Analysis

Limping towards a carbon tax finish line

The carbon tax, which starts on Sunday, was a good idea introduced at the wrong time which will have unforeseen side effects -- some of which may lift rather than reduce Australia's carbon output.

In fact the one of the forces that looks like reducing carbon output in Australia in the longer term is what is happening in the US which is developing a smarter carbon reduction policy than Australia.

As I have pointed out on many occasions by introducing a carbon tax at a time of steeply rising power prices Prime Minister Julia Gillard and her carbon man Greg Combet caused a dramatic swing in Australian views on carbon.

The carbonites, who had won the public argument about the effect of carbon on climate, suddenly started to lose it. The carbonites have yet to understand the implications of this change in public perceptions, particularly in the top echelons of business.

In her very limited public statements Gina Rinehart cites a Fairfax Media bias towards the linking of carbon to climate change as one of the things she wants to change should she gain representation on the Fairfax board. Rinehart is advised on climate by Professor Ian Plimer who believes the study of geology shows that while changes in the atmosphere can affect global climate, it is activity on the sun and the tilt of the earth that have a much greater impact.

When Plimer speaks in public there are often green inspired protests and when I mentioned that his views need to be debated I received a huge blast from the carbonites. It underlined that the carbonites have not realised that introducing a carbon tax at a time of steeply rising power prices had caused a dramatic change in public opinion. Unlike Rinehart I am not a Plimer believer, but I recognise his right to be heard.

More importantly Gina Rinehart, with almost 20% if Fairfax, is not going to take kindly to being rejected as a board member. Fairfax may be split with Rinehart's perceived need for both sides of the carbon debate to be heard being one of the motivating forces if she plays a role in reshaping Fairfax.

There is no doubt that the big power price rises (of which the carbon tax probably causes between one quarter and one third) will reduce the usage of electricity and therefore carbon output. With high cost wind and solar power being driven by government regulation and subsidies the incentive to radically change the way we generate base power is being delayed. The owners of the high pollutant brown coal generators can now see a future for at least the current decade and so are replacing bank funding. Brown coal may become a major Australian export. Again these are not events that the carbonites expected from a carbon tax but it's what happens when a policy is badly thought out.

Meanwhile the big rise in power prices will simply cost jobs and reduce our industrial base unless there is more government help. Job losses will further inflame the community. Many would argue that job losses in capital cities will help us provide labour for the mining investment boom. But that boom is going to be greatly curtailed after 2015.

While it's early days yet, the US is swinging hard to gas from coal and shale, which will reduce their carbon footprint.

It will have a by-product of making US coal available on the export markets so curtailing Australian coal exports which will help our carbon footprint, as the US becomes less and less dependent on the Middle East oil that will depress oil and gas prices

What Australia should have done is adopt a similar policy to the US. You will note I have so far not mentioned Tony Abbott. If he wins the next election carbon taxes will be out and will never return unless the world goes that way.

Instead of using carbon taxing to fund cash distribution to lower income families what the government should have done is to have taken real action to cut carbon which would gained great public support. And once you lose public support...

*This article was originally published by Business Spectator.


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