On the carbon tax: doing the PM’s job for her

The best argument that Julia Gillard seems to have come up with in defence of her carbon tax is that Abbott won’t be able to repeal it because Labor will block his attempt, as well as spruiking the pre-emptive bailouts her government has decided to give to everyone.

Right.

Well, there are also points like this:

Sensible Australians will see carbon pricing as a change for the better | The Australian.

Did you know the Chinese company Suntech, whose chief executive Zhengrong Shi was educated at the University of NSW, became the world’s largest producer of silicon solar modules in 2010? Or that in 2010 global investment in generating renewable energy such as solar and wind power overtook investment in generating energy from fossil fuels?

Well, fortunately for the Chinese government, it doesn’t have to spend much money developing companies like Suntech because it allows workers to be kept in on-site barracks and work 48-hours straight for less money than Gillard probably spends on breakfast. That makes Suntech a lot more viable than it would be in a country where joining a trade union wasn’t a good way to disappear of the face of the planet. But then, people my age don’t care about democracy anyway, so maybe the Chinese model is a good idea.

Let’s throw another company into the mix: Solyndra. Here’s a good piece from Juliet Eilperin in Wired a little while ago that describes that whole kerfuffle:

Why the Clean Tech Boom Went Bust | Wired Magazine | Wired.com.

In 2005, VC investment in clean tech measured in the hundreds of millions of dollars. The following year, it ballooned to $1.75 billion, according to the National Venture Capital Association. By 2008, the year after Doerr’s speech, it had leaped to $4.1 billion. And the federal government followed. Through a mix of loans, subsidies, and tax breaks, it directed roughly $44.5 billion into the sector between late 2009 and late 2011. Avarice, altruism, and policy had aligned to fuel a spectacular boom.

Anyone who has heard the name Solyndra knows how this all panned out. Due to a confluence of factors—including fluctuating silicon prices, newly cheap natural gas, the 2008 financial crisis, China’s ascendant solar industry, and certain technological realities—the clean-tech bubble has burst, leaving us with a traditional energy infrastructure still overwhelmingly reliant on fossil fuels. The fallout has hit almost every niche in the clean-tech sector—wind, biofuels, electric cars, and fuel cells—but none more dramatically than solar.

That, right there, was what happens when the government artificially props-up an unviable industry. The government was committed to Solyndra, so had to keep pumping money into it, even when it started to become obvious that they were just never going to be as competitive as they had hoped. A few billion taxpayer dollars later and the now gigantic Solyndra imploded, leaving hundreds of people without jobs and an entire industry in ruin.

Now to pick-up on a point in today’s Australian editorial:

Carbon debate is taxing but falls short of targets | The Australian.

Given that Mr Abbott has subscribed to the same carbon reduction target as the government — cutting Australia’s emissions by 5 per cent by 2020 — the framing of the debate in this fashion pushes the onus on to him to produce more substance. His “direct action” policy relies on the government picking winners rather than the market seeking out least-cost abatement, so it is bound to be less efficient than a trading scheme, and therefore more costly on the economy. Mr Abbott should not escape by simply pledging to repeal the carbon tax. He must show how he can meet his target without creating a large burden on the budget. Scepticism about his ability to do this abounds, especially given he promises to provide tax cuts for families and business, while scrapping the carbon and mining taxes.

See, the Coalition’s “direct action policy” is not dissimilar from the policy the US was following when the whole Solyndra thing broke out. Tony Abbott is essentially arguing that the government should be funding carbon-saving ideas in order to reach the emissions target that he agrees we should have. The carbon tax is a prima facie tax, but the direct action scheme is an indirect tax. After all, someone has to foot the bill for the hundreds of millions of dollars that would actually be required to implement it, and no prizes for guessing who that is (hint: me and you).

Why the government hasn’t been using this as an argument is beyond me. Whatever flaws its policy may have, it’s vastly superior to the Coalition’s (and ironically, more in-line with the Coalition’s general ideology than the Coalition’s policy is).

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