Climate Tasmania

A Tasmanian take on the thorniest global issue since the dinosaurs. Based on Peter Boyer’s newspaper column in the Hobart Mercury.

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Government takes aim at Renewable Energy Target

Terminating Australia’s carbon price scheme wasn’t enough for the Abbott government. Now the Renewable Energy Target is in its sights. [29 July 2014 | Peter Boyer]

PHOTO ORIGIN ENERGY

“Network costs” – the upgrading of poles and wires – are the principal driver of higher power prices. PHOTO ORIGIN ENERGY

In a few weeks’ time a Hobart suburban household, a heavy energy user, will part company with the National Electricity Market and go it alone.

Seventy-two rooftop solar panels will produce 18 kilowatts of power, a lot for a normal household but not if it includes an electric welding business, as this one does. Besides driving the welders, the power will have to serve home electrical needs for 24 hours every day. Energy will be stored in computer-controlled, sealed lead-acid batteries: older technology than lithium-ion units but cheaper, and perfectly acceptable when weight isn’t an issue.

The off-grid system will end the household’s $10,000 annual power bills. It will take quite a few years to pay for itself, but neither Goanna Energy’s principal consultant Marc White nor Rob Manson of I Want Energy, which is installing the system, doubts that it’s value for money.

Last week my own winter power bill arrived – an unhappy experience that unfortunately I can’t blame on the carbon tax, or its absence. It’s up from last winter simply because with an extra body in the house we used more electricity. But coming at the end of a long period of steadily-rising power charges, only a small part of which can be blamed on the carbon tax, it brought to mind the kind of sentiment that’s driving growing numbers of Australian households and businesses to radical action.

The main driver of higher power prices is the huge investment over the past few years by Australian electricity utilities, estimated to be as high as $45 billion, on distribution and delivery networks. It prompted economist Ross Garnaut to accuse electricity suppliers of “gold plating” poles and wires.

With network costs keeping electricity prices high, going off-grid is beginning to look attractive for the consumer. The basic technology is in place, and the financial risk is decreasing with economies of scale now coming into play for both solar panels and battery systems.

But it’s certainly not attractive for the power utilities, already facing falling demand for grid power with the rise of rooftop solar. Whether state-owned as in Tasmania, NSW and Queensland, or private as in other states, they’re all businesses relying on a steady revenue stream.

This is why they’ve leaned on governments across Australia to make drastic cuts to feed-in tariffs payable to households producing electricity. It’s why coal-power producers wanted the carbon tax gone, and why they now want to see an end to the venerable Renewable Energy Target (RET).

No-one can claim the government broke an election promise in abolishing the carbon tax. But it’s fair to say the government allowed voters to think it would keep a strong RET.

I can already hear environment minister Greg Hunt’s response that he pledged during last year’s campaign that an Abbott government was committed to keeping the “20 per cent by 2020” target, and he’s confident this will still happen. No dispute there.

But as is often the case in such matters, it’s what he and his leader, Tony Abbott, have carefully avoided saying that’s important. Since the Howard government set it up in 2001 the legislated target has always been a specific energy output, not a percentage. We heard nothing of this during the campaign.

The RET was always intended to push limits. In 2001 its aim of doubling the amount of renewable energy in the country seemed ambitious. Then in 2009, with energy usage rising, the Rudd government increased the target nearly five-fold. In both cases, support was bipartisan.

In 2010, the RET scheme was split. The small-scale target covered home systems, which it was envisaged would contribute 4000 gigawatt-hours of power to the 2020 total. The large-scale target for hydro, wind, and other big installations was to contribute 41,000 gigawatt-hours by 2020.

Five years ago Australian electricity consumption was expected to rise to 300,000 gigawatt-hours by 2020. Based on this, in 2010 Greg Hunt strongly supported the fixed large-scale target, even adding that by 2020 it would need to be over 40 per cent higher.

But power consumption in 2020 is now expected to be around 250,000 gigawatt-hours — 15 per cent lower than was expected back then. If demand for energy from the grid remains static or falls, by 2020 large-scale renewables will take up 25 per cent or more of total energy used.

