Just popping in to remind you all: whenever Tony Abbott says anything about the effects of a carbon tax, it’s most likely wrong.
At the bottom of this article is more scaremongering rubbish:
Touring the Ford factory at Geelong, Mr Abbott said a $30 carbon tax would add $412 to the price of a car and could lead to the end of the motor manufacturing industry in Australia.
As a corrective, some figures from Ford from a life-cycle analysis of their vehicles. It’s from the USA, however, the numbers aren’t going to be radically different here.
In a nutshell, in a typical midsize vehicle, there’s 3.5 tonnes of emissions from raw materials, 2.6 tonnes in the actual manufacturing/assembly process, and an additional 0.3 tonnes from “manufacturing logistics”. 6.4 tonnes in total, in fact. That comes to roughly $192. To get a cost of $412 with a carbon price of $30, the average car would have to emit 13.7 tonnes in the raw materials manufacturing and the assembly process.
But let’s pick it apart even further. Those emissions from “raw materials” are mostly steel and aluminium (with a bit from plastic). You know, those “trade-exposed, emissions intensive” industries that Greg Combet spends so much time talking about. And, guess what – if they’re trade exposed, the price of those materials is going to be largely determined by global markets, not the costs of local manufacturers. So it’s the raw material suppliers who’ll take the hit to their profitability, not the car manufacturers. In practice, every iteration of a carbon price yet proposed has ensured that the TEEI industries are compensated for a large fraction of their permit costs for the next few years. Either way, it’s not the car industry, or, ultimately, the purchaser, that pays until the global cost of those materials reflects a carbon price, at which point it’s not a competitive issue.
So we’re left with roughly three tonnes of emissions from the assembly process, and an impost of $90 – assuming 100% Australian content. Even for the relatively small and cheap Holden Cruze (which has an imported drivetrain and thus the carbon tax impact is even lower) that’s around 0.4% of RRP.
Compared to the Aussie dollar, that’s just noise.
Reality check number 2:
A quick check of a large Melbourne Ford dealership shows that the asking price of a new Falcon is $33,888, drive away.
To anyone thinking of spending that kind of money on a new car, I don’t see how another $412 would make them say, “Nah, stuff it! I’ll get the used Camry instead.”
Even if the carbon tax DID add $412 to the price of a new car, the suggestion that it would mean the difference between prosperity and extinction for the car industry is ludicrous.
Relevant: a useful deconstruction of the idea that economics is a science of a distinct domain (the marketplace)
http://books.google.com.au/books?id=B_RyU1Z4AwIC&lpg=PR8&ots=JIExeQl2up&dq=timothy+mitchell+dreamland&lr&pg=PA289#v=onepage&q=timothy%20mitchell%20dreamland&f=false
See especially the end of the first par on p.292
Bill @1
Well, it wouldn’t. More likely, they would opt for a brand new fully imported Mazda 626 or Subaru Liberty, with lots of extras built in for around the same price.
Oops. Mazda 6 (not 626)
Of course, while we can all agree that Tones does indeed talk out his arse, there remains an inherent contradiction at the heart of all of this, which is that any ETS or tax is supposed to drive behavioural change. That is my understanding of its fundamental point. If the price impacts are slight or non-existent, I struggle to see how any behavioural changes will be effected.
Wilful,
There is no inherent contradiction. A well-designed ETS/tax should only change behaviour in a way which reduces carbon emissions at least cost.
Since manufacturing cars in Japan instead of Australia is unlikely to reduce emissions, it is a behavioural change which is not intended or expected. Conversely, an ETS which did close down Australian car manufacturing would be poorly designed and could rightly be criticised.
Beyond what Tony (or the meeja) says, for believers (like those above) it’s important not to focus too much on just the change in the end price to the consumer. While that will have more or less value in different industries in changing consumption, the carbon price starts at the top of the production/supply/distribution chain and so can have impacts all the way along the chain.
The whole game is not just about what change in price the consumer sees, but what everybody in the chain sees. If you believe the economics, then at every step that carbon price can make a difference, even if small, and if it has the chance of changing behaviour at every step, it all adds up.
I’m not sure if I can think of great examples in this situation, but for example, the carbon price would change the relative price of every component in the car, so if someone can produce wheels in a lower carbon way, then they will get a competitive advantage over their higher carbon competitors, etc, Ford buys more of those lower carbon wheels, and so on.
While the price impacts on a cashed up (but still whinging) Aussie consumer might be dubious on the face of it, ask someone in the production chain if they (and their boss) are not closely watching prices from their suppliers and trying to do better.
