A QUIET but effective lobbying campaign is under way by the Australian Aluminium Council to deflect the unnecessary economic damage being inflicted on the industry by a dramatically expanded renewable energy target.
Rather than tackle Labor’s hidden carbon tax head-on, representatives of the aluminium industry understandably are seeking to exempt themselves from the fatal toll the RET is inflicting on Australian producers of aluminium.
From a political economy perspective the strategy adopted by the sector makes sense and would appear to be an attractive option, at least as far as the aluminium industry is concerned.
However, exempting aluminium refiners and smelters alone from the RET has the effect of shifting the cost of the scheme on to other energy users. It may allow aluminium producers to save hundreds of millions of dollars in energy costs, yet it unfortunately heaps the cost burden of the scheme further sideways on to mums and dads and small-business operators at the expense of the broader community.
The likelihood that those who would be asked to bear the cost of these exemptions will provide sufficient political resistance to these proposals is limited. Small businesses are too busy keeping their heads above water to be overly engaged in policy machinations and most households are focused on putting food on the table and ensuring their kids get the best chance in life.
Similar behaviour by sectoral interests was seen around the imposition of the carbon tax. Rather than opposing bad policy outright, many focused instead through necessity on carving themselves out of the policy to minimise exposure. As a political dynamic this is one reason so many policy failures get up in the first instance. There can be only limited effective opposition to bad policy when industry sectors focus instead on narrowly targeted campaigns to moderate their own impacts.
All of which serves to highlight the importance of broad-based industry associations in the political environment as advocates for good economic policy. The Australian Chamber of Commerce and Industry represents the interests of a large base of energy users in the business community covering 300,000 businesses and acts on their behalf to ensure their views are considered in the national policy debate. The broad interests of industry in relation to the RET also happens to largely coincide with those of household energy users; both groups would benefit considerably from the scheme being phased out or scaled back.
The RET operates to drive up electricity prices for the sake of high-cost carbon abatement opportunities. Soon to be released modelling for ACCI by Deloitte Access Economics shows this will not only impose costs on energy consumers directly, it will also lead to broader economic damage to the Australian economy to the tune of $30 billion across the remaining life of the scheme. Jobs and investment will also be a casualty of the RET due to the loss of competitiveness it inflicts on Australian industry. The chief beneficiaries of the RET are in the wind industry, which will pocket $37bn in subsidies until 2030, or about $2.5bn a year on average.
Rather than seeking an exemption for individual sectors, ACCI is seeking wholesale reform of the RET on behalf of all energy users. Just as Palmer United Party senator Jacqui Lambie wants to see the entire state of Tasmania exempted from the scheme, ACCI believes the most appropriate exemption is one for the entire country.
Burchell Wilson is chief economist of the Australian Chamber of Commerce and Industry.