Power Policy Prioritises Expensive Green Goals

Written by:
26 June 2018
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The key lesson of recent wrangling over energy policy is this: if it sounds like a tax and looks like a tax, then it probably is a tax.

The National Energy Guarantee (NEG) is the government’s energy policy centrepiece.

It promises to manage the so-called policy “trilemma” of affordability, reliability and emissions reductions in the energy sector. It will do so by mandating both a reliability and emissions reductions guarantee.

The emissions reduction component is driven by Australia’s commitment to the Paris Climate agreement which requires Australia to reduce its emissions by 26-28 per cent on 2005 levels by 2030.

However, the only way emissions reductions on the scale mandated by the Paris Agreement can be achieved is through heavy government intervention which favours less carbon intensive forms of energy generation.

And just like the Gillard government’s full-blown carbon tax, the complex web of regulations and fines which form the basis of the NEG will amount of an effective tax on carbon-intensive forms of energy generation.

Translation: coal will be taxed and renewables will be subsidised.

The de facto carbon tax stems from two areas.

The first is the mere existence of an emissions guarantee, which would force energy retailers to acquire a certain amount of energy which is generated from greener sources. This makes the NEG indistinguishable from the Renewable Energy Target, a Clean Energy Target, an Emissions Intensity Scheme, or a carbon tax. The outcome is policy favouritism of renewables at the expense of coal.

The second component is an explicit tax.

A $100 million tax (the government refers to it as a fine) will be placed on energy retailers who do not meet their emissions reductions obligations.

Yet just a $10 million tax will be placed on those who do not meet their reliability requirements. This means the government is voting 10-to-one in favour of emissions reductions over reliable energy supply.

The extent of government command and control of Australia’s energy policy would have made even Commissars in the Soviet Union blush.

The government is imposing a set of make-believe objectives onto the energy market.

It is then sabotaging the natural operation of the market by imposing a web of regulations and taxes, strongarming energy retailers, running a nationalised electricity generator (Snowy Hydro), handing out billions to the Clean Energy Finance Corporation and Australian Renewable Energy Agency, and allowing the whole show to be directed by unelected bureaucrats.

That the Department of the Environment and Energy’s website refers to the NEG as a “market-based solution” is surely a joke. But this joke is on us.

The energy crisis in Australia is the latest sign of a deep sickness in our political system.

Australia is blessed with a bounty of onshore and offshore gas, 1000 years’ worth of coal, and 30 per cent of the world’s uranium supplies.

Yet the Canberra political class has taken Australia from having among the lowest energy costs in the world to having among the highest.

Rather than a bona fide public policy, emissions reductions are best understood as a vanity project of the political elite.

Human emissions account for around 3 per cent of total carbon dioxide emissions. Australia accounts for 1.5 per cent of that.

And according to data from the International Energy Agency and the Climate Council of Australia, the Commonwealth Renewable Energy Target — which favours renewables over coal — reduced emissions from fuel combustion exercises by just 1 per cent over a 15-year period.

You don’t need a calculator to figure out that 1 per cent of 1.5 per cent of 3 per cent is mathematically zero.

The cost, though, is immense. The working and middle classes of Australia are being bludgeoned with higher electricity prices which is trashing their standing of living. And businesses are avoiding Australia like the plague.

That is why new private business investment is just 11.7 per cent of GDP, which is lower than the rate which prevailed during the economically hostile Whitlam years. Worse than Whitlam, indeed.

This is the price we must all pay so the political class can continue with their vanity project. Now that is a true expression of “class privilege”.

The last time Australians were consulted on energy policy they voted for affordability and reliability over emissions reductions. That is the key reason the Coalition won a thumping majority at the 2013 election and the carbon tax was abolished.

There is now talk that some on the right flank in the government will cross the floor to vote against the government’s own energy policy.

Don’t hold your breath. Talk is cheap. But they should.

Any government that cannot deliver affordable and reliable energy doesn’t deserve to govern any longer.

That is the lesson of the Gillard years, and they are being repeated again today.

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