1. Carbon Myths
July 19 2011
Myth: “Carbon pricing bene ts carbon importers
but hurts carbon exporters”
Australia is a country abundant in natural resources. How does this position us competitively in a
carbon pricing world? It is sometimes said that because Australia is a carbon exporter (as opposed to
the current major carbon pricing supporters, the EU), we should not follow the EU’s example in this
respect. I will try to debunk this argument.
Is the EU a carbon importer?
e EU - as a group of nations tend to be highly developed economically - have been gradually
exporting their manufacturing industry to the likes of China and they tend to be net importers of
carbon-based energy.
For the EU to put a price on carbon-based fuels, means that they increase the cost of these inputs for
their entire economy. eir goods and services become relatively more expensive and whether the EU
products are sold inside or outside the EU zone, they are at a competitive disadvantage.
Another angle to consider is the embodied carbon in goods imported from China which so far do not
have much of a cost of carbon priced into them. From an economic competition perspective, importing
these products in the EU is again not going to bene t EU companies since their local goods need to
include that carbon price.
Australia - a carbon exporter?
We export carbon in the sense that we export products which, when used, release carbon into the
atmosphere. But no emissions trading scheme (ETS) has ever proposed to include such emissions into
our national footprint. Indeed these emissions are counted towards the inventory of the countries
using these resources. e only relevant emissions are the ones released by digging up the coal and
transporting it to the ports. In the same way, fuel emissions worldwide aren’t being counted towards
Saudi Arabia’s national inventory.
Under an ETS, Australia would be at a disadvantage where our production (be that coal and gas - or
any widgets) competes against goods produced in a non-carbon pricing country, for use in Australia or
in our export markets.
Neither ‘carbon importer’ nor ‘exporter’ bene t
In short, purely from the production costs perspective, neither the EU as a carbon importer, nor
Australia as a carbon exporter bene t from including a carbon price into their economy.
It may be easier for the EU to justify switching to more expensive clean energy because they don’t
have a quasi-unlimited supply of cheap domestic energy. For energy security reasons, and to keep
their money in their country, it makes sense for them to de-carbonise. But forget the import/export
argument to explain why the EU can or does price carbon and why Australia should not.
Email: bruno@pricescarbon.com www.twitter.com/pricescarbon