Anal communication is the Leader of the Opposition’s dominant mode I would have thought. I’m pretty sure that’s the reason for the Speedos, less fabric to muffle the inarticulate series of grunts and snorts that work their way out through the alimentary canal that substitutes for a brain.
Grigory @1:
Except won’t the carbon tax jack up the price of that imported car by weakening the Aussie dollar?
Yes, what passes for debate has become farcical. The media some paralysed, completely without a clue as to how to go about interrogating the kind of statements that Abbot and co are making across a range of issues. And I just saw Joe Hockey saying that the public doesn’t understand the budget (have we ever) and that the govt should stand aside and give the opposition a go. Juvenile. Gratten on RN this morning framed the whole “$40″/tonne idea as shock horror for the govt. Wouldn’t it be nice if someone asked “Well Michelle, you’re across the facts, would $40 give us a better or worse outcome”? Not bloody likely.
So if the carbon tax drives the price up and has no behavioral effect, then what is the point of it?
Yes, I just watched Shrek’s farcical performance at the National Press Club. Hats off to the journalists who saw right through him and punched through to the contradictory core of Lib policy, such as their calls for govt spending in specific areas while at the same time calling for spending cutbacks. Shrek couldn’t answer any question directly, other than “we stand by our figures,” and was constantly reverting to the usual talking points and Gillard bashing. I was especially proud of the journalists who made fun of Shrek’s perpetual campaign mode.
Wilful, I think I&U kinda nails it, and Livewire also has a good point.
However, Livewire, in the specific case of the motor industry it’s hard to see, even in the world of componentry, the carbon price making much difference. The effect is tiny compared to the dollar.
Yes, Tony abbot does talk out of his arse. Saw him on TV last night, well, talking out of his arse. Also saw Malcolm Fraser who won an award for his book apparently. Said to the wife, “Who would you prefer as leader, Malcolm or Tony?”. Answer, “Malcolm, and I hated him as Prime Minister.” Plus 1 on that. Funny how the Libs go more batshit crazy as time goes on (closely followed to the right by the other mob) so that Malcolm looks so good now. Imagine, in another 30 years, we’ll probably look back and say the same thing about Tony. Shudder.
Question is, when does Tony NOT talk out of his arse?
D A, never. ’cause that’s all he’s got – arse. And in the current ‘oi, oi, oi’ cultural regnum, that is a choice asset to display.
Con @9
Why would the carbon price change the value of the $AUD?
If the actual increase in price was $412, that $33,888 car would be priced at $34,300. It’s fairly well-known at this point that retailers price their goods at rates like $49.95 instead of $50 or $199.99 instead of $200 because consumers see the latter amounts as exorbitant in comparison to the former. They think they’re getting a bargin. Of course, whether $49.95, $199.95, or $33,888, that’s not the actual cost of the goods, even including on-costs, but a maximised amount to achieve [reasonable] profit. Therefore, any increase in price to the $33,888 automobile that achieves, in the example, a price like $34,300 would have to be either lowered for the bargain effect, say $34,299, so that the dealer eats a dollar of carbon, or up to, for example, $34,349 – more profit: yah! So in a manner of speaking, maybe Mr. Rabbit’s not so far off. That car’s going to increase in price above the increase caused by the carbon tax.
Tone is going to have to change his tack on ‘Australia going it alone’ now that the Brits have committed to halving emissions by 2025.
Too right silkworm @12: was Hockey just not prepared or didn’t he care; perhaps he thought nobody would be watching the Press Club so he didn’t need bother to respond to a group of journos.
The argument that the carbon tax will lead to the end of the motor manufacturing industry in Australia and indeed the world as we know it has become an Abbott favourite. When he visisted Whyalla last month he told the locals that it would wipe Whyalla off the map, make it a ghost town, an economic wasteland and the same was true of umpteen other centres in other States. He repeats it endlessly and will continue to do so with impunity until the media pressures him into justifying such patently facile gibberish.
Grigory@17, I’d've thought since coal (basically pure carbon) is a major export, a rise in price would tend to drive down demand for the A$. Don’t you think?
Speaking as someone who spent much of the 1970 and 80s imagining all sorts of unpleasant turns of events for Fraser and who took singular pleasure seeing him beaten, despite my disgust for Hawke …
I’ll give him this — he wasn’t in Abbott’s league for stupidity or ignorant populism. He wasn’t an ethnocentric bigot. He seemed to believe at least some things that rational people could believe and to avoid saying things that were obviously absurd. Offensive? Yes. Patrician? Yes. Boneheadedly stupid? Generally not.
