Our story
last week about the power, influence and connections of the fossil
fuels industry has sparked a number of interesting responses, including
several challenges to the Greenpeace line that Australia’s fossil fuel
industries receive many billions a year in taxpayer subsidies.

Take
the NSW mining industry, which is about 80% coal, for example. Apart
from the argument about subsidised power to aluminium smelters, the
industry claims it doesn’t receive any subsidies. Half the pre-tax
profit goes to the state government, another quarter to the Feds and
this came to around $1.2 billion last year in NSW alone.

On
the question of a carbon tax, it isn’t so much what the coal industry
could sustain (80% exported), but rather what the Australian economy
could sustain. Demand for energy is highly inelastic, which is why fuel
excises are so lucrative for government. Further taxing coal will put
up the price of energy, which will be both inflationary and drive
energy intensive industry offshore. Cheap energy is one of Australia’s
few comparative advantages. It’s a brave and tough call to cut it
loose. That’s what governments globally are realising about climate
change policy – talk is cheap, but action is not.

But why not
cut the volume-related royalties and replace them with a carbon tax to
really get the market incentives moving in favour of lower emissions
without crippling the overall industry? Gas is already receiving
preferential tax treatment, so why not just make this a little more
pronounced in some rebalancing that’s revenue neutral.

Then there is this conspiracy of influence that Four Corners (check out Andrew Bolt’s de-bunking here)
and Crikey have separately raised. The industry laughs at this
suggestion and merely points out that any large wealth-generating
industry has influence and governments ignore them at their peril.

Many
in the mining industry profess to support a drive to a lower carbon
energy supply in Australia, but rail against any form of carbon tax
unless it is a truly global system. China is tipped to build 550 new
coal-fired power stations in the next decade to help drag a billion
people out of poverty. It is, indeed, a tricky morality. You need to
create wealth to help deliver the solutions.

Finally, the NSW Parliament has just released this background paper
on climate change. It’s one of the best you’ll read as a genuine,
articulate, impartial summary of the science behind the arguments about
climate change.

Peter Fray

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