Archive for April, 2011
Dear Prime Minister
You wrote a letter to the Business Council of Australia before going overseas, challenging it to declare whether it supports your government’s target of reducing national carbon emissions by five per cent below 2000 levels by 2020?
I have now read the BCA answer and it fails to respond as it could/should have done in order, in turn, to require you to be more open about the proposed carbon tax.
The key issue, in my submission, is that your government has an emissions destination in 2020 but no publicly available roadmap of how it will be reached.
I should like to pose the following questions to you:
First, in the absence of a new global agreement on climate change policy, do you commit the government to maintaining the national target at the present level? As it stands, it is not a weak target, as the Greens would have it, but a huge task and any move to increase it would have serious implications.
Second, can you state what level of carbon abatement the government seeks from electricity generation in pursuit of the existing target, currently estimated to require a total reduction of 160 million tonnes annually by 2020? As well, where do you expect to achieve the balance of the cuts beyond electricity-related emissions?
Third, noting that almost 30 million tonnes a year of abatement is predicted by your government to be achieved through the renewable energy target in its present form, can you state what the carbon price will need to be to deliver the balance of the electricity-related reduction in emissions in 2020? I believe it will need to be much more than double the $20 figure the Climate Change Minister has been using if it is to involve the closure of a number of coal-fired power stations.
Fourth, will you release the advice your government has received from ABARES and Geoscience Australia about electricity demand in 2020, the make-up of the generation mix at that point and the expected level of emissions? We have the 2030 forecasts in the energy assessment document, but the projections for 2020 are key to judging efforts to attain your abatement target.
Fifth, what measures other than the carbon tax is your government considering using to reduce the growth in electricity demand between now and 2020 – for example, are you planning to introduce a mandatory end-user efficiency target or to legislate for a higher RET? The public is entitled to know this, I believe, after the misunderstanding about your carbon policy intentions during the 2010 federal election campaign.
Sixth, will you release the full text of the key Treasury advice to the government on electricity prices? The advice produced by the department in October and December last year – and released under the Freedom of Information legislation this year – is minus 64 pages, almost all its content. We are entitled, I believe, to ask you what your government is hiding from us?
Seventh, allowing for the introduction of a carbon price and other higher power costs, does your government accept the Port Jackson Partners’ view (as contained in the BCA infrastructure report of late 2009, re-iterated by the Australian Industry Group earlier this year) that the electricity price on the east coast in 2015 will be double what it was in 2008?
Eighth, has your government sought advice on the impact on the national economy of this price development and will you release this advice to the community?
Ninth, is it correct, as public servants indicated to the Senate Estimates hearings earlier this year, that the government has not required the Treasury to model the impact of a carbon price since the work done in 2008? Will you order updated modelling to be undertaken before proposing legislation and undertake to provide it in full to the Parliament before the carbon tax is again debated?
These questions, and your answers, are critical to a full understanding by the community of what we face when your government, with the support of the Greens and the independents, moves to legislate for a carbon price in the third quarter of this year.
Given the importance of adequate electricity supply at an affordable price to economic growth and national prosperity, and thus to employment and household budgets, it is hard to understand why the information outlined above should not be made available.
Editor, “Powering Australia” yearbook, Director of Coolibah Pty Ltd and former Managing Director of the Electricity Supply Association of Australia (1991-2003)
Suppose you are running a business and you want to go in a bold new direction that provides very interesting opportunities but also carries quite large risks. How do you go about it?
You decide what you would like to achieve. You draw up a plan to reach this goal. You test the elements of the plan and you establish a timeline for pursuing it. You cost it rigorously to ensure that you can afford what you want to do.
Above all, you are honest with yourself about the risks. In truth, this is the point at which more than a few business people lose the plot. Just read the newspapers.
Importantly, you are honest with your shareholders, if you have such.
You are free to run over a cliff on your lonesome.
If you have fellow travellers, they are entitled to know exactly what is going on. The law has a few things to say about this point for businesses.
Against this background, consider what the federal government is up to with its decarbonisation plan.
We have a goal – to cut emissions by five per cent below 2000 levels by 2020 – but very little understanding in the public arena of what this means.
