Coal will remain the most economical fuel for energy production until we have a carbon price.

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The government’s backdown over the mining tax is a lost opportunity for tackling climate change. Indeed, it will probably make it worse. Since taking office, Gillard has said she wants to tackle climate change and the mining tax. This was an opportunity to do both.
In case you were not following it, the new Prime Minister Julia Gillard announced she was watering down the tax. The new minerals resource rent tax will apply just to iron ore and coal projects.

Just a week before the deal, the Federal Government backed plans to export 20 million tones of brown coal, the dirtiest form of energy, from Victoria every year.  That, combined with the mining deal, signals that it’s business as usual for the coal industry.

Miriam Lyons from the Centre for Policy Development says the change tells us all about the political power of fossil fuel industries in Australia. It’s a warning to Australian politicians. You don’t pick on carbon generating mining companies. And if nothing else, this latest change will encourage a more carbon intensive industry.

The bottom line is this: coal will remain the most economical fuel for energy production until we have a carbon price. Economics writer Ross Gittins
makes a similar point. “The big miners have won their fight against the emissions trading scheme, and now they'll be seen as achieving major concessions in the attempt to make them share with the owners of the resources a larger proportion of the windfall gains from the resource boom.” And as I say here,
we don’t know what Gillard means when she talks about having a carbon price. The only way a carbon trading scheme would work would be if it was accompanied by a carbon tax which would keep the carbon price steady.

Gillard has ruled out an ETS, carbon tax and interim carbon levy before 2012. By then, the new mining tax that she announced last week will be operative. A member of the Reserve Bank board, Professor Warwick McKibbin has warned the government that delaying a carbon price will hurt the economy and business.

Writing in the in the Business Spectator, Keith Orchison tells us that
achieving the goal of reducing emissions by 5 per cent below 2000 levels by 2020 will require a carbon price of $30 a tonne. And that will result in an increase in the wholesale price of electricity on the eastern seaboard of between 40 and 50 per cent. And as reported here, we are burning more coal than ever before which means we are producing more emissions.

This government could have imposed a carbon price as part of the mining deal. It could have been about climate change, the environment and communities. Instead, it just did a sweet heart deal with the miners in the lead up to the election.