Wednesday, April 18, 2012

Keep Green policies out of business

The Greens' strategy to build a business constituency will be successful, at least among the Australian and multinational companies whose rent seeking and vested interests are advanced by Greens policies.

Since being elevated to the party leadership, Christine Milne has outlined her interest in building better business relationships.

In a break from her predecessor, Bob Brown, she has said she will bring ''a stronger articulation of not only our vision for the country but how our economic strategy would support it''.

The Greens and Milne want a cosy relationship between big government and the ''progressive'' big businesses that fit their unreal vision of a Green Australian economy.  This will suit some businesses that like politicians to confuse policies that are in their economic interests, but are harmful to their competitors and a free, open and competitive marketplace.

Most of the Greens' economic message has been targeted and deliberately polarising — renewable energy is good, mining and fossil-fuel-dependent industries are bad.

The Greens support favourable regulations and taxation arrangements that help the former;  and unfavourable regulations and taxes that punish the latter.

Milne outlined what this means in practice on the ABC's 7.30 program earlier in the week when she argued that the government should ''get rid of those fossil fuel subsidies'' for the mining industry achieved through tax arrangements.

She was instrumental in negotiating the $10 billion Clean Energy Finance Corporation, which provides subsidised taxpayer finance for renewable energy projects that cannot raise capital in the market.

Believing in the Greens' economic vision also requires turning a blind eye to some unpleasant realities.

The wind turbines made by Milne's preferred ''progressive'' companies, such as GE and Vestas, are made from metals that were dug up by her equivalently identified ''rapacious'' mining companies that are ''thinking in the last century''.

But the real achievement of the Greens has been to use their environmental objectives to legitimise bringing government back into the centre of the economy.  Carbon pricing will have the same distorting economic influence as protectionism and foster the same rent-seeking behaviour that is achieved by businesses that seek to advance their interests through government policy.

The costs of carbon-based taxes and regulations are shouldered by businesses throughout the rest of the economy.  These added costs will make Australian businesses less competitive domestically and in export markets.

Any carbon price reduces international competitiveness, and yet Australia will need a high carbon price for the country to transition off fossil fuels, ensuring carbon price pain will be particularly acute.

As the carbon price is introduced, and increases, there will be a business constituency of companies and a green professional class that will rely on tighter regulation and a higher carbon price to advance their business interests.

But concurrently it will foster a counter-business constituency that will have to pay the cost.  The general instinct and theme of the Greens' policies is to regulate, adding costs onto businesses to advance political priorities.

Unsurprisingly most businesses are not likely to line up to toast Milne's success.

Those that do are likely to be the ones that see Greens policies as a vehicle to build the regulatory environment to help them do what business does best — make a profit.


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