Above all, we don’t have a roadmap, even though the government has been pursuing its goal for more than three years.
The central problem is that a crucial part of the roadmap, the energy white paper promised by Kevin Rudd on assuming office, has not been produced.
After initial delays – it is a huge task – the expectation was that the paper would appear in 2010, but Rudd’s personal political train wreck helped to derail this.
The government is now saying the white paper won’t be available until late next year.
Federal Resources and Energy Minister Martin said in a speech on 1 April that the process needed to be restarted after last year’s election.
“I remain committed to finalising (it) by the end of 2012,” he said.
The big, big difficulty with this timing is that the federal government is determined to push through the carbon price legislation late this year so that it can take effect in July 2012.
This is putting the cart so far in front of the horse that they are not even in the same town.
Decarbonising energy supply and use is not the only means of cutting greenhouse gas emissions.
Indeed, the energy industry is adamant that it must not be.
But stationary energy emissions – as opposed to those from vehicle tailpipes – are central to the decarbonisation plan.
The 2020 target currently stands at 160 million tonnes of annual abatement.
This is higher than it was when Rudd announced the goal because continuing growth in domestic fossil-fuelled energy production keeps making the target bigger.
It is likely, I think, to be about 200 million tonnes in reality by the decade’s end – which is equivalent to the total emissions from power generation today.
To put this in context, note that the renewable energy target scheme, on the government’s calculations, will deliver 30 million tonnes a year of abatement in 2020, assuming the RET can be made to work properly.
At present, partly because of silly decisions to use it also to subsidise solar photovoltaics, the RET market is in a mess and about $4 billion worth of wind farm development is parked in corporate “pending” files.
Another $15 billion worth of wind planning is stalled behind this.
It is wholly illogical to commit to a carbon price regime without the energy white paper, but speeding up production of the latter is easier said than done.
So why not bring the deadline for its delivery forward, perhaps to mid-2012, and delay a decision about the carbon tax until the full picture is available?
Of course, this may be more than Julia Gillard’s political life is worth.
However, without a new energy policy approach as the horse, Julia Gillard’s carbon cart actually is going nowhere, no matter how she and Combet paint it, no matter how many ribbons they tie to it and no matter how loudly they cry “Gee up!”
And coming up with a heavily-laden cart now, then producing a horse to pull it in a year’s time is no way to travel.
It’s an art form to deliver a long speech on a major policy while imparting the least possible information.
Greg Combet managed it at the National Press Club, Canberra, this week.
His eight-page speech entitled “Tackling climate change in the national interest,” contains exactly five short sentences of what might be seen as new information.
The most interesting of these sentences is the assertion that “millions of households will be better off under the carbon price.”
Now there are, in round terms, about nine million householders in Australia.
How do I know?
I look at the number of residential customers listed in the Energy Supply Association yearbook. At 30 June 2009 the number exceeded 8.6 million. Allowing for annual growth, it will now be close to nine million.
My understanding is that there are roughly three million households classified as low income.
The denizens of the Press Club could have asked Combet how many of the remaining six million will given “generous assistance” – his expression. They didn’t.
He said that pensioners and low and middle income households will be a priority, but he did not repeat the claim that the Labor Party made last year that “90 per cent of all households will receive assistance.”
His predecessor, Penny Wong, also claimed in one of her speeches promoting the Rudd government’s CPRS that “8.1 million working families” would receive “$660 a year on average” in compensation under the original scheme.
The Sydney Morning Herald recalls that, under the Rudd scheme, singles earning up to $30,000 a year and dual-income families with two small children earning up to $100,000 would receive compensation.
Combet also asserted at the Press Club that “demand for clean energy will grow because it will become cheaper relative to the current cost of burning coal for electricity.”
Which forms of clean energy does he have in mind?
His government believes that most of the change that will occur between now and 2030 will be through the use of gas for power generation, taking it up six-fold to 37 per cent of the electricity supplied at that point.
It believes renewable energy will be at 20 per cent of demand in 2030, driven by the renewable energy target.
It believes that coal-fired power supply will be just a fifth less in 2030, in terms of actual output, than it is today.
