Senator Ron Boswell (National Party) makes the case in The Australian today that Australia is losing manufacturing due to rising energy costs, while the US is gaining manufacturing back from China because it has a cheap energy advantage with shale gas.
I could make the case that when Big-Government tries to change the weather, it has moved into the realm of witchcraft. There is no empirical evidence that reducing CO2 will measurably reduce storms, floods and sea-levels, and there is no economic calculation that suggests Australia can afford to change the global climate (even if it were possible). Business is doing the only sane thing and shifting to countries that are more rational.
Such is the “National Conversation” on these policies, it is impossible to say exactly how much The Carbon Farce has cost Australian business, due to the complexity of supply chain accounting and the rule that the government will put you in jail if you publish an estimate that is wrong. There are other factors at work, but there is no situation where higher energy costs make business easier, unless your business is one of the ones making expensive energy.
Energy taxes are the nail in the coffin of local manufacturing
Ron Boswell The Australian May 08, 2013
THE collapse of the European carbon price has laid bare the absurdity of the Gillard government’s energy-based taxes on production.
The Australian carbon tax, at $23 a tonne and rising, and the almost-as-expensive renewable energy tax are killing the competitiveness of our businesses.
Boswell lists the businesses cutting production in Australia: Holden, Bluescope Steel, Boral, Penrice Soda, Pentair, Amcor, Goodman Fielder, Caltex…
So Holden will cut 500 jobs in South Australia and Victoria to reduce costs while Labor adds an estimated $550 to the manufacturing cost of every new Holden: $350 with a carbon tax and $200 with renewable energy targets. European car manufacturers gain an immediate advantage because of their far lower carbon price, not to mention the high Australian dollar. Why subsidise the Australian car industry on one hand and penalise it with energy taxes on the other?
Australia’s strong manufacturing sector was based on two great advantages: abundant food and mineral resources and cheap power from massive coal deposits.
By increasing the cost of power, Labor has thrown away one advantage and major Australian manufacturing operations are going out of business or overseas.
Businesses here are cutting jobs to save costs:
BlueScope Steel in Victoria, 170 jobs gone; Boral, 790 jobs gone; Penrice Soda in SA, 60 jobs gone; Pentair, a company that made steel pipes in western Sydney for 60 years, 160 jobs gone; and Amcor, 300 jobs gone. Goodman Fielder is shutting 15 factories, cutting 600 jobs, Caltex its Kurnell refinery, 330 jobs, and the Norsk Hydro aluminium smelter near Newcastle, 350 jobs.
Others are moving production overseas: Kerry Foods, 100 jobs gone; Kresta Blinds, 72 jobs; Cussons soaps, 75 jobs; Aerogard, 190 jobs; Harley-Davidson, 212 jobs; and Bosch, 380 jobs. Golden Circle has moved processing lines and jobs to New Zealand too.
In the US, manufacturing is growing:
General Electric is spending $US800 million ($784m) bringing back production of electrical appliances from China to Kentucky. Apple is spending $US100m on a US manufacturing line for Mac computers currently made in China. Other companies lured back to the US include Caterpillar, Whirlpool, Otis, Electrolux, Google, NCR and Zentech. Foreign companies plugging into the US’s cheap power include German chemicals giant BASF, which has already committed $US5.7 billion to North America since 2009.
US commentators are talking about an extra $US1.5 trillion increase in manufacturing production and 3.7 million manufacturing jobs by 2025. One of the main reasons for this resurgence is cheap electricity, generated by the shale gas now being tapped into by US power companies.
In November Ron Boswell pointed out that one industrial company estimated that electricity costs had risen almost 50% due to “Green” policies. Naturally the company stays anonymous for fear of being jailed:
The carbon tax is placing an $8 billion a year burden on Australia…
One industrial user in Queensland told me it recently received a $244,000 electricity bill. Of that, $32,500 was attributed to the RET and $45,000 to the carbon price. This is an increase of almost 50 per cent on this user’s costs last year, due to the RET and the carbon price. A cost projection prepared for another Queensland industrial user shows that next year it will pay a $5.78 million electricity bill; $495,000 of that will be from the RET and about $1m from the carbon price.
Even companies that don’t use much electricity suffer from higher energy prices
All businesses in Australia hurt when Australian consumers have less to spend. The invisible opportunity cost robs them of customers:
Modelling done for NSW’s Independent Pricing and Regulatory Tribunal, the Climate Change Authority and other bodies all show that households would save about $270 a year with the RET and carbon tax gone.
That’s $270 from every household each year that could be used to create jobs in restaurants, holiday towns, local shops, gyms, sporting facilities… instead of Australians enjoying memorable moments, and getting fitter, it funds some bureaucrats, it provides jobs in China, Japan and Germany and other places where “renewable-energy” machinery is made, and it helps to reduce world temperatures by zero degrees.
But it’s true that part of that money props up a small local industry. It’s a group of people who install equipment they hope will change the weather.
We might as well be casting spells and stirring cauldrons.
Welcome to the land of witchcraft.
*Update: Added “Senator” and Nationals to the first line. h/t for proofreading to Themm.