And these days he serves the function of reminding us that at one time the Liberal in Liberal party actually alluded to being liberal at least in some respects. Abbott will never do that.
Don’t forget to add to that calculation, Robert, the fact that most people will pay for that vehicle over a, say, 4 year period, making that Carbon Cost Impost a huge $22.5 per year…plus interest.
Con @ 21.
I think recent fluctuations in the Australian suggest that its value is primarily determined by what happens to other currencies, especially the value of the US dollar.
Con, just to add to your point on the impost of the carbon tax. You are right on the fact that it will add very little to the final cost of manufactured goods. The real price signal is all about the aggregated costs within business to business transactions. Probably one example would be Ford sourcing steel for car bodies. Let us assume that both major suppliers are whyalla and port kembla. The cost to a ton of steel is about 1 to 2 days forex movement. However, due to the scale of production a small saving within the processing would yield significant savings. Such as whyalla using an electric minimill with some green power as an input the final cost advantage over port kembla could be well worth it. Remember the carbon savings only have to be at the margin to make it work.
None of this figuring makes much sense absent an announcement of the details of the compensation package. Let’s assume it’s 100% of the cost imposition caused by the tax – it won’t be of course for everybody, but it will for most citizens. The economic effect will be realised by consumers choosing to buy goods with lower built-in emissions over those with higher emissions, and by choosing to reduce their own exposure by reducing carbon-intensive consumption, such as by lowering their own electricity consumption through installation of solar hot water. The more emissions-intensive the lifestyle, the greater the incentive to invest in lower-emissions alternatives.
As George Monbiot has pointed out, it’s the rich whose lifestyles are the most emissions-intensive – heated swimming pools and the rest of it. These are the people Abbott represents.
@ PatrickB
“Yes, what passes for debate has become farcical”
I agree mate you are not wrong, just look at this rubbish
“Anal communication is the Leader of the Opposition’s dominant mode I would have thought. I’m pretty sure that’s the reason for the Speedos, less fabric to muffle the inarticulate series of grunts and snorts that work their way out through the alimentary canal that substitutes for a brain.”
Quality debate there eh?
LPers love intellectualizing stuff. Problem is, us in the electorate live in the real world.
For instance, you guys see a carbon tax as Australia doing its bit in reducing worldwide CO2 emissions. You say everyone needs to do their bit – and even though many countries aren’t doing much (and often the reverse), we need to be part of the solution, not part of the problem.
Whereas we see higher taxes & no material reduction in worldwide CO2 emissions because Australia’s just too small to make any difference.
You guys see high migration as great, and any problems are caused by “inadequate government investment in infrastructure”.
Whereas we see traffic jams, close to unusable transport, higher priced and higher density housing, etc.
Not that Abbott is any great messiah – but we’re really ready to kick Gillard out. Because that’s the real world.
Davey, trolling LP is more effective if you bother to read comments on relevant posts.
Buying the used Camry would be an excellent outcome.
We’ll never achieve sustainability by making crap that nobody needs. If people stopped buying our coal and steel and our dollar fell we might make more things and export them. As long as they’re useful things that are built to last, that would be good, I imagine.
Doubling the price of new cars would be nearly as good as doubling the price of petrol. Even better, let’s set a recommended amount of floor-space per occupant head and tax the bejeezus out of big houses.
There is no reason to make cars in Australia. Surely we can find a manufacturing industry that the rest of the world doesn’t do better. Røde seems to be able to sell microphones, for example. Cutting the link between cars and our national self-image would have to be a good thing.
Even better than making things more expensive would be reducing wages. Most Australians make way too much money. If they actually had to budget they wouldn’t buy so much disposable consumer crap. Buying furniture, for example, should be a once-in-a-generation event. Stealing it out of skips, on the other hand, should be recognised in the Australia Day awards.
Hal, I take your point in general, but there is enough information in the public domain about the car industry and the broad outlines of the carbon price to refute Abbott’s comments.
Household compensation isn’t relevant to the argument here. Nor, as I think I’ve made clear, is industry-specific assistance.
Poor Davey thinks that all problems are as simple as saying ‘stop the boats’ or pay back the debt. Like the debt accumulated during the 2008/2009 downturn in tax reciepts from corporate Australia which in turn was due to insufficient banking regulation enforcement within the gap analysis area in the USA. If you don’t understand gap analysis Davey then move on to Bolts blog where you can add to the conversation.