The $20 per tonne carbon price Combet used in his speech as an example of the cost impact on steel and aluminium producers will not bring about a massive change in the electricity industry’s current emissions.
It is unlikely to even drive the switch to baseload gas generation to meet new demand requirements.
It won’t be enough to help the wind industry overcome the problem that renewable energy certificates, as a result of the RET subsidies for solat power, are now too low in value to justify building new farms.
The purpose of a carbon price is not to encourage householders to be more energy efficient – and why would they be if heavily compensated? – but to ensure that resources for power generation other than coal overcome their current cost disadvantages.
Beyond 2030, it will require a price sufficiently high to enable renewable energy to overtake gas as a major resource. (Nuclear power is banned, remember.) But that is for the longer term.
The immediate future is 2020 and the government’s abatement target for then will not be achieved by a $20 carbon price this decade.
Federal Treasury, in recently released documents, canvasses a $40 per tonne price with a $1,100 overall annual household impact, if the tax includes petrol.
What level of compensation does the government have it mind? And for whom?
How can it commit future governments to ensure that the compensation it proposes to make available will be “permanent,” as Combert claims?
An unkind critic could suggest that Combet’s speech raises more questions than it answers.
The 3,200 delegates at the Australian Petroleum Production & Exploration Association conference in Perth this week have been exposed to a rare bird.
Joseph Stanislaw, independent senior adviser to Deloitte, is a towering figure in global thinking on energy issues.
He advises companies and countries on strategies to deal with the risks and opportunities in the evolving marketplace.
He was the co-founder with Daniel Yergin of Cambridge Energy Research Associates and the co-author with him of the prize-winning book “The Commanding Heights: The Battle for the World Economy,” which was turned in to a six-hour documentary aired on television around the world in 2002-03.
Not being able to be in Perth this week – I have missed only four APPEA conferences since 1981, having overseen 11 of them as the association’s manager – I interviewed Stanislaw at long distance and his comments underline why delegates will have found his keynote address of more than passing interest.
Orchison: Over my time running industry associations, I came to the conclusion that three four-letter words sum up all that is critical to energy supply: time, risk and cost. As issues, they are far more complicated now than, say, back in the 1980s when the North-West Shelf project was being commissioned. Are today’s generation of leaders able to manage this?
Stanislaw: Your three four-letter words appropriately sum up the challenge of the world energy industry. Having worked in the energy world since 1975, I think these words are as appropriate now as then. They are no more a challenge now than they were then and I say this knowing full well that in the past year the world has experienced an unpredictable series of catastrophic events that the “probabilities” said would not happen. We had some of these events in the past, but not to the degree and sequence that we do now. When these events happened in the 1970s and 1980s, it meant that, for any given project, regulation and risk would go up, costs would increase and time to develop the project would lengthen. This is exactly what is happening now. I think your three four-letter words must be placed on everyone’s forehead.
Orchison: I think your concept in your recent writings and interviews of the world turned upside down is extremely apt, but is it fair to say that the biggest mistake now would be to assume that the new paradigm is where it is at? Is it really possible today to make grand plans for 2040 and 2050?
Stanislaw: The starting point is that, once the world settles in to what we may think is a new paradigm, it will not stay in that paradigm very long and change will happen. I think the only constant of any paradigm is that change and uncertainty are facts of life. Grand plans that try to lay out each step for the next 40-50 years are impossible, but it is important to try to have a vision of where the world might go. Vision needs to incorporate the uncertainties and possibilities for the unexpected to happen. Often the unexpected and the unknown are a very happy surprise. We can’t have plans that don’t allow for the surprises, good and bad. We are dealing today with large infrastructure development projects that often take 10 to 15 years to realise. For example, if one is thinking right now of large-scale nuclear development, if one did not have a plan in place now, one would not have the plants in place in 2025.
Orchison: Fukushima has hurtled in to the perceived future of nuclear energy like a bowling ball clobbering ninepins. What are the core messages nuclear, coal and gas proponents should be taking away? Should governments be spending even more on carbon capture and sequestration?
