The modelling says what?

The newspapers are full of the problems facing the aluminium industry. The basic problem as I see it is that the government has adopted a policy – the carbon tax – that should see the industry closing down (or at least massively reduced in size) but doesn’t want to admit to it. The AFR reports Bill Shorten explaining why the Treasury modelling doesn’t really show the industry collapsing (emphasis added).

Employment Minister Bill Shorten also rebuffed concerns based on the carbon tax modelling.

“It’s how you use that modelling – and that modelling depends upon the rest of the world doing nothing,” Mr Shorten said. “And the reality is the rest of the world is moving to lower emissions, greater carbon efficiency.”

Does Treasury know?

An equilibrium global permit price emerges to clear the global permit market.

The modelling assumes an eventual shift to a lower cost coordinated international policy framework, recognising that this is ultimately in all countries’ best interests. By 2016, a more coordinated international policy regime allows countries to trade either bilaterally or through a common central market. As a result, a harmonised world carbon price emerges in 2016.

That must be the exact opposite to what Shorten is saying.

Update: Should point out that this is Bill Shorten MBA (Melb) misrepresenting the Treasury modelling.

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36 Responses to The modelling says what?

  1. daddy dave

    But hang on. They said want to shut down “big polluters”. Gillard in particular said she wants to “make big polluters pay.”

    Well, guess what. Aluminium is a big polluter. It’s possibly the biggest “big polluter” we have.

    And by the way, there’s no chance of having a green aluminium industry. Aluminium will never be anything but a big polluter (if you count CO2 as pollution).

    The choice is between
    (a) having it here and wringing our hands, fretting about carbon emissions, or
    (b)closing the industry down, whence it will move to China or another asian country. But that way at least we get to feel good about ourselves for stopping the “big polluters.”

    …even if they merely set up shop in China or elsewhere and do the exact same thing.

  2. JamesK

    The substance of what this government say doesn’t make a difference.

    They apparently believe – with the weight of precedent to support them – that they only need the facsimile of an argument.

    The substance can be absolute dross, the appearance of a considered position is all that’s necessary as they won’t be questioned and the facsimile is all that appears in the brief segment on the news bulletin.

    The Canberra press gallery needs a purge

  3. Gab

    This derangement and obession with CO2 being pollution and the cause of the climate changing has got to stop. The rest of the world is beginning to see this and treating the CO2 Grimm fairy tale like the stinking pile of poo it is.

  4. JC

    They are absolute morons Dad. It’s like reality doesn’t exist for these clowns

    All that happens is the Alcoa management sitting in the US, does a spread sheet calculation to determine where they get the better return on capital. So they get the Australian operation to simply turn off the switch and ask their operation in friendly XYZ country to turn on their switch. Net result to Alcoa is the same production. We lose jobs because for artificially created barriers.

    I’m resigned to all this. We need to jump off the cliff to able to see what they are doing and the deranged damage they are causing. Good.

  5. Winston Smith

    It doesn’t matter what they say, they want to destroy the economy.
    And that’s what they’re doing.
    Why?
    It doesn’t matter why. They are doing it because they can, and the dumbarse Australian Labor voters will go along with it.
    It appears every generation has to learn the hard way that Labor can’t be trusted. They haven’t learnt it yet, which is why I’m sceptical that Labor is dead and buried.
    Julia will get proposed to by her current boyfriend and this will give her a lift in the polls; or someone else will be put in power by the backroom boys, and the media will swoon over them.

  6. JC

    I think you’re right Winston. The polls are hugely disappointing to be honest as I can’t understand why the Liar’s Party primary vote is not in the low teens by now.

    This is why I say… lets just go full Alliance retard and trash the economy till there’s nothing left and they finally get blamed NSW style.

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  8. Skuter

    This is why I say… lets just go full Alliance retard and trash the economy till there’s nothing left and they finally get blamed NSW style.

    Over at Zero Hedge they have the same idea in the US context…

    I am leaning towards this view as well. Although the costs are high, the benefits will be so much greater, particularly if a similar thing happens here as it did in Canada not that long ago…

  9. The Clean Energy Bill is working well especially the provision that makes it an offence to incorrectly blame the legislation for price increases or closing of a business. So whilst anyone with half a brain can work out it is an extra cost and will go into theoretical calculations of viability, No business especially one that might consider getting free carbon permits or other subsidies will dare utter the words carbon tax.

  10. Mk50 of Brisbane

    C’mon, say it like barge-arse Juliar does!

    One slurred-together word – bigpalloodar

  11. m0nty

    Meanwhile the Liberal policy is to cut industry assistance, e.g. for the car industry, so presumably they will cut the $35 million in annual subsidy per smelter that the aluminium industry depends on too.

  12. Gab

    But hang on. They said want to shut down “big polluters”. Gillard in particular said she wants to “make big polluters pay.”