Yes, Robert, and I also take your point. The political/media issue though is the attention being paid to ‘all this sh*t is going to cost more’ and none whatever to ‘but you’ll have more money to spend how you want’. I recall the introduction of the (much more economically disruptive) GST being accompanied by lots of focus on the positives.
The other issue is the constant unchallenged assertions that the ‘rest of the world’ is doing nothing, as evidenced by the trolls up thread. In point of fact, of the industrialised countries Australia is doing the least. We are, by some measures, the richest per capita country in the G20. We are also the most profligate generators of GHG emissions. We stand to be among the most hurt by climate change and its more frequent weather extremes. If not us, who needs to act?
Robert: Thanks for proving my point. Actually I expected a better response from a LPer then your strawman argument. Back to the womb of LP land for you.
PS Bolt makes more money than most of you put together. There might be a reason for that….
Apologies, that was meant for Russell, not Robert.
And I think most Aussies (even bogans) can distinguish between “stopping the boats” and having high net migration. Howard might have exploited their naivety, but they’ve wised up since.
Friggin’ intellectuals with their empirical based arguments full of hard dollar figures.
The crazy abstraction of it all hurts like I’ve just struck my silent majority bone.
These global warming scammer’s are really climate change convicts somehow believing that tinkering with increased taxation will save their super, embolden their intellect and save the world at the same time, Inigo Jones (rip).
He’s not a messiah at all. Messiahs don’t talk out of their arse.
Today showed why the journosphere theme that Abbott has this inexhaustible ability to keep attacking the government is rubbish. They can’t keep their options open by opposing everything the Gillard government does, and they can’t pull off a win at the last minute by pulling out a few half-baked policies a month out from election day. Lightweights can’t go the distance.
Abbott does indeed talk out his arse but he’s not the only one and he’s second rate in terms of importance. Abbott did say that Whyalla would be “wiped off the map” and made a “ghost town” but he was backed up all the way by Murdoch’s Adelaide Advertiser. If you want to read sober sensible analysis of the possible introduction of a carbon tax go and read the local “Whyalla News”. Very impressive. Especially liked the front cover photo of the deputy mayor, a local businessman, who led the charge in refuting many of Abbott’s alarmist claims and is quoted in the article as saying there has been a lot of misinformation and unsubstantiated alarm spread over this issue. Bundled in his hands and spread across his ample small business girth are copies of the Adelaide Advertiser prominently displayed.
Abbott may have also made these claims about the car industry but the more damaging effect would be from the front page article in the AA complete with screaming headline and similar claims to TA’s that go unchallenged. And the columnist that brought you this….the star of the Godwin Grech saga Mr. Steve Lewis.
Yes Dave of the Real World©, Abbott’s not even a mediocre messiah, not even a very naughty boy, just a particularly unprincipled politician.
Most of the coalition can’t lie straight in bed, and you just have to look at what’s happening in NSW already to see the kind of duplicitous crap that is the coalition’s stock in trade.
If anyone had any doubts remaining about the insanity of the political discourse manufactured by the Murdoch press, take a look at Terry McCrann’s piece in the Herald Sun today.
Hate to “intellectualise stuff” and all that, but do you think we could raise the tone just a little?
Nickws: Don’t kid yourself. No research claims that Australia’s unilateral actions on CO2 reductions will make any meaningful difference to global CO2 emissions. The arguments are more philosophical, along the lines of “we’re part of the world, we’ve got to do our bit, even if most of the others aren’t pulling their weight” – so don’t pull out the “empirical evidence” card.
Davey, two small points:
The post is all about hard facts and figures, not the broader philosophical argument.
On the broader philosophical argument, your position is akin to the adult who goes swimming in the kids’ pool and decides that it’s OK to piss in it because it’s what all the kids do.
Not sure you should be comparing Davey with an adult, Robert, although it’s otherwise a good analogy.
Mr Denmore@42, Terry McCrann’s article – yeech – for those like me who don’t have the stomach to g to the Herald site, Pure Poison is a blog that has done it for you – http://blogs.crikey.com.au/purepoison/category/terry-mccrann/ (the top one equating a price to herpes I think is the one Mr Denmore is talking about – McCrann, a climate scientist, economist and an epidemiologist, what a guy)
“hard facts and figures” FFS
Robert: Forget the adult v child analogy, it doesn’t hold when applied to countries. But lets stick with the pool analogy: if everyone else is pissing large volumes into the pool, and you just need to have a small pee, is it worth going outside the pool into the cold, walking 2 miles to the toilet?