This is surely very good news, a real win for sustainable energy which would have to be welcomed by everyone.

Well no, not everyone. Power utilities and coal generators are pressuring the Abbott government’s advisory panel reviewing the RET to recommend weakening or abolishing it. The panel’s chair, climate sceptic Dick Warburton, is due to hand his report to the government any day now.

Last week Australia’s Chamber of Commerce and Industry, Business Council and Minerals Council quoted a Deloitte-Access Economics study they’d commissioned to argue that the RET is four times more expensive than the carbon price as an emissions reduction tool.

Another way of saying this would be that the carbon price was four times cheaper than the RET, which if true would have been handy to know when determining the pricing scheme’s future. But the report appeared a week after parliament axed the tax. Funny, that.

But the Deloitte findings about the RET are challenged by two other reports, an ACIL-Allen study for the Abbott government and a ROAM Consulting analysis for the Clean Energy Council, both of which conclude that the RET will eventually cause household power prices to drop.

But that’s in the future. Right now, Tony Abbott has said repeatedly, the RET is too expensive.

As if killing Australia’s working carbon price scheme wasn’t enough, now the government now wants to disable the best long-term abatement tool we have left.

• The cause of public health suffered a big loss with the death on Saturday, 26 July, of Dr Erica Bell, deputy director of the University of Tasmania’s Department of Rural Health. Besides a long list of scholarly and other publications and presentations across health and education, she was a strong voice for effective action to reduce human impact on climate and the environment and to prepare public health services for future challenges. She will be sorely missed by her colleagues in the medical and public health communities and in the wider public.

After the carbon price, what?

We are now more or less back where we started in 2007. Except, luckily, for the RET, the CEFC and one or two other quite useful acronyms. [22 July 2014 | Peter Boyer]

Greg Hunt and Tony Abbott at a Parliament House press conference following the repeal of the carbon tax legislation. PHOTO AAP/Lukas Coch

Greg Hunt and Tony Abbott at a Parliament House press conference following the repeal of the carbon tax legislation. PHOTO AAP/Lukas Coch

So this is it. A decade of effort by thousands of Australians based on the best scientific and economic advice the world can offer has come to nought: no carbon price, no “direct action”, no climate policy. A big round zero.

This is a first-order political failure. Tony Abbott got the numbers and declared a win, but it’s a pyrrhic victory won at his nation’s cost. We’re all losers.

Some will greet this assessment with derision. Belittling the science and economics behind human-induced climate change and the carbon price has been one of the characteristics of Australia’s endless debate over climate policy, with Abbott’s true believers leading the charge.

But their posturing does nothing to change reality. On the same day as the senate delivered the last rites to Australia’s carbon pricing scheme, the US National Oceanic and Atmospheric Administration released its 24th annual “State of the Climate” report.

There’s nothing surprising in the NOAA report, meaning only that global warming continues unabated. In 2013, one of the six warmest years ever recorded and Australia’s warmest on record, sea level continued to rise while carbon dioxide concentrations reached historic highs.

I’d be willing to bet that no-one voting for the repeal of the carbon price paid any heed to such information. Politics is the order of the day when politicians come together, not science. What counts is who’s on top.

Tony Abbott was definitely on top when he fronted media soon after the vote with environment minister Greg Hunt. He’d just slain the dragon, the “useless, destructive tax which damaged jobs [and] hurt families’ cost of living”. What’s more, he said, it did nothing for the environment.

Actually, it did, though you need to look for the signs. Studies I’ve discussed in recent months have found many signals that the carbon price was changing the energy landscape in Australia, giving a lift to renewables while bringing down electricity consumption and cutting emissions. To those assessments can be added a study by the Australian National University’s Centre for Climate Economics and Policy, just concluded, of the impact of carbon pricing on the National Electricity Market.

Using conservative parameters, the study found that the price on carbon had caused a decline in electricity demand of between 1.3 and 2.3 per cent of the NEM, with a reduction in emissions of 11 million to 17 million tonnes of carbon dioxide. The study found that by allowing renewable alternatives to compete with coal, the carbon tax had caused coal-power operators across Australia to switch off a significant amount of generating capacity. The end of the tax will be the nod for those idle generators to be fired up again.

