel about how wonderfully ‘clean’ the Australian coal industry is, this little howler had me wondering just how many billions of taxpayer’s money he thinks should have been handed out?
Gotta say that Abbott and his sidekick sounded pretty flat, and as if they’re only just going through the motions…which of course, they are.
Still peddling the same tired old lies, Frank?
Reference please.
Name a major technology in power generation that does NOT depend entirely on imported technology and equipment. You can choose from Turbines, control valves, alternators, gearboxes, control systems, high voltage circuit breakers and switchboards.
Unless you have some kind of alternative, non – renewable power generation technology in mind which is 100 % Australian designed and manufactured, this argument – “wind is bad because wind turbines are imported” – is absolutely groundless.
How?
They might be useless at reinforcing your world view, Frank, but at producing clean and reliable electricity they are pretty damn useful.
I’ve shown this to be true to you on these fora for over a year now – comprehensively. I’m not going to repeat the facts yet again – just show you up every time you ignorantly flout the evidence.
Norway introduced carbon tax and the ETS long ago and their economy is still strong. As one of the largest oil exporter in the world the oil industry innovated way to capture CO2 emission during production and pump it back down.
Recent survey found that Norway ranks number 1 in human development and the most peaceful country in the world. I think it is the fourth richest country in the world and their current unemployment rate is around 3.6%.
I’ve been hearing about how the Australian Labor party will destroy the Australian economy ever since they got elected in 2007 but the Australian economy got through the GFC without a recession and the current unemployment rate is 4.9% one of the best in the OECD. Recent study found that countries which implement stimulus package which focus on assisting or creating jobs Like Germany and Australia came out better whereas those which heavily helped the financial sector employment don’t do well because availability of money does not mean people will lend or invest and employ (and please do not say China rescued us to me, China does not make up 100% of our export trade we are exposed to other economies as well).
Recent study also found that Australians are the most happy or satisfied with their lives. So it does not matter whatever facts we present the Anti-Laborites will always have their own truth and claim the sky is falling.