How coal damages the economy

April 28, 2013
The $2 billion-a-year subsidy to the coal industry amounts to an $87 yearly handout from every Australian.

After being forced to admit that “clean coal” will never happen, the coal industry has fallen back on an old argument to justify itself — that Australia cannot live without the industry because it does so much for the economy by providing jobs and creating wealth.

The Australian Coal Association (ACA) released a study into the economic impact of the coal industry. It found that the coal industry directly employs 49,300 people, indirectly employs almost 130,000 people and its economic contribution is valued at $43 billion, a growth of 20% over six years.

While seemingly impressive, the figures lose their shine under examination. They show about 0.21% of the population works in the coal industry or about 0.42% of those in employment.

The coal industry is not unique in indirectly employing large numbers of people. Every industry leads to other employment, but the coal industry uses this figure as a way to seem more important than it actually is. Renewable energy investment, for instance, would see a similar employment multiplier effect.

In fact, the figures reveal how job poor the coal industry is. Its contribution, as measured, is about 3.14% of GDP, yet only employs directly and indirectly 1.55% of those working in Australia.

Tourism — which has been negatively affected by the mining boom — by comparison, contributed a total of about 5.3% of GDP in April last year and directly and indirectly employed 7.9% of those working.

Even the growth rate of coalmining must be modified by the fact that inflation from 2007 to the end of 2012 was 16.3%, leaving a real growth rate of 3.7% over five years.

How the $43 billion in economic activity is distributed is something the industry does not want to discuss.

As of May last year, the average yearly wage for those in mining was $124,176, the highest of any industry in Australia. But mining wages as a percentage of "contribution" to the economy is 14.2%.

The overall wages for coalminers is more than $6 billion a year, compare this to the worth of Gina Rinehart which is estimated at $17 billion, which is worth almost three years of work of every single coalminer in the country.

Mining’s overall contribution is obviously skewed towards owners of companies. The much-vaunted benefit they provide tax wise must also be dismissed when as the Australian Institute points out the effective corporate tax rate for the mining industry is 13.9%

It must be remembered, though, that this contribution is built on the back of public subsidies. The Australian Institute estimated that at least $4 billion a year goes to the mining industry from the Commonwealth, with coalmining representing about one third of the mining industry.

An article in The Conversation pointed out: "Direct subsidies include coal terminal leases and the provision of infrastructure to transport coal to electricity generators or to port loading facilities. Federal government funding for the Hunter Valley Corridor Capacity rail upgrade totals $855 million.

The whole mining industry receives a subsidy in the form of a tax rebate on the diesel that fuels the trucks and machinery. This $2 billion-a-year subsidy amounts to an $87 yearly handout from every Australian.

Governments give many high-energy users like mines cheap electricity. For example, while household and small business electricity prices in NSW are rising at about 15% a year, wholesale prices paid by industry have not risen for 12 years.

Moreover, built on the back of public subsidies, the ACA study avoids the social costs of the industry.

Just on the health impacts, a study released in the US found that when it comes to air pollution, its costs "were at best 80% of industry value added and at worst 5.6 times greater”.

The Sydney Morning Herald reported on April 24: “Exposure to polluted air increases the risk of heart disease and stroke by speeding up the hardening of the arteries, according to new research."

Greens Senator Richard Di Natale pointed out in the same article that the "number of Australians who died from air pollution each year was more than twice the national road toll”.

Coal is a major contributor to global climate change. The Guardian reported on September 26: "Climate change is already contributing to the deaths of nearly 400,000 people a year and costing the world more than $1.2 trillion, wiping 1.6% annually from global GDP, according to a new study."

The ACA said the study put a "price tag on the kind of future Greenpeace and other anti-mining groups are looking to force on the Australian public through campaigns to stop coal exports and eventually shut down the industry".

A price that doesn't involve the costs isn't really a price. They want us to believe that the coal industry is a zero-sum game, we either accept that $43 billion “contribution” or we don't.

In reality, the development of clean energy will also "contribute" to the economy, be much more job intensive than the coal industry and won't have nearly the same economic and health costs that coal mining has.

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