The ANU study was released on the day of the senate vote. Like the NOAA report, it was too late to change minds. A parliamentary train in motion rarely changes course.

Interviewed that evening by ABC Lateline’s Tony Jones, Hunt said he’d seen the ANU study but preferred Australian Energy Market Operator data that indicated the Renewable Energy Target was mainly responsible for declining emissions, not market forces shaped by a carbon price.

Hunt’s dismissive response to an independent expert analysis, highly relevant to climate policy, follows a pattern. Since his leader staked his career on a complete rejection of carbon pricing, Hunt has been very selective about what information he takes on board and what he rejects.

The Coalition has taken upon itself to determine what should be done about the totally unprecedented policy dilemma of climate change while rejecting the vast bulk of professional research that points to an alternative path. That is a very risky course.

Now the Coalition will be forced to test that risk, first by getting a majority in the senate to support its $2.5 billion Emissions Reduction Fund in August, and if that gets through then getting the scheme to work within its strictly limited budget. Both are dubious propositions.

Unfortunately, the ERF’s effectiveness will be nullified completely if the government can’t stop big polluters abandoning all emission limits. It has still not produced “baseline” compliance measures to prevent such behaviour, and they’re now unlikely to appear before next year.

We’re lucky that we still have an effective Renewable Energy Target, but for how much longer is anyone’s guess. Climate sceptic Dick Warburton, Abbott’s hand-picked chairman of a review panel, is soon to hand down a verdict on its future. Lower power usage makes the basic RET (20 per cent of renewable energy by 2020) a real doddle. That stays, Greg Hunt said last week, but he didn’t mention a 2011 addition that gave the RET more bite, 41,000 gigawatt-hours of renewable energy a year by 2020. That’s the bit that bothers Abbott.

We’re also lucky that the Clean Energy Finance Corporation, the Australian Renewable Energy Agency and the Climate Change Authority, all Labor-Green carbon price agencies, still exist. The Abbott-Hunt climate plan was to get rid of them, but the senate crossbench voted that down.

The survival of the Climate Change Authority must really rankle with Abbott. It has advised that (consistent with the ANU study) Australia would easily achieve the bipartisan 2020 target of 5 per cent emissions reduction and should aim for a stiffer 19 per cent target. But that advice was given when we had a carbon price.

Now, with the strict spending limits Abbott has placed on the ERF, we’re unlikely to reach even the 5 per cent target. The most conservative independent ERF analysis says this will cost nearly double the amount budgeted.

I hope that in the wake of the senate vote the government enjoyed its moment in fading sunshine. Now we should all get ready for a long, hard night ahead.

Axing the tax is not so simple, after all

We owe it to our obstructing Senate for helping to reveal the true cost of abandoning carbon pricing. [15 July 2014 | Peter Boyer]

Senators Ricky Muir, Jacqui Lambie, Zhenya Wang, Glenn Lazarus and Janet Rice seated in the Senate for their introduction to Senate procedure PHOTO DAILY TELEGRAPH, SYDNEY

Senators Ricky Muir (seated, top centre), Janet Rice (top right), Zhenya Wang, Jacqui Lambie and Glenn Lazarus taking their seats in the Senate for their introduction to Senate procedure. PHOTO DAILY TELEGRAPH, SYDNEY

If it hadn’t actually happened, no-one would believe the story of the lingering death of Australia’s carbon pricing scheme. So absurd, it seems like a dream. But for the government it’s been a nightmare.

The plot has deviated wildly from the plan announced by Tony Abbott over a year ago, well ahead of the election. That scenario had a submissive parliament acting quickly and without fuss to repeal the carbon tax and abolish all the Labor-Green abatement apparatus.

Instead, the Abbott government has found itself embroiled in a protracted debate on climate policy, in which it’s been forced to defend itself on territory it thought it had conquered.

