Carbon taxes are useless without a technological breakthrough

Which is the whole weakness in the idea of carbon taxes. While superficially ‘efficient’ they cannot meet their aim of fuel substitution because the suitable fuels do not exist, or if they do, are banned from consideration by this government.

There are a number of results from this. One is that rather than substituting one fuel type for another they end up substituting one highly-taxed location for a lower-taxed one.

Much of Australia’s emissions under the various regimes in place under previous and current governments have merely been exported to China, South-East Asia more generally, and more recently South Asia, rather than reduced. Ditto for most of the rest of the hyperventilating carbonphobic world, like the EU and the balance of the Anglosphere.

Because only the 215 largest installations will have to adapt, this also represents a boost for smaller businesses. The 216th largest installation will be laughing all the way to the bank, at least in comparison to the 215th (which raises another issue, what happens if one of the 215 goes out of business?).

That’s why since 1990, when the IPCC at the Second World Conference called for a treaty on climate change, global emissions have risen over 53 per cent despite the expenditure of trillions trying to stop them rising.

There are no substitutes and carbon taxes are therefore, in effect, a subsidy to manufacturing in China and the developing world, not a mitigation strategy at all.

Carbon taxes do cause some substitution, such as from coal to gas. This has happened in a perverse way in Australia. As renewables continue to penetrate the power generation mix, there is an increased need for on-demand rapid deployment sources of power, like Open Cycle Gas Generators. In a state like South Australia they make up around 30 per cent of electricity supply.

Unfortunately for Australia the carbonphobics hate natural gas too and have made it difficult to prospect for new fields and bring them online, making gas more expensive than coal, unlike the US where it is generally cheaper. This results in a further ‘tax’ on consumers as gas, being the marginal producer, sets the price for the whole of the electricity network.

Yet even this substitution is to be banned as the governments of Australia declare that gas cannot be part of any ‘capacity mechanism’ (even though gas makes up a substantial part of AEMO’s Infrastructure Plan in 2050, the year we plan to be Net Zero).

Which is where the lack of substitutes will really cut in. Metal refineries need to operate 24/7 – you can’t ever let the metal cool in the pots. And some of them consume vast quantities of electricity. For example, Rio’s three smelters in Queensland consume about 17 per cent of state power generation, the Tomago smelter in NSW around 12 per cent.

The technologies don’t currently exist at all, or where they might exist, in the quantities required, to make these large installations viable using renewables (despite what management says). The tax squeeze is going to send them to the wall, but the world will still need their output, so it will come from somewhere else.

Bear in mind that the businesses we are talking about include power generators, steel and cement manufacturers, fertiliser and plastics manufacturers, oil refineries, and rail operators. The bulk of emissions from some of these has little to do with fuel supply, but is a by-product of their manufacturing process. For example, the coking coal used in steel manufacture cannot be replaced at the moment.