Valterri Bottas reacts after winning the Formula 1 2019 Australian Grand Prix (Image: AAP/Julian Smith)

As the bushfire catastrophe reached new levels of severity at the end of 2019, there was much discussion of the possible cancellation of New Year’s Eve fireworks displays.

Some displays were called off, but in most cases it was argued that the fireworks had already been paid for, and that there was no real risk in going ahead.

A more serious version of the issue will arise in March, when the Australian Grand Prix is due to be held in Melbourne.

With luck the worst of the bushfires will be over by then, but this cannot be guaranteed. Previously confined to summer, the bushfire season this year started as early as August in some parts of Australia, and it may well extend beyond February.

The Grand Prix operates on the basis of a subsidy of $60 million a year from the Victorian government. Much of this is justified by arguments about direct benefits to tourism, but even the most extravagant claims of economic benefit amount to no more than $40 million. 

The rest of the subsidy is claimed to be offset by benefits from the international exposure associated with broadcasting of the event. The publicity consists of “an estimated global audience of 80 million” (a similarly extravagant number) watching a racetrack event lasting a couple of hours, with incidental coverage of the setting in Melbourne. 

This raises a couple of questions. First: if this exposure is worth $20 million in international tourism, what is the cost of months of front-page reporting of a massive fire and smoke catastrophe, seen by just about everyone in the world with access to any kind of media? Looking at the figures, even a 10% reduction in international tourism could potentially reduce Australian exports by a couple of billion dollars a year.

The second, more immediate question, is that of the international effect of staging a celebration of the internal combustion engine against a backdrop of the smoking wreck of a fire-ravaged country. Such an event would justly reinforce the worldwide perception that we Australians are reaping what we have collectively sown.

Of course, the direct impact of the event on carbon emissions will be trivial. But the symbolism will be appalling. 

What, if anything can be done about this? As in the case of the fireworks, the contracts have already been signed. In fact, the Grand Prix owners, US firm Liberty Media last year exercised an option to extend the contract to 2025.

Cancelling the event could expose the government to liability amounting to the whole of the $60 million subsidy over the remaining six years — a total of $360 million.

But even this would be a bargain. The minimal economic benefits of the Grand Prix are fully offset by the negative externalities of the event. The $60 million subsidy has been a complete waste, and cancelling the event will not change this.

But perhaps something better can be negotiated.

Liberty Media might be willing to accept part payment of the subsidy in return for cancelling the event. They would get money for nothing and a slot in their schedule to pitch to some other city. The Victorian public would still come out ahead.

The race itself could be replaced by an event in the Formula E electric car series, hopefully without such a large subsidy. 

Such a change would signal to the world that Australia is really serious about getting off carbon.