Tim Wilson discusses the long-term impact of the carbon tax and the friendly environment for crony capitalism and renk-seeking that the it will breed as well as the challenges that poses for Tony Abbott.
Kurri Kurri’s situation will now be replicated all across the country. Businesses that are dependent on cheap energy will experience declining profitability and decisions to recapitalise won’t be taken. Greenfield investments also will never be made if they are exposed to the cost of a carbon tax that’s designed to annually increase. For a country that has always been an investment capital importer, the impact will be felt on job creation across the medium and long term. All of the carbon tax’s pain won’t be felt at midnight between June 30 and July 1, but it will be felt eventually.
By comparison, the “new economy” of Greens leader Christine Milne will be built off the back of the carbon tax, which acts as a subsidy for lower-emissions industries.
But it won’t be good for the economy. “Green” companies will use more investment capital to produce less, undermining economic growth. That was the experience of Spain and its carbon-based regulation that led to every “green job” in the economy coming at a cost of two jobs elsewhere.
[...]The carbon tax acts as an internal economic tariff to protect the interests of low-carbon investments at the expense of the rest of the economy.
Like traditional protectionism, the carbon tax will create a constituency of rent-seekers who will fight to protect their interests. Abbott will face a backlash from renewable energy companies claiming that repealing the tax will result in lost investment and jobs. Technically they’ll be right that their business will be harmed. But it will require them to ignore that disproportionately more investment and jobs would flow if the scheme were scrapped.