Stanislaw: Fukushima highlights the direction of your first question – those three four-letter words. Whether it is nuclear or oil or coal or natural gas, the message is clear: the public, and thus the politicians, are going to be stressing more vigorously about environmental risks, costs and social impacts. This affects how long it will take to develop any projects, the costs of those projects and the willingness of the public to accept the risks. The basic facts of life are that every energy supply source has risk attached to it in some sense or dimension. Different people view those risks differently. It all comes down to “time, risk and cost.” These three words apply to China and every place in the world.
It says something about the vibrant state of Australia’s upstream petroleum industry, and about concerns with policy issues affecting both exploration and production, that more than 3,200 people are attending the 51st annual Australian Petroleum Production & Exploration Association conference in Perth, starting on Sunday.
This is a 23 per cent increase on the record set at APPEA’s 50th conference in Brisbane last year, 12 months in which a fair amount has changed in terms of the Australian scene.
As chief executive of the association from 1980 to 1991, I am fascinated by the huge increase in attendance – the record in my time was about 800 people, I think – and by the 160 organisations in the service sector that have booked 8,000 square metres of space in Perth Convention Centre in the associated exhibition as well as by how gas has overwhelmed oil as the centre of attention in the forum in the past 10 years.
Through the 1980s the search for oil and the policies impacting on oil-related exploration and production were the dominant conference topics as the upstream industry engaged with the Fraser and Hawke governments
Underpinning the conference participation today is the fact that Australia is on its way to become a superpower in the international gas market, driven both by the huge resources located offshore the north-west and northern coasts and onshore in Queensland and by this country’s strategic position alongside the fastest-growing demands areas in Asia. Export of Australian LNG could rise eight-fold between now and the middle of the next decade.
The demand outlook has been changed yet again between APPEA conferences – first by the “shale gas revolution” in the US, with its implications for the global market, second by the Fukushima nuclear disaster, inevitably leading to higher gas needs by Australia’s largest LNG customer and third by the revival of the national carbon tax proposal after Prime Minister Julia Gillard said during the federal election in August last year that it was not on her agenda for a new term in office.
“Australia is not in the (world energy) anteroom,” observes Dr Joe Stanislaw, the US-based Deloitte global senior adviser on energy issues and a consultant to governments and major companies, a keynote speaker at the conference.
Premier Colin Barnett is happy to add: “Western Australia is the place to be,” calling the gas discoveries adjacent to the State “Australia’s most valuable natural resource.”
Barnett claims that the potential gas resource offshore WA is likely to be more than 200 trillion cubic feet. To put this in context, one needs to understand that just three trillion cubic feet of gas will provide enough feedstock for an LNG project producing two million tonnes annually for 20 years. Australia as a whole today only consumes one trillion cubic feet of gas annually.
Critical factors for local development include national taxation policy, the proposed carbon price regime, the growing problems with environmental issues both in Western Australia and in Queensland’s farming areas,a strong renewed focus on offshore drilling safety issues after recent disasters, the value of the Aussie dollar, project development costs, ongoing global financial constraints and the escalating problem of finding an adequate number of skilled workers for projects worth scores of billions of dollars. Just the Gorgon and Wheatstone projects in WA will require some 16,500 workers.
The proposed carbon charge is probably the largest cloud on the industry’s horizon.
APPEA chief executive Belinda Robinson warns that a poorly-designed policy could impose a burden on local LNG developers not shared by their international competitors at a time when this country is seen as an expensive location for gas development because of high labour and material costs.
Reuters reports analysts’ calculations that the local developments are among the world’s most expensive.
Robinson is calling for a policy that goes beyond treating Australian LNG projects as a trade-exposed, energy-intensive industry to one that “loudly and unashamedly celebrates the magnificant opportunity” the industry offers for the domestic economy and the international efforts to reduce greenhouse gas emissions.
Almost wholly obscured by all this is the issue that has dominated APPEA conferences for most of the past half century: this country’s requirements for liquid fuels.
Federal Energy Minister Martin Ferguson revealed at the Brisbane conference last year that the net deficit in these fuels now stands at $16 billion a year and is heading towards $30 billion annually by 2015-16. The deficit was $12 billion in 2008.