David Irving: Could you please go back to work and stop with your insults? Your public service salary is paying for you to do work.
Davey, congratulations on a thread derail.
Ontopic: Turnbull points out only substantial virtue of Abbott greenhouse “policy”.
I heard Abbott refusing to answer any more questions about the above. The Coalition seem to live in a bubble where journalists are not permitted to ask relevant questions. Maybe that’s because the press don’t seem to be game . . .
“PS Bolt makes more money than most of you put together. There might be a reason for that….”
Yeah, he is a shameless corporate whore and unprincipled manipulator of ignorance and bigotry, with more than a touch of the Dunning-Krugers.
“corporate whore and unprincipled manipulator of ignorance” isn’t that against blog rules moderator?
Only if it was directed against one of the other commentors.
Finally got here.
According to Q!, if you bare your arse in a thunderstorm you won’t get struck by lightning. Would be about the only thing Abbott has going for him when it comes to his posturing on Climate Change etc.
Bolt is a very popular journalist/commentator, not sure where the above allegations are from. Just because you disagree with him doesn’t make him evil. I think he is sincere in his beliefs.
More sincere than Turnbull on Lateline.
I don’t think Bolt is stupid, but he is like Helen Caldicott (or, indeed, Tony Abbott, getting back to the point of this post) that he’s prepared to just make up, or borrow, plausible-sounding shit to win an argument.
“Bolt is a very popular journalist/commentator,”
So what? Those who deliberately pander to ignorance, ideology, and bigotry usually are, and are also usually well paid for it. Money and popularity are not the main measure of a man’s worth. Not even close. That you need this pointed out to you is a sad indictment of your values
“not sure where the above allegations are from.”
Ethical Reality.
“Just because you disagree with him doesn’t make him evil.”
I disagree with him because he is “evil” (your term, not mine).
“I think he is sincere in his beliefs.”
I don’t care if he manages the logically impossible, to genuinely believe everything he says, 6 times before breakfast. He is still an nasty deluded bully, who seriously poisons genuine public debate on important issues with his aggressive and irresponsible language, and basic incompetence and dishonesty.
“More sincere than Turnbull on Lateline.”
Turnbull has more integrity, decency and competence in his little finger than Bolt has in his entire body, and I don’t even particularly like Turnbull, (though he is a much better choice than Abbott, which proposition the Libs will have to deal with in short order).
Bolt’s main claim to fame is that he has built such a prominent and influential edifice on so little substance. Murdoch must be so proud.
Tailpipe emissions for a petrol driven car are about .0023 tonnes CO2/litre.. This means that car related emissions will be dominated by tailpipe emissions, not the emissions generated during car manufacture. It may actually make sense to increase manufacturing emissions if this results in lower fuel consumption.
The irony of course is that Abbott is so obsessed with his great big scare campaign that he has missed the most important message in the figures he quotes. As Bill @1 says
. The real message is that a $30/tonne carbon tax will be very ineffective with respect to driving changes in car purchase decisions. Bill’s figures are backed by meta-studies such as this one On the studies figures a $30/tonne tax would reduce fuel consumption by about 1.4% when it was introduced rising to 3.4% after a number of years. (Based on petrol at $1.50/litre)The rise over time would reflect changes in purchase decisions. The tax per tonne CO2 abatement would have dropped to about $900/tonne by the time the 3.4% point had been reached.
Whatever tax rate Combet settles on he needs to be challenged to explain what specific emission reductions that tax rate will drive and what the tax per tonne CO2 abatement will be for each of these cases. He certainly should not be allowed to get away with the economic platitudes he is using at the moment.
Certainly. As is Abbott. Any serious political player must be prepared to do this.
Abbott carefully chose the Ford factory because Ford is not doing well in terms of sales at the moment. That has more to do with the unfortunate choices the company has made about its Australian operation than the potential effects of a carbon price. Had they chosen to assemble the Focus here, for example, they would be busy right now. The Falcon is not selling well, partly because it is still in the Bronze Age and partly because no-one knows what its future will be. And as the price of fuel increases, the execrable Territory will founder. But why should we think Tony would understand anything about the business? After all, as has been pointed out, he arrived for his visit in a Holden.
“But lets stick with the pool analogy: if everyone else is pissing large volumes into the pool, and you just need to have a small pee, is it worth going outside the pool into the cold, walking 2 miles to the toilet?”
What. Yes, yes you should get out of the pool, you hobo. Jesus christ.