As of July 16th 2014, the Australian Upper House conservative majority repealed the carbon price mechanisms setup by the previous government. The biggest beneficiaries are Big Coal and Gas. They object to competition from a growing renewable energy industry.

The media announcements by Tony Abbott, have consistently stated, that the carbon tax “harms the economy”. He says “we should not protect the environment by damaging the economy.”

Our government has chosen to protect favoured businesses “by not having them pay for their permanent damage to the environment”. To an ecological economist, and most sensible people, the Economy, and all we need for our lives, food, water, air, are entirely dependent on environmental gifts. Every business input depends on gifts from the environment. Business wants to pay the least amount for environmental gifts, and pay the least amount for polluting outputs, and employ the least amount of labor at the lowest price. Business prefers cheap energy, which is still mainly from fossil fuels, to expensive human labour. Business also wants to grow as fast as possible. Corporations are designed to maximise profit for their owners and CEOs, so this class of people can have more social status and luxury.

Permanant damage to the environment means a reduction in all future economic benefit. As Big Coal destroys agriculture, that is major damage to our economy, and a reduction in human carrying capacity of our world. Pollution of all sorts is a reduction of future wealth and health. Our economy is reducing our environments capacity to supply water, food and materials for life. There are ways to slow down our growth in ecological impacts. This fact requires much greater social recognition and agreement before greater global responsibility can happen.

Wacky Economy

It was a relatively small carbon tax on big polluters, not the world’s biggest. Big polluters are damaging our economy by damaging our environment. Australia’s competive advantage in Agriculture is being undermined by big mining. There is high dollar exchange rate caused by the mining boom. There is the destruction of prime agricultural land and stealing and polluting of water by big mining. All of this has contributed to increasing income inequality in Australia, and job losses in all other sectors of our economy.

Clive Palmer obtained large personal and corporate monetary benefits from his parties role in the repeal of the carbon tax, for his corporate mining investments. [3] Despite his publicized legislative changes, the electricity and gas supply corporations have already put up the supply price rises because of ’costs’, to more than cover the cost of a very small pass back of carbon tax savings. With mean and tricky corporate and budget accounting, who can really tell?

Whose Business

The reduction of immediate direct costs for existing business is the principle motivation for the carbon tax repeal. The money from all taxes pays for national provision of education, health and welfare services. It does not disappear from our economym but gets shared around in many ways. To balance the budget emergency caused by self induced loss of taxation revenue, our government proposes to axe our social services and welfare joint by joint. The net result is that a majority of Australians will experience a net rise in the “cost of living” and a loss of services. Social welfare payments will be cut or restricted. Cost of services will rise. The budget wants to restore the indexation of petrol excise to rises in the Consumer Price Index. As the CPI rises due to global oil price, our government will tax petrol more.

The carbon tax mainly targetted the cost of electricity supply, and therefore the input costs of many businesses. Electricity suppliers are a natural monopoly. Both government and private owners want to get as much income as possible from them. All analysis has agreed that the carbon tax, and RET (Renewable Energy Target) schemes contribute a minor fraction of the electricity price. Generation costs about 30 per cent of total, grid network costs about 43 per cent, retail billers about 13 per cent, and carbon tax 7%. The RET scheme and other subsidies for renewable energy and energy efficiency take up about 7%.[10]

Big energy companies like Origin Energy have bet their business that the most future profit to them is in fossil fuel energy supply. Origin supplies about 33% of Australian Electricity. It proved to be somewhat incompetent investor in renewable enegy. Many of its investments in renewable energy directly lost money. It failed to predict that massive uptake of solar PV on Australian household roofs, and rising electricity prices, and household energy efficiency measures (solar hot water, pink batts) would reduce total demand for power supply, and so constrain what Origin may charge. Origin energy is lobbying reducing the RET. It is also blocking connection by many renewable energy projects, such as wind farms, by refusing to provide reasonable power purchase agreements. Renewable energy competes directly against its investments in coal and gas power. [5]

Keeping the cost of business inputs down

The only principle that our conservative government seems to consistantly follow is to increase profits of business, by reducing the amount that business pays for its costs.