If the federal government’s carbon charges drove the petroleum refining industry out of Australia, as it very well might by the end of the decade, this problem will take on even greater strategic significance.
The other side of this coin is that, on the latest calculations by ABARES, the government’s commodity advice agency, exports of LNG may be earning more than $21 billion a year by 2015-16, almost 40 per cent higher than today.
A critical issue for Australia is the development of a long-term strategic energy plan that covers all these issues and a number more, including electricity supply.
Ferguson said on 1 April that he is committed to having the much-delayed energy white paper delivered by the end of 2012.
Many in the energy industry will see this as too long to wait for this important signal on national policy, while decrying the government driving ahead with a carbon price regime without the all-important roadmap to the future.
With about 40 journalists attending the APPEA conference, Ferguson and other keynote speakers will be treated to some close scrutiny of their opinions over the next week.
As put-downs go, it is rather noteworthy.
Federal Resources & Energy Minister Martin Ferguson found himself speaking at a forum on strategic priorities for energy market development just as Ross Garnaut’s badmouthing of electricity distribution businesses and the networks regulator was bursting in to the media headlines.
Garnaut won media attention with comments about “gouging” and “gold-plating” and the “weak” oversight of the Australian Energy Regulator.
This is what Ferguson said:
“We know that we have seen significant increases in distribution regulatory determinations in recent years.
“Part of this reflects the need to strengthen the network to cope with rising peak demand. This investment also reflects the age of the network.
“Getting the ‘right’ level of network expenditure is extra-ordinarily complex. There is always a balance between maintaining reliability and cost to the community.
“We must remember that lack of reliability imposes significant costs on the community.
“The establishment of the regulatory regime for the network sector is deliberately at arms length to government in order to maintain investor confidence.
“While Ross Garnaut has a role to play in advising the multi-party climate change committee, he does not speak for the (federal) government, nor for the (CoAG) Ministerial Council on Energy.
“The regulatory framework for Australia’s energy sector is leading edge and, as such, the Ministerial Council on Energy and the energy market bodies often review different aspects of our regulatory environment to ensure that it delivers optimal outcomes for the community.
“In undertaking its long-term policy work, the Ministerial Council, which consists of nine energy ministers, seeks to operate away from the spotlight of the daily media cycle. It is not in the public interest to trivialise these matters in a high level public debate over the network regulatory regime.
“The market bodies and institutions already exist and have responsibility for finding the appropriate balance between reliability and value to the community.
“Electricity prices are currently a topical issue in the community.
“Residential electricity prices have increased by about 40 per cent over the past three years and are forecast to increase in the order of 30 per cent in the three years to June 2013.
“As those who study these issues, will know, there is no quick fix to rising prices.
“Trying to suppress prices ultimately leads to pain in the future when catch-up is required, as some jurisdictions are now finding.
“Prices reflect the cost of investment to maintain and replace ageing assets to ensure that the community gets the reliability it has come to expect.
“It is also important to recognise the complications that arise from peak demand growth, which is rising faster than underlying demand.
“Since 2005 peak demand in the national electricity market has grown by 3.5 per cent per year compared with growth of 1.2 per cent in energy demand.
“(This) means that we are spending billions of dollars on capital that will be utilised on a handful of occasions each year.
“For instance, 12.5 per cent of the capacity in the $8 billion south-east Queensland distribution network — $900 million of capital – is used on only three and a half days a year.”
I can’t remember when last I have read a ministerial statement and been able to say I agree with every word.
I just wish that Ferguson’s comments could reach a wider audience than the 4,600 people who currently visit the Coolibah website each month to read the newsletter and this blog. Pass them on.
You will not find a better commentary illustrating the problems that can arise with populist energy policies than the latest research paper published by Paul Simshauser and his economics group at AGL Energy.
Simshauser is AGL’s chief economist and moonlights as professor of finance at Griffith University. Tim Nelson is head of the firm’s economic policy and sustainability unit and an adjunct research fellow at the University of New South Wales. They have teamed up with Simon Kelley, AGL’s manager energy policy and regulation, to produce a review of solar power feed-in tariffs as the latest in a baker’s dozen of economic policy working papers published since 2008.
