Reaping the carbon policy harvest
18 January 2016
For five years, Tata, the Indian firm that owns what used to be British Steel has been warning that energy costs in Britain are squeezing competitiveness.
Previous reductions have accelerated in 2015 with a 15 per cent cut in jobs.
Successive UK governments have responded by further turning the screws with now renewable energy requirements and other impacts. And each new announcement of retrenchments, like the most recent one, is met by anguished blame shifting and calls for specific supports.
Politicians the world over have a knack of etherealising their decisions on renewable energy as though they have no consequences.
Many have been conditioned by absurdities like the sun and wind is free so how can using this energy be adding to costs and their eyes glaze over when confronted by hard data demonstrating the renewals cost three times as much as fossil fuel alternatives.
Doubtless, public servants will advise them that if energy costs account for 12 per cent of product costs and the energy price increases by 20 per cent then cost increases are less than 3 per cent and easily absorbed. Such arguments fail to recognise that it is the residual profit that drives business decisions and the 3 per cent is perhaps three tenths of profits, or a 30 per cent reduction in the owners’ income.
The result of the developed world imposing penalties on its energy costs is an acceleration of the relative growth in China, India and other countries that would not countenance anything but token measures to price carbon.
Among developed countries, the US has attracted European relocations by dint of its cheap energy (both BMW and Mercedes build their SUVs in the US) – Obama is doing his best to undermine this but political power is more diffuse in the US and his efforts have not been fully successful.
Here is some data on average electricity costs (US cents per kwh)
The tragedy in Britain is multiplied in Australia by government policies responding to the lobbyists, who populate all our political parties. Enforced use of high cost renewable energy undermines what should be the cheapest electricity in the world.
Already we have seen closures of smelting plant and the car industry (where the firms’ departures were aided and abetted by a left wing judge imposing his own preferred industrial relations regime on the industry).
Sadly, the current Turnbull regime is unlikely to unwind the industrially crippling energy policy that has evolved in Australia. We will be the poorer for this and the consequent industry re-locations don’t even mean any reductions in the satanic greenhouse gases they purport to address.