As an example, the fuel tax credit returns to businesses the fuel excise paid on purchase that everyone else pays. Businesses are not supposed to pay anything, because its an “input cost”. Why should businesses not get “price signals” for environmental and social costs? If they do not get them, they do not pass them with the price of their products to consumers. How are the consumers to get environmental price signals from business? Is an international competative advantage in environmental destruction something for Australia to boast of?

The reason given is to avoid a “doubled-tax” paid by consumers for the business services, and also in the direct consumer purchase of the input. This is a intrinsically weak argument. The extra tax cost to the business, and passed on to consumers, is diluted many times over its production, and by all its other costs. Environmental costs are so little paid for, that a better price signal in business products makes for a healthier economy.

All of the “badness” of fuel tax for business, was noted in a recent report prepared by Deloitte Access Economics for the Minerals Council of Australia on the fuel excise and rebate. This is precisely the rhetoric used by conservative politicians against the carbon tax, particularly as the clean energy legislation had removed a near-equivalent of the carbon price from the fuel excise tax rebate, making it more of an input tax. I will repeat the quote made in the report, supposedly explaining the general principle.[7] These arguments were used strongly in speeches made by Senator Mathias Cormann for the government case, as much as if the Minerals Council of Australia had written them.

Because it is adminstratively easier and the tax system generally works on claiming back tax paid for business purposes, all of the fuel excise rebate is claimed to be legitimate tax recovery, and not a public subsidy. The conservative government claims that businesses should not pay it, as its “bad economics”. There is no doubt a similar line of thinking as regards a carbon price. This is seen by vested business analysis as a “bad tax”. it is viewed as a tax on business inputs which is passed on in costs to consumers. The Deloitte report quotes some obscure piece of holy scripture from some academic economists. I have not bothered to find the original context.[7, ?]

We need to exercise better ecological values, because the economy is purely derivative exploitation of the gifts and its living geophysical systems. A “pure” tax implies it is not a limited adjustment for growth in environmental and depletion costs, but something designed by government purely for revenue. In practice about 75% of the fuel tax does indeed go to general revenue, but business costs get a full rebate. Business inputs that take non-renewable resources require destruction of our environment, and that is a real “misallocation” of resources. We want to move resources (costs of labor and materials) away from carbon polluting industries, and depleting resources, to support more sustainable methods of energy production. A tax on carbon inputs is very effective and necessary for future survival. No tax system can be ’values’ neutral. The idealized free market economy of the Liberal Party is a fantasy because of the way the real world works, with unpaid costs of depletion, pollution and destruction. Corrections need to occur to ensure that economic choices better reflect our values, which includes future survival.

If the production process does not reflect our chosen values, is not sustainable, and is not taxed relative to more desirable outcomes, our supply decisions based on short term cost will lead to permanent bad outcomes.

Coal and gas mining are polluting technologies that cannot maintain and restore our planet to its state of climate and ecological health. They destroy the most of our future environment and its dependent economy. Coal and gas are non-renewable polluting resources that even China is moving away from.

The driver of our globally connected economy is oil. As it can no longer grow in supply, and is declining, so will our oil dependent economy. The costs of coal and other mining greatly depend on the costs of oil for energy. To some extent this can be alternately supplied by renewable energy. Future generations will have to get by without large quantities of fossil fuel energy. It would be smart to make our economy more resilient to oil supply shock by investing in alternative energy supply systems for transport now, as transport energy is the key and glue of running our economies. It would be smart to not further invest in the future destruction of global warming.

Rather than harming our economy, the carbon tax was making it healthier, and it was a healthy move towards slowing the death of nature and climate as we know it, caused by our growing carbon emissions economy. Big Coal and Gas have repealed the carbon tax, by undue and corrupt influence on government policy, and the consequence is accelarated Anthropogenic Global Warming, and for Australia, a greater dependence on depleting fossil fuels, and a restriction of the renewable energy industry. In the longer run that costs much more than Big Dollars.

Vested Interests vs Ideas

Since this is about our economy and climate change, here are some quotes from John Maynard Keynes.[?]

and ...

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