Friday, March 4, 2011

SMH: Start an industrial green revolution

"IT'S called carbon leakage and everyone's against it: the possibility that Australia could bring in a carbon price only to see jobs lost as industries relocate to lower-cost, dirtier countries overseas, with the unintended consequence that global greenhouse gas emissions go up instead of down."
So starts a great business day piece by Paddy Manning in the SMH a few days ago. On a topic that will be another carbon pricing flashpoint this year. Compensation for industry. Especially for emissions-intensive, trade-exposed industries (EITEs).

"The problem is, the carbon leakage argument has been misused. In reality, especially in sectors like aluminium and oil, we are turning into one of the brownest destinations around, with some of the oldest plant powered by the dirtiest energy, whooping it up under one of the lowest implicit or explicit carbon price regimes in the developed - or fast-developing - world.

We are in danger of being had. It's not at all about Australia losing jobs or investment or international competitiveness as we move to price carbon ahead of the rest of the world. It might have been that way in the '90s, when we first started debating the climate issue.

In 2011 the EITE compensation debate is often about saving certain industries the effort and expense of investing in best-practice plant and equipment to lower carbon emissions intensity."

The basic idea being that some industries calling for compensation are extremely polluting and inefficient due to an almost complete reliance on coal fired electricity and old technology. I guess a subtext here is that despite knowing since the late 80s that unrestricted greenhouse gas emissions were likely to be a bad thing, some industries have done nothing to clean up their act and are now demanding the government pay them to do so/ keep them afloat in a world where they can no longer pollute for free. On the other hand according to Grattan analyst Tristan Edis:

"Australia's steel makers, Edis argues, have invested in newer, efficient plant and have a legitimate case for compensation."

Overall the question we need to ask is:

"Should the Australian government be propping up industries that will fight to survive a fundamental realignment of our economy, or should it - at a time of record low unemployment and widespread skill and labour shortages - help workers shift into more competitive sectors of the economy?"

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