    Yes, Daddy Dave. And with the closure of one, comes the closure of another ans eventually more closures and then certain CO2 targets are met:

    For example Victoria’s Loy Yang A power station was specifically built in tandem with Alcoa’s second and much bigger smelter, at Portland. No smelter, no Loy Yang A. And Victorians turning out the lights earlier.
    Indeed even more precisely, Gillard and Combet are embarked on closing (at least) one of Victoria’s coal-fired stations—Loy Yang A or the older Hazelwood.
    Bingo! Close Point Henry and Portland, and you would have gone a long way to eliminating a big chunk of the demand for electricity produced by one of those power stations.

  13. Gab

    Meanwhile the Liberal policy is to cut industry assistance, e.g. for the car industry, so presumably they will cut the $35 million in annual subsidy per smelter that the aluminium industry depends on too.

    Good. Industries based on subsidies are unsustainable and suck money from taxpayers to prop up inefficiencies. And why cherry-pick when it comes to subsidies?

  14. .

    I’m not too sure that is a subsidy. It’s a volume discount, arguably.

  15. Monty is referring to lower tax rates for heavy vehicles and probably GST exemptions on export exposed industries. They can be considered subsidies if you want but as Monty is a leftie so should point out that these subsidies flow on greatly to supermarkets which are indirectly large users of roads and do not put GST on basic foods and they use electricity like all of us.

  16. m0nty

    It’s lucky for Abbott that there aren’t any aluminium smelters in Queanbeyan, where he likes to terrorise the local small businesses by parachuting in and pretending to be One Of The Boys, because if he donned the hardhat and visited one of those establishments he’d probably get heckled by the workers for his lack of support for industry.

    It’s a bit disingenuous of Sinclair to chip the government for its support of the aluminium industry, when he should be (and probably is) advising the Liberals to raze the smelters to the ground as well.

  17. JamesK

    I see logic and rational thought processes are still altogether too difficult for m0nty.

    And don’t bother deriding me for having unreasonable expectations.

    I don’t.

    I just felt like noting it yet again.

  18. H B Bear

    Bzzzzzzzzz – wrong Shorten. Dead wrong.

    I continue to believe the more we see of the GG’s son-in-law the less impressive he will seem. Pretty easy to look good amongst this current Labor rabble.

  19. Bruce

    Maybe we could ask Mr Shorten what ‘abatement sourced from overseas’ means, exactly. Which is what Treasury cutely assumed, without a gnat’s eyeball’s worth of detail, would account for a mere 78% out of 80% of emission ‘reduction’ by 2050.

  20. Johno

    My understanding is that the Victorian government has long term contracts with Alcoa to provide them with subsidies electricity. I think the contract run to 2016. This means Alcoa is quarantined from any CO2 electricity price hikes for the next four years and possibily longer if they are allowed to screw over Victorian taxpayers again when the contracts are up for renewal.

  21. wreckage

    if they are allowed to screw over Victorian taxpayers again when the contracts are up for renewal.

    Privatise all aspects of electricity, and stand aside.

  22. brc

    This meme of ‘fossil fuels get subsidised’ has been growing of late – I see here it is being bent to indicate subsidy of aluminium.

    If it’s a handout either to the company (eg Holden/Toyota) or to purchasers of the product (eg Solar panels) then it is a subsidy.

    Long term high volume electricity supply contracts are hardly subsidy. If I were running a plant that was going to account for a guaranteed 25% of the electricity usage, I’d sure as hell want a much lower price than the useful idiots of the world who think that making sure their TV is not in standby mode is going to save the world.

    As for diesel fuel rebates – lower taxes for specific operations isn’t a subsidy – at worst you can call it preferential treatment.

    If you want to call something a subsidy, show me where there is a line item in the accounting showing ‘payment from government for no reason at all’.

  23. John A

    Bruce ‘abatement sourced from overseas’ means that we will pay someone else (not in Australia) for the fact that they have ‘already reduced’ their emissions (hah!).

    That means the government will no longer collect the carbon(dioxide) tax.

    Innocent question: I wonder what that will do to the budget deficit after 2015?

  24. brc

    John A: with the carbon price worldwide on a downward spiral, I’m guessing all those permits can be had for about $1 a ton. Something even the Aluminium industry can probably deal with.

    Or – unless – it’s not really a free market after all, and you’ll only be allowed to purchase permits at $23/ton or more? Say it isn’t so, Labor people? I thought this market thing would give us ‘lowest cost’ abatement? What part of a couple of bucks a ton isn’t ‘lowest cost’.

    Pah – anyone who thinks there is ever going to be a global agreement on this stuff is in serious denial about international agreements. On the rare fluke that they are actually made, they are rarely ratified, and if they are ratified, they are never enforced.

    Only a total gibbering idiot would believe that there will be a global carbon market in a bit over 3 years time, when all the vital signs of Kyoto are flatlining and there’s only 10 months of it left to go.

  25. wreckage

    As for diesel fuel rebates – lower taxes for specific operations isn’t a subsidy – at worst you can call it preferential treatment.

    Some of the fuel taxes apply to on-road use. The rebate is for specifically off-road use. If we had congestion taxes, all of the operations that get the rebate would also avoid the congestion tax. Would this be a subsidy, too?

    Is the tax-free threshold a subsidy?

    What about progressive tax rates- anyone who doesn’t pay the top marginal rate is getting a subsidy!

