There are a lot of unfinished sentences in the raging carbon tax debate. Labor has developed some well-polished lines to sell the tax/ETS but avoids mentioning their necessary corollaries.
For instance Labor’s promise that “70% of households will be fully compensated” is not followed up by the statement “but the others will take a financial hit”.
And saying the carbon price will “drive clean energy investment” is not followed by “but we’re killing off the cheapest energy source available (fossil fuels)”.
That’s only natural for politicians but policy thinkers who have Australia’s best interests at heart have to be able to juggle those pairs of linked propositions without letting one dominate the other.
Why? Because as Ralph Hillman said in his National Press Club address yesterday “growth is precious”.
Hillman argued that “it is naive and blasé to say ‘Oh, we’ve got growth, it will just be a bit less’.”
Quite so. But when holding Labor to account for its one-sided media statements we should do the same for the opponents of carbon pricing.
So what is the corollary to saying that the coal industry will continue to grow “just a bit less” than it would have done without a carbon price? How about this: “Other industries will grow more quickly than they would have done.”
But which industries? Greens Senator Sarah Hanson-Young clearly has little idea – her comment earlier this week about South Australian steel town Whyalla showed a distinct lack of big picture thinking.
The Australian quotes Hanson-Young as saying: “”Whyalla and that whole area along that peninsula is one of the best places for wind energy in this country and one of the best places in the world. Wouldn’t it be wonderful if we could start to get some real investment dollars into that industry if people in Whyalla needed to have other avenues?”
It would be more wonderful if the senator and some other members of her party – not all, Senator Christine Milne is showing signs of quite sophisticated economic thinking— acknowledged that there’s more to successful combining of labour and capital than meets the eye.
If we lived in a more highly-regulated, more state-dominated economy telling the 20% of Whyalla’s residents working in steel to retrain for new wind-power careers might be an option.
Likewise using public money or coercing private capital to invest in wind might also be an option. Misallocation of resources and an economic loss would be the most likely result.
Wind power may or may not flourish under the government’s carbon tax and renewable energy target schemes but market forces still have to make most of the decisions as to where and how.
And there’s no point in picking wind as a winner for the region. Other areas of the economy may well grow faster.
Yesterday I stood on a windswept, muddy construction site in Canberra’s New Acton precinct where Australia’s first eight-star large-scale residential and commercial building is taking shape.
ACTU president Ged Kearney invited journalists to visit the CFMEU-controlled site because she and the union believe the carbon tax will unleash a boom in green housing and commercial property development.
The 16-storey Nishi building will have 235 apartments, a cinema, shops and offices. Representatives of developer Molonglo Group explained that its high energy efficiency meant that apartments would be more expensive to buy but would save residents substantial amounts of money on electricity.
Its architects concentrated on thermal mass to keep the building warm or cool – its thick walls will be built with green-star concrete (using minimum Portland cement) and bulked up with recycled aggregate to give it similar temperature smoothing qualities to a cathedral.
I asked how the flats would be air-conditioned in summer. “Oh, there’s no air-conditioning,” said the rep.
Did he mean residents would have their own air-conditioners on their balconies? “No, they won’t need those. The way it’s designed even on a 42 degree day it will be only 28 degrees inside the flats,” he told me.
It’s an exciting project but only relatively wealthy people will buy such properties.
Housing Industry Association chief Graham Wolfe says energy star ratings affect people’s home buying behaviour but not nearly as much as locality, size, design, number of rooms and so on – though as energy prices rise under a carbon tax that may change.
There may not be a construction boom in eight-star apartments but there is a huge amount of work to be done retrofitting Australia’s existing housing stock of around nine million dwellings. Wolfe pointed out that many have energy ratings of 1.5 to 2.0 stars.
Confusingly, residential properties are rated out of 10 while commercial properties are rated on a five-star scale with green-star being one step above five. To me that seems a bit like the guitar amplifier used in the Spinal Tap movie that “goes up to 11” instead of the normal 10.
The biggest energy savings per dollar invested are found at the lower end of the scale says Wolfe – it costs a lot more to move from seven-star to eight-star, than it does from two-star to three-star.
To that extent the idea behind Kevin Rudd’s pink batts stimulus program was sound even if its rushed execution was a disaster.
Will householders become more likely to spend $30,000 double-glazing windows and insulating walls under a carbon tax? It seems unlikely because the return on investment may be very high (in power bill savings) but unless banks or other finance houses market easy-to-use credit facilities for that kind of work householders are likely to baulk at the high up-front capital outlays.
Commercial property owners should prove less timid. The Molonglo and CFMEU reps on site explained how government tenants in commercial properties were increasingly demanding higher energy star ratings before signing new leases.
They argue that locking in a long-term lease from a government department could pay for retrofitting costs in as little as five years and the tenants’ savings on energy bills would increase their productivity, making it a win-win scenario.
If decoupling growth from carbon pollution is to happen those types of growth areas should be at the front of mind every time another part of the economy complains of job losses.
Telling Whyalla to put up wind farms isn’t going to work but growth industries are there and the market is the mechanism most likely to find them.
This article first appeared on Business Spectator
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
