Impact of Australian Mining Sector on Environment: Economics Report

This report provides an economics and international trade analysis of the mining sector in Australia, emphasizing its significant contribution to the country's GDP through exports of resources like zinc, coal, and iron ore. The report explores the reasons behind the industry's growth, including Australia's abundant natural resources and the comparative advantage this provides. It delves into the economic implications of fuel tax credits granted to mining companies, and the potential negative impacts of environmental regulations and taxes on production costs and demand. The analysis examines the effects on climate programs, government expenditure, and the role of major mining companies in avoiding tax schemes. The report concludes by highlighting the need for the Australian government to increase support for environmental departments and better regulate the sector to mitigate its environmental impact. It references the Guardian articles to support its claims.

Economics and
International Trade
Analysis of mining sector in Australia and its impact on the environment

Introduction to Australia’s mining
sector
The mining sector is very important for Australia as it generates high
level of profits due to its export market. Australia is accounted as the
biggest exporter of zinc, diamonds, coal, iron ore, lead, coal and
zirconium. The sector contributes over 8 percentage of Australia’s GDP.

Reasons for the growth of mining
industry
• Australia has huge amount of natural resources that supports the
mining sectors to produce mined goods in bulk amounts at a cheap
cost. This gives them a comparative advantage in production. Mining
sector itself contributes more than 60 percent of the total Australian
exports.

Fuel tax credit
The mining companies in Australia derived an appreciable amount of
tax credit from the government. Tax credit is defined as the amount
that is subtracted by the taxpayers, owed to the government.T ax credit
has helped the firms to gather huge profits without paying fir the tax
regulation.

Economic implication
Tax is imposed by government on companies that emit harmful
substances and increase the carbon footprint. When taxes are imposed,
the cost of production goes up that results in a rise in selling price. Price
and quantity demanded has negative relation such that a hike in price
leads to a fall in quantity demanded. The demand for mined products
will go down in the world market that will lower the aggregate profit
contributed to GDP. The profits of the companies will fall as well and
they try to avoid the fuel taxes.

Effect on climate programs and
government expenditure
The aggregate investment on climate and biodiversity programs has
declined to about 6.32 billion from 6.95 billion by the government has
lowered by 16. However, expenditure by the government went up by
10 percent. The environmental regulations has effectively changed in
the past few years and government had stopping funding for
environmental policies.

Budget of federal environment
A 30 percent decline in the budget of federal environment department
has gone down as the government stopped supporting the firms, which
was about 950 million dollars. Lack of proper investment and support
concentrated the environmental problems with less action against the
climate change. This in turn affected the real estate market for natural
resources which resulted in its deterioration.

Contribution of the big companies
The big companies of the world like Glencore, Rio Tinto, BHP Billiton
omit the fuel taxes and generate super normal profits. Commonwealth
bank wanted to provide 2.5 billion dollars to mining companies to lower
their carbon emission by using energy efficient techniques and
technologies. The proposal was rejected by environmental department
as it will not solve the problem but, enable firms to use that amount in
their production processes.

Tax credit schemes
A credit scheme has been adopted by the Australian government where
the rate of fuel tax was lowered by the government for agricultural
businesses, farmers and miners whose businesses had net worth over 3
billion dollars. This policy enabled Australian firms to carry on with poor
governmental regulations that concentrated the problem. The effect
was a rise in carbon foot print.

Landcare programs
• The Australian government create a Land care program where land
protection activities were involved and presented in the economy.
Mining sectors and farmers were given money to use quality tools and
lower the level of carbon emission.

Conclusion
Therefore, the mining sector contributes a part of global climatic
problems. Low support of climate regulation programs and activities
from the government has caused major environmental problems.
Biggest mining companies avoided the tax schemes and used them to
enhance their profit percentage. Thus, the Australian government
needs to look into the matter and support more to the federal
environment department .

Bibliography
• Knaus, C. (2019). Mining firms worked to kill off climate action in Australia, says ex-PM. [online]
the Guardian. Available at: https://www.theguardian.com/environment/2019/oct/10/mining-
firms-worked-kill-off-climate-action-australia-ex-pm-kevin-rudd [Accessed 23 Jan. 2020].
• Morton, A. (2018). Miners receive twice as much in tax credits as Australia spends on
environment. [online] the Guardian. Available at:
https://www.theguardian.com/environment/2018/feb/02/miners-receive-twice-as-much-in-
tax-credits-as-australia-spends-on-environment [Accessed 23 Jan. 2020].
• Taylor, L. and Chan, G. (2014). Fuel tax credit 'firmly in sights' of Coalition's budget razor gang.
[online] the Guardian. Available at: https://www.theguardian.com/world/2014/apr/30/fuel-tax-
credit-firmly-in-sights-of-coalitions-budget-razor-gang [Accessed 23 Jan. 2020].
• Van der Merwe, M., Cockerell, L., Chambers, M. and Jääskelä, J., 2019. Private Non-mining
Investment in Australia. RBA Bulletin, June, viewed, 6.