The commentary will be balm to the soul of federal Energy Minister Martin Ferguson, who has been resisting pressure for a national solar feed-in tariff for years and copping lots of environmentalist flak for his pains. Ferguson told federal parliament a while back: “Premium feed-in tariffs create an additional burden on electricity consumers.”
“Darned right” would be a two-word summary of the paper by Nelson, Simshauser and Kelley (which is now published on the AGL website). The current FiT arrangements being pursued in the ACT and the States are a regressive form of taxation, they argue.
What’s more, the trio shoot a big hole in a piece of propaganda pursued by the environmental movement to support FiTs.
The green movement, using postcode addresses of people who rushed to buy solar PV systems in Sydney under the outrageously generous Keneally government scheme, points to the higher take-up in the western suburbs versus the lower north, inner west and eastern suburbs to claim that the policy supports lower-income people.
But some digging in to AGL’s customer base tells a different story.
Fifty-five per cent of those among its customers in NSW who rushed to take up PVs earn more than $62,000 a year versus 15 per cent in the low income category (ie under $26,000). And 56 per cent of the customers taking up PVs live in homes worth $600,000 and more.
Doing some mathematical footwork involving costs and household income, the AGL trio come to the conclusion that the solar policy’s impacts fall 2.6 times more heavily on low-income households (as the cost of the scheme is smeared across all consumers) than on the better-off homes.
A poor public policy outcome, they say, because the FiT becomes a cross-subsidy of wealth from lower to higher income earners.
On the other hand, they point out, the large federal renewable energy target scheme ensures that all consumers benefit in proportion to their spending on energy.
There is another point.
Nelson and Co explain it thus: “Only householders that own their their homes can install solar PV systems. As such, the proportion of the population incurring the highest incidence of (this) taxation, those renting, are unlikely to be able to take advantage of the policy.”
The conclusion is straightforward: “Australian FiT policies funded through higher tariffs on all other consumers are fundamentally regressive.”
There are now 140 MW of solar PV on rooftops in New South Wales and about 510 MW nationally.
Nelson, Simshauser and Kelley also point out that there is no available analysis to support claims that the take-up of solar PV has network benefits – and it is network costs that are the primary driver of the current round of much higher power bills.
Their overall conclusion: “FiT policies internalise the benefits for wealthy households and result in a disproportionately higher effective taxation rate on lower income households. They should be gradually reduced and eliminated.”
Or, to quote Martin Ferguson: “Maintaining the least-cost approach to stimulating investment in renewable generation that is represented by the RET will minimise the impact on electricity prices and vulnerable consumers.”
Which leads me to repeat the admonition from Martin Parkinson, previously federal Secretary for Climate Change, now Secretary of the Treasury, that placing a 1.5 kW solar array on every household rooftop in Australia by 2020 at today’s technology costs would run up a capital outlay bill of about $200 billion and deliver only 16 million tonnes of annual abatement.
The obvious landing point for policymakers is that, if we are going to subsidise solar development, it is better by far to support large-scale projects through direct grants (as in the federal government’s Solar Flagship program, which is supposed to hand over $1.5 billion to attract twice as much in investor contributions) and via the RET.
All of which just reinforces the fact that pursuing piecemeal and ill-analysed green schemes for party political advantage – or even with an honest, but misguided desire for environmental benefits – without working from a detailed, long-term, national roadmap for decarbonising the economy is the dim bulb way to advance this cause.
Is it possible to deliver a speech about China’s efforts to curb its emissions of carbon dioxide over the next two decades without ever mentioning its massive nuclear power plans?
It is if you are Climate Change Minister Greg Combet.
On 30 March Combet spoke at the Australian National University forum on climate change activity here and in China. His talk is on his ministerial website. It runs to five pages. It never mentions nuclear power once.
He contrived to repeat this trick in an Op-Ed piece in The Australian newspaper on April Fool’s Day.
Combet plays up the huge Chinese investment in renewable energy and the ongoing activity to close old, inefficient coal-burning plants but avoids talking about the large-scale coal and nuclear development replacing them.
