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Calls for bipartisan energy policy, but who's listening?

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By David Speers

When it comes to climate and energy policy, exactly who are the major parties listening to? 

For all the hot air in parliament this week, neither side is paying attention to the growing consensus amongst business, energy and climate groups.

18 organisations including the Business Council of Australia, the Australian Industry Group, the Aluminium Council of Australia, the ACTU and the Climate Institute came together on Monday to issue a very rare joint appeal.

“There is simply no room for partisan politics when the reliability, affordability and sustainability of Australia’s energy system is at stake”, they said. A decade of political point scoring has resulted in “enduring dysfunction in the electricity sector.”

This is a damning indictment of both sides of politics from those who are dealing directly with the mess Australia’s energy system has become.

So what do these groups actually want? First and foremost it’s some bipartisan certainty. The prospect of re-writing the rules after every election is preventing any major investment in power supply.

Beyond that, business groups are wary about backing any particular model. But the Emissions Intensity Scheme (EIS) idea, identified by economists and scientists as the cheapest way to meet out Paris emissions targets, is generally deemed to be the best approach.

I spoke to Miles Prosser from the Aluminium Council, which represents one of Australia’s most energy-intensive sectors. Even he argues an EIS, properly structured, would be fine. This is the head of a heavy-emitting, trade-exposed industry body agreeing a price on carbon would be better than what we have right now!

Labor is on the right track by committing to an EIS. It’s on the wrong track, however, by coupling that with a 50% renewable energy target/goal/ambition/aim/aspiration/dream. It should drop this silly idea. There’s only one target that matters and that’s the target to cut emissions.

The 50% renewables figure was only ever chosen for political reasons. A nice round number, easy for voters to digest as evidence of Labor’s green credentials.

Unfortunately, no one can confidently explain how it would be achieved or what it would actually cost. In their attempts to do so this week, Bill Shorten and Chris Bowen found themselves in a tangle. The Prime Minister didn’t miss the opportunity to strike.

Turnbull has established himself at the start of this year as the best performer in parliament. He is dominating the stage and enjoying it. So are his troops.

But ridiculing Labor’s 50% renewable energy target is the easy part. Soon, the Prime Minister will have to work out his own post-2020 climate and energy policy. Let’s consider the options.

The first option is to continue with the status quo. That means pouring several billion dollars more (which we don’t have) into the “Emissions Reduction Fund” to pay companies for emissions reduction. This is going to become an increasingly expensive exercise, and to date, it hasn’t driven investment in new large-scale energy supply. So billions more debt without fixing the problem.

The second option is to use taxpayers’ funds sitting in the Northern Australia Fund and the Clean Energy Finance Corporation to help attract private sector investment in battery storage and maybe even clean coal-fired power plants. This appears to be Turnbull’s favoured approach. Battery storage technology is rapidly improving. There would likely be private sector interest in this with some government help. It’s hard though, to see much appetite for the huge investment required for clean coal, even with some taxpayers’ billions thrown in.

The third option, favoured by some on the Right, is to scrap the Paris emissions target and the Renewable Energy Target altogether. This has simplistic appeal for those who don’t believe Australia really makes a difference to the climate anyway.  In reality, scrapping the legislated RET would open up huge compensation claims from those who’ve invested billions in renewables in good faith. It would also be unlikely to drive an extra dollar of investment in coal-fired power, given the likelihood of Labor winning an election at some stage in the next 30 or so years and re-instating limits on emissions.

The final, and most obvious option, is the EIS. A well-structured scheme would be the cheapest way to cut emissions, it would come with the blessing of industry and it would finally achieve the necessary bipartisanship required to drive investment in energy supply. But Turnbull has ruled this out. Why? Because it would represent a price on carbon, which his party won’t cop.

The settled political consensus is that the Coalition cannot embrace even a small price on carbon. I suspect an EIS will soon look far more politically and economically sensible when one of the other inferior options is attempted.

Published: Friday, February 17, 2017


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