Effects of a carbon price - debunking four myths

Metal smelting, oil and gas industries produce commodities that are traded on world markets and are also emissions intensive. For example more than 20% of the cost of aluminium smelting is electricity. Petroleum industries have high fugitive emissions from flaring and fuel processing. These industries present the strongest case for compensation

The previous CPRS intended to provide compensation to these industries by exempting them from paying a C price on up to 95% of their emissions. This amounts to more than 20% of Australia's total energy emissions. Other manufacturing and electricity industries would have had to pay a higher carbon price to meet targets. This cost would have been passed on to the taxpayer, who would be paying more to subsidize large corporations, which are about 50% foreign owned. Hence it was no surprise when the Greens knocked it back.

Government should not be conned or coerced into making any industries exempt from paying all or even part of their carbon liabilities. Giving resource industries 'free permits to pollute' would remove the incentive for these most polluting of industries to reduce their emissions and may even encourage them to pollute more.

Partial compensation should be provided by granting scaled reductions in other taxes not related to energy, such as company and or payroll tax. Those firms adopting cleaner production could then potentially become more profitable than without a carbon price. Smelting industries such as iron and steel, which is crucial to the health and security of the domestic economy could be given additional protection by charging the carbon price as a tariff on steel imports.

Myth 4: 'Production will move to China; there will be worse emissions and huge job losses'

Non-ferrous metal refining uses enormous amounts of electricity. Aluminium smelting is by far the most energy and emissions intensive of our industries, accounting for a whopping 6% of our CO₂ emissions. With a carbon price, the dirtiest third of smelters are the only industries that may have to close down or move production to areas with cleaner electricity. There are only four countries with electricity as polluting as our own, China being the most notable. It is very unlikely that smelting capacity will be increased there when there are many more suitable locations with low cost hydro or nuclear capacity. Claims that 'carbon pollution will be exported' are unsubstantiated .

The claim that many thousands of jobs will be lost is greatly exaggerated. The smelting industry produces a whopping 6% of Australia's total emissions but provides only 0.6 per cent of manufacturing employment (or around 5,500 jobs). It contributes 1.3 per cent of the manufacturing sector's share of gross domestic product. Smelters include 3 of the 10 largest mineral corporations in the world and are about 50% foreign owned. For more than 25 years, smelters in Victoria have made enormous profits and paid less than 2c / kWh for off-peak electricity generated from brown coal and subsidized by the Government. It is the cheapest and dirtiest in the world, with emissions 45% higher than the grid average. This industry, more than any other needs a carbon price as an incentive to clean up its production.