IA commentary draft 2:

By Wesley Hudson

Title of the article: Adani mine would be ‘Unviable’ without $4.4bn in subsidies, report finds

Source: The Guardian Australia

Date: 29/8/19

Link: https://www.theguardian.com/environment/2019/aug/29/adani-mine-would-be-unviable-without-
44bn-in-subsidies-report-finds

Terms to define:

a) Subsidies

b) Negative production

This article discusses how a $4.4bn Tax subsidy is making the Queensland Adani mine viable to the
“Adani Corporation”. A tax subsidy is government payment to producers attempting to lower the price of
produce and increase quantity produced (encourage production). In the international trade context,
the subsidy is given to domestic producers to increase their international competitiveness. “The subsidies
have been provided in an effort to get Adani’s thermal coal mine up and operating for the sake of a handful
of jobs and a bag of royalties, payable in a decade or so.” However also by taxpayers “footing the bill” it is
creating multiple Negative production externalities. A NPE “is a harmful side effect to the society due to
the production by a firm.” In this case the mines creation of 705 million tonnes of carbon dioxide (CO2)
every year. And the extinction of multiple native species.

With the following graph it can be established that currently the cost of the mine is too much for Adani to
have interest in the investment. However, with the subsidy supported by the “good old aussie taxpayer”.
$ price
Market pre-
subsidy
subsidy

Market after
P1
Subsidy
P2

D
Quantity
Q1 Q2
As can be established by the movements within the graph, at the point of P1 Adani interests in the creation
of the mine were limited due to the cost with regards to building said mine. (This price has not been
$ Costs revealed). However by moving to P2 with the $4.4bn subsidy the demand indicated by Q2 has increased
via right shift. Therefore by introducing this government subsidy into the equation adani has furthered their
interests into the NPE. For example the creation of a “100 million dollar public road” between the mine
and the abbot point coal terminal. Their argument for the subsidy pushed by the current state parliament
and Adani is, “to secure 900 million dollars of revenue within a year” and also the acquirement of short-
 term jobs for the region. However, by creation of the Adani mine it would create multiple Negative
production externalities. This can be displayed within the following graph:

MSC pre-Subsidy

P2 MPC After
Subsidy
P1

MPB

Output
Q2 Q1
As depicted in the graph above we see the employment of the subsidy but this time the MSB and MPC
plus MPB. For the MSC to lower than what it is, Adani’s MPB and MPC will lower, from P2 and Q2 to P1
and Q1. leading to them losing out in the long term to meet the demands their shareholders to appease a
small group, regarded in the MSC. This would be a left shift in the graph. However, the implications of
this would the loss of 900 million dollars put back into the Queensland economy. Though by giving this
subsidy it would mean Adani would have to pay zero royalties on land and such with this subsidy. Though
a major negative production externality which connects to the anti adani movement would be. The
potential destruction of local native wildlife’s habitat. This is seen the estimated 705 million tonnes of C02
being produced due to the coal being burnt overseas. It will also destroy areas of the already collapsing
great barrier reef. And continue its coral bleaching.

Therefore, if the Queensland government continues to support the Adani mine with its $4.4bn dollars
subside. It will see the adverse environmental impacts occur and problems with water rights. In
comparison it will see minimal gains with regards to MPB and government benefits. That of jobs and
money returning to the economy. However, it is question that the Queensland government must pose to
either see themselves marginally benefit at the MSC of the it people or stick with a vocal minority to
protect Queensland’s shoreline. Though the Adani mine poses promising results its direct export India is
fluctuating with the usage of coal as a power source. Therefore it runs risk of forge in
externalities/legislation.

So if the Queensland, decides to go down the route of continuing this Subside it would see a split with
regards to outcomes. For example, on the one hand increased revenue in a booming industry but runs some
risks with regards to external changes. Or run the MSC of the destruction of certain sections of queens
lands and its native animals.