The Coalition insisted the carbon price saddled households and businesses with an intolerable financial burden while having no effect on carbon emissions. Neither claim stacks up.

Every tax has its impost. If income tax were abolished we’d all feel a lot more prosperous for a while. But eventually we’d realise the prosperity was illusory, because the tax served a purpose.

Over time we’ll be able to judge the hip-pocket impact of no carbon tax, but I predict it will be short-lived and marginal. We may notice slightly lower electricity and gas bills, but total savings to you and me will be nowhere near Abbott’s claimed average saving of $10.50 a week per household.

On Friday environment minister Greg Hunt said that the repeal laws would allow the Australian Competition and Consumer Commission to fine supermarkets and airlines if they fail to subtract the carbon tax element from their prices. Supermarkets and airlines don’t agree. Virgin, Qantas, Coles and Woolworths all say they absorbed the cost of the carbon tax when it started and won’t be lowering prices on the back of its repeal.

But the important question, the one the government keeps avoiding, is this: What do we lose by abolishing carbon pricing?

National accounts reveal that over three years to the March quarter 2014, with population rising by over five per cent and overall household consumption up by nearly eight per cent, per capita household energy consumption dropped by nearly 10 per cent. While Australia’s economy expanded over the year to May this year, emissions from generating electricity dropped by 5.3 million tonnes. The Climate Institute calculates that the scheme has to this point had the effect of cutting carbon pollution by nearly 40 million tonnes.

The scheme’s working, and virtually all economists in Australia and elsewhere believe it’s the most cost-effective abatement method, easily beating a regulatory scheme like Direct Action. So if carbon abatement is your objective, you’d want to keep what we have.

But carbon abatement has never been Abbott’s objective. Winning was number one, then “opening up for business”, including enhancing coal’s position as a primary driver of the economy.

In opposition he conducted a relentless campaign to “axe the tax”, which took pride of place among the handful of slogans that he used to communicate his program for government. Measured against his aim of winning at all costs it worked very well.

But even before the September election the Coalition was aware of a catch to their strategy: how to be fiscally responsible while “axing taxes”. So it took care to mention among its election slogans Labor’s “financial mess” that the Coalition would have to fix.

As we now know, this signalled the government’s post-election declaration that, contrary to many assessments including those of international credit-rating agencies, it had inherited a “debt and deficit disaster” requiring some harsh measures to get the budget back into surplus.

But party strategists ignored the probability that the election wouldn’t deliver the government the numbers it needed in the Senate to put its plan into effect. Tony Abbott now has to bargain with minorities, which is proving difficult. Negotiation isn’t his strong suit.

The responsibility to fix this mess isn’t just the government’s. No matter what your politics, the loss of $30 billion or more in revenue because opposition and cross-bench politicians oppose particular budget measures is not good for the country at large.

Party politics is an ugly business. It was wrong for the Greens to oppose the rise in the fuel excise, because it went against their own position that transport fuel, like coal, had to be taxed. Similarly, Labor shifted positions on some educational measures that it had supported in government.

Clive Palmer and his senate team must also take some blame. Political deal-making requires that both parties maintain agreed positions, but in the turmoil of the senate carbon tax vote last week the Palmer United group seemed to revel in surprising and embarrassing the Liberals.

But the main culprit is the government. It created the illusion of a Liberal-National nirvana in which repealing the carbon tax, stopping the boats and building big new roads would fix everything.

Fiscal deficits and expert abatement advice notwithstanding, it’s now locked into replacing an effective carbon pricing scheme raising revenue of between $7 billion and $8 billion a year with untested, unsupported, revenue-negative Direct Action. That makes another net loss from abandoning the carbon price option: a hit on the budget bottom line of around $9 billion a year.

That’s even without considering the other positives flowing from the carbon price, like supporting renewable energy investment, future-proofing industry and keeping Australia sweet with climate-conscious trading partners. Each of which, in the long term, is good for business.

All this got into the Senate Hansard because cross-benchers, including Ricky Muir who stopped the debate being gagged, wouldn’t lie down at the government’s bidding. We should thank them.