WA electricity bills to take big hit

Carbon tax to push up State energy producer's costs with

no impact on emissions

The $23 a tonne carbon tax to be imposed by the Gillard Government will cost WA's leading energy producer Verve Energy about $200 million a year. That's a 20 per cent increase in Verve's cost of producing electricity.

This is just for starters. With the carbon tax to go up every year, increasing sharply when it is renamed an emissions trading scheme in 2015, the cost of producing electricity for WA will continue to rise as a result.

West Australians will have to pay the price, either as consumers paying more for their electricity or as taxpayers having to cover the additional costs incurred by the State-owned electricity producer.

Incredibly, according to evidence by Verve Energy before the Senate carbon tax inquiry recently, this significant increase in the cost of producing electricity caused by the carbon tax will not result in any emissions reductions. It will be a straight hit to Verve's budget bottom line.

That's because for energy security reasons there is no prospect that in the foreseeable future Verve Energy will be able to reduce the use of coal for energy production given the lack of reliable and adequate alternative energy options for WA.

The most likely scenario, according to Verve Energy, is that the use of coal for WA's electricity generation will continue to grow between now and 2020.

The carbon tax will push up the cost of everything, make us less competitive internationally, damage small business, cost jobs and put our energy security at risk all that without doing anything to help reduce global greenhouse gas emissions.

It is an act of economic self-harm for no environmental gain. Or tantamount to unilateral economic disarmament, as a US congressman recently observed about the planned carbon tax.

Australia is an energy intensive export-oriented economy. This is particularly true for WA. The carbon tax directly attacks one of our main competitive advantages.

Where previous economic reforms were aimed at improving our international competitiveness, the carbon tax undermines it. By imposing a price on carbon in Australia outside an appropriately comprehensive global agreement, the Gillard Government is making overseas emitters more competitive than the most environmentally efficient equivalent business in Australia.

In doing so the Government is just shifting emissions (and jobs) overseas rather than helping achieve a net reduction in global emissions. It seems intent on pursuing a strategy to reduce emissions in Australia which will lead to increases in emissions in other parts of the world. How does that make any sense?

None of our most important trade competitors are proposing to go down this path. Not China, not India, nor the US, Japan, Canada, Russia, Mexico, Brazil or others we compete with are planning to impose a carbon tax or an emissions trading scheme.

Since the failure of the 2009 Copenhagen conference to agree on an international carbon pricing mechanism, all the movement internationally has been away from any form of carbon tax or cap and trade proposal in favour of direct action initiatives to reduce emissions.

According to Ross Garnaut, over the five years to 2009 China increased emissions by about 2500 million tonnes a year. Over the 10 years to 2020, Chinese emissions are expected to increase by a further 6000 million tonnes. To put this into perspective, through its carbon tax the Government is trying to reduce emissions in Australia by 50 million tonnes a year. Across many of our key industries China stands ready to take market share from Australian businesses and replace those emissions in the process.

The carbon tax will also make it harder for Australia to maximise its cleaner energy exports to China, India, Japan and other places where liquefied natural gas or uranium could help achieve significant additional net reductions in global emissions. If the Government's objective really was to do everything it could to help reduce global emissions, surely it would not make our LNG and uranium exports less competitive internationally.

The Government continues to be dishonest in the way it uses its Treasury modelling. For example, Treasurer Wayne Swan asserts that the Treasury modelling "shows" a carbon tax has no impact on jobs.

That's not what the modelling shows. The Treasury model "assumes" it. Indeed, the Treasury modelling includes a technical assumption that the so called non-accelerating inflation rate of unemployment remains constant over the long run. The Treasury's modelling assumes that rather than an increase in unemployment the impact of the carbon tax or ETS would be lower real wages. Lower real wages when prices will continue to rise is hardly a happy combination.

There is a better way. The Coalition’s Direct Action Plan invests in more trees, better soil management and smarter technology, to among other things to clean up coal fired power stations. It would deliver emissions reductions of 5 percent by 2020 without a huge new tax. The Coalition plan is costed, capped and fully funded from savings. That means that households would not have to face increases in the cost of electricity and gas.

Importantly, reductions in domestic emissions through our Direct Action Policy translate into net reductions in global emissions. Instead of just shifting emissions overseas, Direct Action would reduce emissions in Australia in a way that reduces emissions for the world.

The Labor-Green carbon tax will put even more pressure on our economy, damage our international trade competitiveness, cost jobs, put our future energy security at risk and hurt regional Australia in particular regional WA.

Kind regards,

Mathias Cormann