    Yesterday I didn’t buy a can of coke! OMG! I got a subsidy of $2!

    This washing powder is cheaper in the large boxes! GASP! A SUBSIDY!

    Anyway, anyone who’s breathlessly chittering about subsidies can feel free to vote for a flat tax. Remember, without a flat tax, someone is getting a subsidy!

  26. twostix

    It’s lucky for Abbott that there aren’t any aluminium smelters in Queanbeyan, where he likes to terrorise the local small businesses by parachuting in and pretending to be One Of The Boys, because if he donned the hardhat and visited one of those establishments he’d probably get heckled by the workers for his lack of support for industry.

    M0nty he was made vice captain of his local bushfire brigade, he is by definition “one of the boys” you gamma.

  27. twostix

    As for diesel fuel rebates – lower taxes for specific operations isn’t a subsidy – at worst you can call it preferential treatment.

    Diesel fuel rebates exist because most of these vehicles spend their time on private property making it (and anyone complaining about it) seem pretty fucking stupid in trying to force farmer joe in his tractor in his paddock pay a tax on his fuel that was implemented to fund the public roads that he can’t drive on.

  28. wreckage

    Rugby-player, boxer, surf life saver, bushfire volunteer, and when he was a minister in Johnnie’s government he went and did volunteer work as a teacher’s aide.

    Not One Of The Boys.

  29. Joe N

    Johno, as a Victorian taxpayer myself, who can’t reconcile the amount paid with the limited services received and the ever increasing amount of red tape the people’s republic seems to enjoy enacting, I have to say that the net impact of the Geelong smelter on the taxpayer was obviously positive. There’s 600 odd non public sector taxpayers and a company paying corporate taxes on one of Victoria’s largest exported commodities. The electricity subsidy has probably reduced the profit margin on Hazelwood’s power sold under the contract to single figures. I’d be very surprised if the contract itself didn’t make a profit.

    You’ve got to remember, before the soviet of the south enacted all this renewable electricity legislation Victoria had some of the cheapest electricity in the world as the fuel cost is very low. Wet brown coal is pretty much unexportable. A trapped asset with very little value until it’s sent through the furnace.

    So you take away smelting, you take away manufacturing, you take away the mining headquarters as they’ve largely gone to Singapore, you take away the front offices of the two Melbourne banks as they’ve gone to Sydney, and you’re left with what? A pretty city by the river where everyone works in the public service? Back when I was growing up that was how we described Brisbane.

  30. Joe
    As someone from Brisbane that place you indicate is backwards, me and my state are sending you cash to prop up your car industry. Also would point out it is socialists from Victoria that you people voted in PM and first Greens member. Yes you can blame us for Kevin but he didn’t really get the ball rolling on stupidity that started after and at least they had the sense to kick him out of leadership. The replacement is worse though. If your growing up was during the Joh era here we never had debt and low taxes like lower petrol taxes and no death taxes, now unfortunately the socialists are alive and well in our state also with $62 Billion in debt and counting.

  31. While the Right complains about the competitive damage that will be done by the carbon tax, Australia’s corporate income tax affects our competitiveness as if it were a 30% tariff in every country of destination of Australia’s exports.

    Cf. “Swallowing a camel: carbon tax v income tax“.

  32. brc

    Gavin, if that is an argument for getting rid of corporate taxes, you’ve got my vote. Why tax production twice? Why have a dividend imputation system when you could just forego corporate taxes altogether?

    You’ve framed a great argument for a flat tax rate there.

  33. Johno

    brc

    I agree that a long term energy contract between two private companies at a lower price isn’t a subsidy. But the price that Alcoa is being charged is below this price and taxpayers money is being paid to the electricity provider to make up the difference. It’s a subsidy, pure and simple, and there is no justification for it.

  34. Johno

    Joe N

    The net impact on Victorian taxpayers of the Alcoa subsidy is, without any doubt, negative. If the government didn’t waste it on Alcoa, it could hand it back to you, and you could spend it on what was important to you. That would create 600 jobs, not necessarily in Geelong and not necessarily in the aluminum industry. But it would still be 600 jobs. Those workers would pay their taxes, along with the companies that employed them. So the government would still get the tax revenue, but you get to spend your money on what you think is important, rather than the government spending it on what the government thinks is important.

    As I keep saying. There are NO justifications for corporate welfare.

  35. Gavin
    The profit margin of a company might be 10% so a 30% tax rate is only 3% of the final price, but of course it is the aggregate of the imputs which might be much higher. Our tax rate is fairly low by OECD standards and very low compared to the US which is 35% plus 15% of any net dividend paid as they don’t have franking. So if a person is on the top marginal rate with a 100% profit payout then US will be about 2% cheaper. So in almost all cases our tax rate is lower.

  36. wreckage

    As I keep saying. There are NO justifications for corporate welfare.

    True. However this issue gets muddies when:

    1) any advantage a company gets is considered “welfare”
    2) the existence of “corporate welfare” is used to defend market-distorting and pointless taxation, especially the Carbon tax which comes with over 100% allocation to… corporate welfare.

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