Has the carbon tax slowed mining? > Check the facts
Who: “Many mining companies say they will no longer do business in Australia once this tax and the subsequent emissions trading scheme are introduced.” Senator Alan Eggleston.
The Claim: The carbon price will destroy the mining industry in Australia. This claim has been made by many people in the mining industry and on the coalition side of politics.
The Facts: The carbon price has been in for eleven months and so far there has been no slowdown in mining industry activity. Mining industry investment has increased 85 per cent since the announcement of the carbon price to new record highs. Australia has 87 new resource projects worth a record $268 billion that resource companies have committed to.
Discussion of evidence: The best indicator of the expected future health of an industry is its investment in increasing future production. An industry that expects to continue growing will spend on expanding its output to meet future demand. An industry worried about future growth will not spend money to expand its output.
The mining industry is spending record amounts on investment. The coal industry alone has 21 projects worth around $17 billion. By 2016-17 it is predicted that coal exports would have increased since the announcement of the carbon price by 72 per cent.
These are not signs of an industry that is concerned about its future.
I’m not necessarly against the carbon tax but in the discussion of these facts and comments there are many factors affecting mining investment of which the carbon tax is only one. Coal prices being key. While those prices and potential margins were high, they overcame the effect of the carbon tax. Now that prices and margins are lower there is certainly going to be an effect. There have been numerous recent projects cancelled, delayed or downsized. The carbon tax is as only one factor in these cancellations but I believe its certainly having some effect. Let’s have a look at 2013 data?
The counter to the claim made by Eggleston is not based on good data, as Andrew suggests. There has indeed been a very big downturn in the Austrsalian mining industry in the past two years with projects being shelved, mines not opening, and marginal ones closing down. As well, prices have declined. The mining engineering sector (an overlooked high value add part of the economy) has been very heavily hit.
However, the major reason for this is the global downturn, which finally fed into the Chinese economy. The carbon tax would have a “tipping point” impact on the marginal mines only. As the global economy improves, marginal mines will come back into production.
If there were to be any change to the carbon tax, then it should be to a cap&trade scheme. Reducing carbo emissions dramatically is essential to the survival of the planet.