Henry Ergas sees the Australian carbon tax as a self-inflicted wound on our mineral export sector. I guess he must be referring to the fugitive emissions associated with mining coal since it is difficult to understand what else he could mean. The carbon tax does not fall on Australian coal exports but on Australian coal consumption. To the extent power stations in Australia consume less coal (something Henry and his mob are doing their best to prevent) more will be exported since Australia faces a fair degree of competition in coal markets – terms of trade effects will be quite small. The alumina sector is being comprehensively compensated so this cannot be the difficulty. Thus apart from the fugitive emissions in a few dirty coal mines – the Labor Government has unwisely provided assistance to such miners – there will be almost no impacts at all since increased coal exports will replace reduced domestic consumption. The carbon tax Australia has introduced tackles domestic carbon consumption not production and Henry must know this. Why then the exaggerated claims that a wide range of evidence shows is false? But why bother with evidence if you an opponent of measures for dealing with climate change and some glib and incorrect a priori arguments are on offer. One can claim that we should tax carbon production – and some do – but that is another issue and such taxes do not, in the main, characterise Australia’s approach. The case for targeting consumption is that carbon leakages and adverse competitiveness effects are avoided. (879)
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