Criteria for identifying emissions-intensive, trade exposed industries

This report was commissioned by the Australian Trade and Industry Alliance to update a March 2011 analysis prepared for the Minerals Council of Australia. The report compares the assistance measures offered to emissions-intensive and trade-exposed (EITE) industries in Australia and the European Union (EU). The application of a carbon price raises concerns about the future competitiveness of these industries relative to similar industries from countries that do not impose such a price.

Minerals industry tax data - survey results

The survey finds the tax take from the larger miners has been relatively stable in recent years. The royalty tax take averaged 16.4% between 2007-08 and 2009-10, while the total tax take averaged 41.5%

Costing of The Greens’ Economic Policies: Mining

The Greens? stated economic policies require the phasing out of coal mining in the near future. Contrary to arguments that this policy could be reasonably costless we find that mining in general and coal mining in particular is highly integrated into the Australian economy. We estimate the direct consequence of that policy would be to reduce GDP by between $29 billion and $36 billion per year. Then there are the indirect costs to consider. For each job lost in the coal mining industry 6.5 jobs will be lost in the economy has a whole. The employment consequences of the coal industry closing would be almost 200,000 jobs across the economy. The loss of corporate income tax and increase in welfare payments would constitute a negative $6 billion impact on the federal budget. For every $1 of income lost in the coal mining industry, $3.92 of income will be lost in the economy as a whole. At present any replacement industries are unspecified ? so it is not clear what the net cost to the economy would be.

These magnitudes of loss are not trivial. The modest decline in coal exports during the first quarter of 2011 were blamed for the negative economic growth. On the other hand, we show that coal exports increased dramatically during the recent Financial Crisis. Without that increase in coal exports, Australia would almost certainly have experienced a recession with, at least, three consecutive quarters of negative economic growth.

Most troubling we find that Australian comparative advantage in coal exports has eroded in the past ten years. This we attribute to poor policy developments within Australia. It is clear that policy makers have little regard for mining and this has encouraged poor policy making. Coal mining performs well despite the poor policy environment. It is clear, however, that poor policy will over time undermine Australia?s economic opportunities. At present, however, those policies have not been a deliberate attempt to undermine the industry.

The Greens, and to a lesser extent the government, propose policies that are deliberately intended to disadvantage coal mining. We argue that given the competitive nature of the world coal market that the costs of those policies will be incurred in Australia and will give rise to few, if any, global environmental benefits.

The argument that renewable energy could easily replace coal powered energy is fanciful. Australia has little installed capacity in renewable energy compared to coal powered energy. In addition renewable energy is very expensive and technologically uncertain.

In terms of foregone output, lost jobs and reduced income the costs of implementing The Greens? economic policy relating to coal mining (and mining in general) would be very high.

Action or talk - an analysis of emissions reduction performance of key nations since 1990.

On 9 June, the Productivity Commission will release its report on emissions reduction policies and carbon prices in selected countries. In advance of that report, we assess the actualperformance of key trading partners and trade competitors in constraining emissions since 1990, including the 7 nations being analysed by the Productivity Commission. The findings are clear.  Australia has performed better than most major developed and developing nations in restraining emissions since 1990. The proposition that Australia is a laggard in reducing emissions growth is not supported by the facts. Similarly, the claim that other nations are acting more aggressively than Australia is not reflected in their actual performance in constraining emissions. In fact, the record suggests the opposite. The only nations to have performed better include Germany and the United Kingdom, both of whom benefited from the choice of 1990 as a base year ? Germany?s emissions fell sharply after unification and the collapse of the East German economy while 1990 also broadly coincided with liberalisation in the UK energy market and the related shift to reliance on North Sea gas.

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