Queensland will have to endure a much larger economic adjustment in response to the carbon price than other States, in large part because of the need to reduce fugitive emissions from coal mining and emissions relating to aluminium smelting, which uses huge amounts of electricity. The Treasury carbon price modelling report contains this chart projecting the emission intensities (i.e. greenhouse gas emissions per dollar of Gross State Product) of the Australian States over the next few decades:
Part of this adjustment will involve a loss of competitiveness of Queensland’s coal industry, due to the taxing of fugitive emissions, but this could have a beneficial side effect for Queensland’s tourism industry and our tourism-dependent regions, such as the Gold Coast and the Far North, through a reduction in the exchange rate. The Treasury modelling report notes (p. 99):
…pricing of fugitive emissions in coal and gas production slows their output and export growth. This tends to lower Australia’s exchange rate, making other trade-exposed industries more competitive.
The Queensland Government will now have to consider the impacts of the carbon price on the competitiveness of our coal mining sector and the implications for coal royalties over the longer-term. My gut feeling is that this will only have a small impact, but Queensland coal miners are clearly concerned about it (e.g. see p. 16 of this presentation from former Queensland Treasurer Keith De Lacy).