Bad policy breeds more bad policy

Prime Minister Albanese’s promise of a $2 billion bribe to aluminium refineries to produce “green” aluminium shows there can be no “Future Made in Australia,” according to the Australian Institute for Progress.

Executive Director Graham Young said the government is caught in a game of Whac-A-Mole, where multiple conflicting policies are applied to the same problem at huge cost to taxpayers and with a massive increase in regulation and bureaucracy.

“The aluminium industry is a major consumer of electricity, devouring 13% of Queensland’s generation capacity and 12% of New South Wales’. It was always going to be the first casualty of decarbonisation.

“First, wholesale power prices increased, doubling or even tripling. That makes life difficult when you’re in a global business and competing with other potential production sites that have access to cheap hydro and nuclear power.

“If that wasn’t enough, the federal government’s Safeguard Mechanism requires aluminium refineries to either reduce their emissions by 4.9% per annum or buy Australian Carbon Credit Units to make up the difference—adding further costs.

“Worse still, when blackouts loom, electricity regulators resort to ‘demand management,’ which means asking large consumers to endure temporary blackouts so smaller and politically powerful consumers, like households, avoid them.

“With their massive electricity consumption, aluminium refineries are generally the regulator’s first port of call.”

Mr. Young said Rio, the owner of the Gladstone refinery, has contracted to buy “green” electricity, but it’s obviously not cheap enough. As a result, the federal government has repurposed its domestic electricity policy and provided a subsidy in the hope the refiners will tolerate the cost increases.

“It might be effective in keeping the aluminium industry in the country, but it comes at the cost of higher taxes for everyone else and driving other businesses away. And it won’t stop with aluminium.

“After aluminium, transport is probably the largest emitter. How does Qantas reduce its emissions by 25% by 2030? Or Linfox? I foresee more subsidies as the ‘moles’ keep getting whacked.”

Mr. Young said there was also an obvious political angle to the subsidies.

“After losing Rockhampton and Mackay to the LNP in the last state election, and with Hunter in New South Wales also in play, there is no way the PM wants a major industry in Gladstone and the Hunter to shut down because of his policies.

“So, the subsidies are as much for the ALP as they are for the aluminium refiners.”

For more information, contact:
Graham Young
0411 104 801
graham.young@aip.asn.au