China’s Internal Credit War
Tuesday, 12th July 2011
Paris, France - Melbourne, Australia
By Dan Denning
--The papers are full of winners and losers from the government’s carbon tax. Blah blah blah. Nearly everyone will be a loser in the long run. But for investors, the big winner is obvious: natural gas.
--Rent seekers will be pleased that the government will set up a Clean Energy Finance Corporation (CEFC) and fund it to the tune of $10 billion. A government-picked committee will pick winners in the alternative and renewable energy industry to spend taxpayer money on—this from the government that has burned down homes and wasted billions in its previous efforts to stimulate the economy.
--The CEFC is almost guaranteed to be rife with incompetence and corruption. It is the nature of government agencies. And the central problem is that this isn’t investing at all. This is spending money on technologies that cannot reliably deliver base-load power in a cost-competitive way. This is a gift, a subsidy, and an occasion for front running, in which favoured industries and companies are going to get money because they’re connected.
--Same as it ever was with government-run programs. The really scary creation of the carbon tax is the Climate Change Authority. This new organisation will set targets for greenhouse gas emission levels in the same way the Reserve Bank sets targets for the price of money. It will even be run by former RBA governor Bernie Fraser. More on how this price-fixer will work tomorrow.
--Why is gas the winner? Even before the carbon tax was announced ABARE was reporting:
“The share of gas in electricity generation is projected to grow from 19 per cent in 2007-08 to 37 per cent in 2029-30. Gas-fired electricity generation is based on mature technologies with more competitive cost structures relative to many renewable energy technologies. As such, it has the potential to play a major role in the transition period until lower-emission technologies become more viable.”
--The emphasis added there is our own. But the fantasy of cutting emissions by 80% before 2050 is laughable. The only way to reduce emissions that much is to drastically reduce the amount of electricity the country produces, which may, in fact, be the result of the de-industrialising Greens. Their fondness/fanaticism for a cold, dark, and medieval world of subsistence living is alarming.
--In the meantime, gas-fired power will keep the lights on in Australia while the renewable industry tries to figure out if it can scale up and deliver the energy the economy requires. Federal Energy Minister Martin Ferguson is already talking about the conversion of the Latrobe Valley’s coal-fired power Hazelwood plant to gas. This is why our Revolution in the Desert report talks about gas as the next big energy thing in Australia.
--The most frustrating aspect of the carbon tax is that it’s a continuation of the trend by government to grab more power at the expense of economic and political liberty. The emotional justification—it’s saving the planet—seems to satisfy a lot of people. But the reality is that the taxing of carbon dioxide is just another way for the Welfare State to finance its permanent growth.
--Australia is a global leader in this sense. At a time where the perpetual debt model of the Welfare State is running into its natural limits—the inability to service existing debt—this government has shown the rest of the world’s elite a way out. If you tax carbon dioxide you create a vast new tax base from which you fund the growth and power of the State.
--If you doubt that this is all about government income and making more people dependent on transfer payments, just look at how the case is being made to the public. It’s all about how much you will get from the government and which industries will receive compensation. Government bureaucrats and a taxpayer salary will make those decisions on your behalf. And you’ll pay for the privilege.
--There will be a point where Australians realise the real motivation for these laws is the expansion of government power. It’s not about saving the planet. It’s about doing what you’re told and accepting the government’s power to regulate the minutest aspect of your private life. All for the common good, of course. Australia has been eaten by the bear.
Regards,
Dan Denning
Daily Reckoning Australia
Thanks Dan, you are right on the money
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