On Monday, the Australian Workers Union joined the scare campaign over carbon trading policies by warning up to 15,000 jobs could go if costs were increased for energy intensive industries.

It was typical of the union, some sections of business and their cheerleaders in the media. But it was a story with no foundation, not because of what the Australian government might or might not be doing, but because there’s a shortage of electricity in China and India, while other potential destinations in such as South Africa and Mozambique face years of even worse shortages.

The South African Government and the state-owned power authority have imposed a 5% minimum cut on all big power users in the country. This includes companies like BHP Billion and Rio Tinto who know there’s no point in taking a plant there for the foreseeable future. There’s more chance of an Australian emitter relocating to the USA, which is emerging as a low cost country for manufacturing. But even in the US there are power shortages. California has had several days of low power supply and problems this northern summer.

But the story from China and India is the most interesting. India has endemic power shortages. Brownouts are regular in summer and it can’t build enough power stations to supply growing demand. It is short of natural gas and has to use coal or oil.

In the past week in China, aluminium, lead, and most zinc smelters and refiners have cut production: the justification was to help leave enough power for the games in Beijing. But some provincial governments have ordered the cuts because of doubts there would be enough supply for domestic and rural users. They may not be voters, but the Chinese Government is dead scared of social unrest around the Games.

The cuts were also agreed to be the various companies to try and boost prices (and cut a surplus of zinc and lead). Aluminium prices jumped at the news of a 10% cut in Chinese output for the next quarter at least, lead and zinc prices went up briefly on news of a 10% to 20% cut for the next quarter, but the prices then eased.

Now the real story has emerged: China is running short of electricfity and has been short since the terrible storms in January and February crippled the country.

Coal prices have soared within China for two reasons: a shortage brought about by the authorities clamping down on unofficial mines, and price controls on electricity, which have driven many small urban and rural power stations out of business, or forced them to close down temporarily.

On top of this oil prices are higher, forcing diesel prices higher, but China has diverted diesel supplies to the earthquake hit Sichuan province to power thousands of generators there. A number of major power stations in and around the province suffered some damage in the quake while power lines will take years to rebuild.

Now reports from China reckon the country’s power crisis is worse than at the start of this year, and is probably the worst in four years. Around half of China’s provinces have started rationing electricity and this year’s electricity shortfall could be more severe than in 2004, when the country was affected by its worst power shortage in decades because of soaring demand for power as the economy boomed.

The Financial Times reported:

China’s problems mirror those of other Asian countries, where the rising price of fuel and other commodities has had an impact on governments that traditionally subsidise everything from the cooking kerosene used by the poor to the electricity used by industry. Companies in Indonesia, for example, have complained of rolling blackouts and action by the government to force them to shift factory production to weekends.

That doesn’t sound like the sort of destination that a high carbon Australian emitter would want to relocate to, does it?

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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