He notes that coal’s contribution to Chinese electricity generation will fall from 79 per cent now to 55 per cent in 2035, but fails to point out that this is 55 per cent of a hugely-increased power supply, resulting in emissions rising sharply, not falling.
(This mirrors the Australian government forecast that its policies will drive down local coal-fired generation to 43 per cent of demand by 2030 and its failure to ever point out that, because there will be a much higher electricity output, the actual amount of coal-fuelled power will be 150,000 GWh a year then versus 200,000 GWh now.)
Combet says the right policies will ensure that Australia remains “competitive in the inevitable low-pollution, clean energy world of the future.”
Which future is this?
It isn’t the one in the 2030s when global emissions will be billions of tonnes per year higher than they are today and coal and natural gas will still be the major power generation fuels.
We live in a world where, for example, the ALP has gone in 16 years from being the dominant political party in our largest State to being almost destroyed at the last election – and where, under a series of Labor governments talking up their green credentials at every turn, burning coal to make electricity in New South Wales has risen by about a third to 30 million tonnes a year today.
The federal Labor government, in its national energy assessment, forecasts that Australian generation will be 80 per cent fossil-fuelled in 2030 and, by implication, most of the existing NSW coal plants will still be in production.
Combet, whose parliamentary seat is in the Hunter Valley, dwells on none of this.
How does the 2030 national energy assessment square with “the inevitable low-pollution, clean energy world of the future” in an investment environment where his political party eschews all thought of using nuclear power – and where Ross Garnaut says the carbon scheme should replace the renewable energy target after 2020?
It is this tendency to government Orwellian rhetoric and dissimulation that requires us to treat everything said by the key federal ministers – Julia Gillard, Wayne Swan, Combet – with caution at best and scepticism in the main.
In his ANU speech Combet said this: “Every cent of the revenue raised (through the proposed carbon charge) from the large polluters will be used to assist families with household bills, support jobs in the most affected industries and invest in programs to tackle climate change.”
Leave aside the fact that closing down all Australia’s emitting industries would have no effect whatever on the impact of rising emissions in the atmosphere – and that what we are setting out to do is to encourage the really big emitting nations to make massive carbon cuts by imposing pain on ourselves as an example, although the prospects of most of our competitors following suit are near to zero.
Just focus on Combet committing sufficient government revenue from the carbon price to “assist families.”
Three days after he spoke, media access to Treasury documents through the freedom of information legislation revealed that the “hit” of a $30 a tonne tax on the average household will amount to $860 a year (including $218 for electricity) and a $40 charge will add $1,100.
One of the Treasury documents suggests that direct cash payments to households will be the best way to alleviate this pain.
For 10 million households this would cost about $8.6 billion a year (at the lower price) before money was spent on assisting energy-intensive industries and greater support for low-emission energy developments.
A $30 charge would raise about $7.5 billion a year from the electricity generators, but it is way below what is needed (estimated to be $50 per tonne) to start driving existing coal plant out of the market.
How many “families” will be compensated at what level and for how long – in a national economic environment where already Gillard is talking up the need for a “tough” federal budget next month?
By the way, all this focus on a carbon price is going on while there is speculation (by entities like Fitch Ratings agency) that the worsening of unrest in the Middle East could briefly drive the world oil price to $200 a barrel and see it settle in the $90 to $150 range in the early years of this decade.
Combet at the ANU never referred to the need for care in adding significantly to domestic energy costs at a time when the oil price may be going through the roof.
What advice one wonders are agencies like the highly-regarded Office of National Assessments giving the government about the oil price risks for a country facing a net trade deficit in liquid fuels of $30 billion annually by 2015? Shouldn’t we be told?
The truth is that Combet’s ANU speech is a metaphor for the poverty of the information being made available to the community in the carbon debate and for the low-down deviousness of political rhetoric on this issue.
One final point: it is my understanding that we will see a draft energy white paper from the government late this year, ahead of a final policy statement in 2012 – months after it proposes to drive the carbon price through parliament.
Go figure, as the saying has it. Except that we can’t because Combet & Co are giving us the mushroom treatment.