If you want to know the future of Australia under the carbon tax, look no further than California. In 2009 Julia Gillard was an unabashed fan of Republican Governor Arnold Schwarzenegger and his greening of the economy. Yet today that economy is one of the worst performing in the US, with worse to come.
A new study looks at the effect of the California Global Warming Solutions Act of 2006, otherwise known as AB32. As reported on IVN.US by Lucy Ma, while the government hasn’t released an official economic impact statement since 2010, the Californian Manufacturers and Technology Association has just commissioned one which predicts:
the average California family will end up paying an additional $2,500 annually by 2020 when AB 32 is fully implemented. In addition, the state is expected to lose an additional 262,000 jobs, 5.6 percent of the gross state product, and a whopping $7.4 billion through decreased annual state and local tax revenues as a result. Figures from the study were based on more conservative estimates, suggesting that expected costs could actually range much higher.
It suggests the electricity hikes that Australians are facing are but a down payment on more pain down the track. It won’t matter that Whyalla is still there if the residents of it face this sort of additional cost.
Back in 2009 Gillard was interviewed on Lateline by Tony Jones as she visited California to learn what she could about creating jobs. At the time California, with an unemployment rate of 12.1%, was more than double the Australian rate at the time of 5.6% – Schwarzenegger should have been visiting us rather than vice versa.
TONY JONES: Yep. I’m sure we’ll hear more about that later. You’re in California to talk about jobs, in fact green jobs – the potential for green jobs in clean energy industries. How much of that potential can be translated back to the Australian economy?
JULIA GILLARD: Well, I think a lot of that potential can be translated back to the Australian economy. We share a lot of things with California, I think. We’re parts of the world that have to worry about water scarcity, we’re parts of the world that have to worry about bushfires, and of course we’re parts of the world that are dealing with the challenge of climate change. What has been interesting coming here, Tony, is we have of course in California Governor Arnold Schwarzenegger, a Republican, from the conservative side of politics who has led the way here in California on climate change. He, seven years ago, as Governor, started in this state the move towards adapting this economy for climate change, the creation of the new green economy of the future. That stands in stark contrast to what the Liberal Party was doing back home with the former Liberal Government caught in climate change inaction and denial. California is synonymous, I think, in people’s minds with innovation, and we’ve certainly seen innovation here, innovation in the high-tech areas that are going to make a difference for climate change adaption. But we’ve also seen here in California bringing green skills and green training into the most traditional of occupations – plumbers and carpenters and electricians, and we saw that working in front of our very eyes at a technical college facility in LA today.
Australia and California are actually not dissimilar. While at USD $1.936 trillion their economy is slightly larger than ours which is AUD $1.57 trillion, we actually have a higher per capita income. Of course there are differences, one of which is their proximity to the largest consumer market in the world.
Addendum:
I’ve been accused of making an unrealistic comparison between Australian and California. When I did the post I only checked relative GDPs, but I had an image in the back of my mind of both economies and thought they were probably not dissimilar. As the table below shows, that is more or less correct. Mining and agriculture are more significant here, but both economies are essentially service-based.
| Australia | California | |
| Agriculture and mining | 10% | 2% |
| Construction | 8% | 4% |
| Trade, Transportation and Utilities | 7% | 16% |
| Manufacturing | 8% | 10% |
| Information | 3% | 6% |
| Finance and insurance | 10% | 6% |
| Real estate | 10% | 17% |
| Professional and Technical Services | 8% | 9% |
| Education Health and other services | 24% | 18% |
Note: The statistical categories are not necessarily defined the same way, so this is a bit of a guess in some cases. For example, California has an industry they call government, but we don’t appear to separate it out, and if we did it would represent around 25% of GDP, but would include a whole lot of activity to do with construction etc.
Sources: http://en.wikipedia.org/wiki/Economy_of_California; http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/1301.0~2012~Main%20Features~Value%20of%20goods%20and%20services%20produced%20by%20Australian%20Industry~240; http://en.wikipedia.org/wiki/Global_Warming_Solutions_Act_of_2006; http://www.climatechange.gov.au/en/publications/projections/australias-emissions-projections/~/media/publications/projections/factsheet-emissions-projections.pdf
There is no doubt that there is high cost to renewable energy.
Nevertheless, if there is consensus in that society (california or germany or wherever)to go down that path, so be it. The people there have spoken, I assume.
Problem for Gillard is there is no consensus here to go down high-cost path. Labor has never won the debate.
Comment by Chris Lewis — July 9, 2012 @ 11:24 am
Sorry Graham, don’t see the very simplistic reading of the reasons you seem to put, for the decline and decline of California’s economy. Or indeed, that of the wider American economy.
Most of America’s current economical problems and or that of California’s, were created by conservative govts, derivatives and a deregulated banking sector, virtually licensed to print money; or steal debt, during the Bush era.
Here was an ultra conservative bible bashing President, who handed out tax breaks to the better off, like confetti at a wedding? Then financed his wars in both Irag and Afghanistan with the credit card. Creating a historically huge deficit in the process!
Yes Julia was remarkably kind to Schwarzenegger, but hey, she has quite a history, of being exceptionally kind and remarkably loyal, to conservative drop kicks?
However, she was arguably impressed by his latter day and far too late green conversion.
That said, we can green the economy, utilising revolutionary win/win tax reform, accompanied by quite massive trade practises simplification as the first and essential part.
None of the major parties seem ready willing and able to grasp the nettle or shirt-front the all-powerful and very resistant public service, which will be absolutely essential, if the reforms we now must have, are ever to see the light of day.
Doing what you’ve always done and expecting a different outcome is madness, Quote unquote.
And the very best cost effective solutions, [Aussie innovation,] will virtually walk out the door; and or are grabbed on their way out, by the poorest most disadvantaged and or, biggest emitting economies economies!
That will arguably become the outcome, when all Australian govts finally stop backing or begging for foreign debt funded investors?
But instead, start backing our own people and their better ideas!
If cashed up foreigners want to invest here, by all means. But, let them buy bonds or migrate to these very shores, where their money and or expertise can benefit us and or Australia, rather than a carpet bagging multi-nationals or foreign corporate raiders?
Cheers, Alan B. Goulding.
Comment by Alan B. Goulding — July 9, 2012 @ 11:41 am
The CO2 tax has been instigated and premoted by the very criminals that steal money via derivatives and express increases in our productivity as debt.
It is all about an unelected one World Govt which Gillard has dedicated 10% of our CO2 taxes toward.The ETS will be just another derivative that destroys the real productive economy.
If in doubt just look at Agenda 21 implemented by the UN in 1992.It is a Communist manifesto that destroys the middle class and heralds a new dark age.
Comment by Ross — July 10, 2012 @ 6:55 am
I don’t think this is simplistic at all Alan. The first issue is how California performs compared to the totality of the US, and with Democrat majorities in the state legislature you can’t blame the Republicans for the relative poor performance.
The second issue is whether it has a substantially different mix of industries to us, and whether this might make the impact of reducing greenhouse gas emissions to 1990 levels (which we both intend to do) differ between the two economies.
In that case I think the argument is a pretty strong one that what you see in California now is likely to be similar to what you see here a little later (given they were ahead of us).
Comment by Graham — July 10, 2012 @ 2:54 pm