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The Forum > Article Comments > Carbon tax will stoke inflation and hurt productivity > Comments

Carbon tax will stoke inflation and hurt productivity : Comments

By Henry Thornton, published 4/8/2011

INFLATION and productivity are the terrible twins of Australia's economic policy, and Labor is making both of them worse.

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"Inflation and productivity are the terrible twins of Australia's economic policy."

Unlike the warmists who are science and economics illiterate, the author is 'on the ball'.

Without doubt, the carbon (DIOXIDE) tax will add substantially to inflation.

By substantially raising the price of electric power , a factor of production of all businesses, the carbon (DIOXIDE) tax will lower productivity significantly.

Claims by warmists that thousands of green jobs will be created, may be correct for solar panel manufacture in China, but they are fanciful in Australia's case.

Instead, there will be a fall in total employment as businesses shed labour or close down.

No scientist has yet been able to prove that anthropogenic carbon dioxide emissions have a measurable impact on global warming. It is deliberately misleading to claim that implementation of the carbon (DIOXIDE) tax will affect climate change.

Thanks to the carbon (DIOXIDE) tax, the economy will suffer irreparable damage, but no benefits will be realised
Posted by Raycom, Thursday, 4 August 2011 12:18:31 PM
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The carbon tax will also add indirectly to the price of electricity because the carbon price will cause off peak demand to fall but leave the peak demand unchanged.
For example, major power consumers such as aluminium refining do not operate on peak demand, and should the tax cause them to close down there would be a loss of revenue to the generators but no drop in peak demand. This would result in the generators increasing their charges to cover costs.
Posted by Wattle, Thursday, 4 August 2011 1:10:43 PM
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Itís a pity that this article seems to conflate climate scepticism with a sceptical concern for the impact of carbon pricing on our economy. Rationally, a carbon price could be worthwhile if its benefits exceeded its costs. To a climate sceptic thatís not an issue Ė there is no climate change and hence no possible benefit. But to an economist like Henry it ought to be an issue, one that he alludes to in his title but then fails to address: What is the likely quantitative impact on inflation and productivity of a price on carbon?

Some of the most famous works on climate change economics, like the Stern report, have tried to estimate costs of Ďdecarbonisingí measures. They tend to converge on a figure of 5% of GDP by 2050. What does Henry think about this? Will it be more or less than the costs imposed by predicted climate change? Thatís the key question.

A barrier to progress in this subject seems to be poor understanding of energyís central role in an industrial economy. Energy drives wealth creation by multiplying the productivity of the human body and brain. Energy presently comprises around 8% of GDP, both here and in the USA, so the multiplier is now around 12. Letís keep things simple and say that each dollarís worth of energy creates around $10 of other goods and services. Then assume that the new Ďgreení energy is going to cost double that from coal and oil. Then $2 of energy will create the same $10 of goods and services. Nothing has changed materially but our $11 has become $12. That is, there has been inflation of 9%.

There are gross simplifications here. Energy costs are not uniform and to look at them as one lump is artificial. What is clear is that energy costs directly affect productivity. And itís not hard to see that expensive energy like solar could have massive impacts on inflation. We need the numbers to make rational choices. Over to the economists
Posted by Tombee, Thursday, 4 August 2011 4:09:10 PM
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I expect nothing less from the conservative right than total opposition to a carbon tax. True to form they posture about talking the same old rhetoric about individual freedom, jobs, families etc. As always their true agenda is based on greed and the protection of their privileged position in society. These are the same people whose ancestors brought us workhouses and World war, Nazism and nuclear bombs and in more recent times Afghanistan and Global recession. One can listen to their sycophantic supporters who, like an obedient puppy, kneel at their masterís side hoping that the occasional tidbit will be thrown their way, or one can think for themselves. Anyway, thatís my bit of a diatribe for the morning.
Posted by Paul1405, Saturday, 6 August 2011 8:06:29 AM
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Perhaps Paul1405 could explain how families and others in the community would be better off by replacing reliable low-cost coal power with unreliable wind power at three times the price and unreliable solar power at ten times the price. He should also explain how businesses would maintain their output and employment when they lose their comparative advantage, thanks to the carbon tax.

He could explain why the Govt must introduce a carbon tax, when it is unable to explain what reduction in average global temperature would be achieved, and when there is no international pressure to do so.
Posted by Raycom, Saturday, 6 August 2011 11:27:35 PM
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