Businesses And Workers Pay A High Price For Zero Emissions Targets

Written by:
20 December 2018
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Don Harwin is to be credited for his role as the state’s Minister for Energy and Utilities. But his recent suggestions for the future of energy and climate policy in Australia are misguided.

This week Harwin touted the NSW government’s policy of net zero emissions by 2050, argued for the integration of climate and energy policy, and decried the lack of co-operation between state governments and the Commonwealth.

Interestingly, Harwin also argued for the need to “avoid unnecessary market interventions or distortions” — which is strange given that he is apparently unconcerned with the distortion caused by the $4.8 billion in subsidies that the renewables sector receives each year.

The definition of “unnecessary” appears to mean any intervention that favours coal, while all interventions that favour renewables are conveniently considered to be “necessary”.

Mr Harwin also states that the NSW government “did not in principle oppose” the now-abandoned clean energy target or the emissions intensity scheme and was “quite happy to support” the National Energy Guarantee.

However this, too, appears inconsistent with the desire to avoid unnecessary market interventions, as each proposal was the functional equivalent to a carbon tax and would have ushered in mammoth amounts of government regulation.

This is because the only way that NSW could ever get close to the net zero emissions target is through substantial taxpayer-funded favouritism of the renewables sector.

And this spells one thing: higher prices for consumers and businesses.

Over the past 10 years the share of wind and solar in the National Energy Market has grown from around 2 per cent to 10 per cent.

At the same time, over that period residential electricity prices have risen a staggering 110 per cent. This is five times the rise compared with economy-wide inflation — which has increased by just 22 per cent.

This means that Australia now has the fourth-highest electricity prices in the world, according to the Australian Competition and Consumer Commission (ACCC).

That is despite the fact that Australia has over 1000 years’ worth of coal, 30 per cent of the world’s uranium deposits, and an abundance of onshore and offshore gas.

This is wreaking havoc on industry.

An ACCC report from 2017 gave the example of a retail grocer whose electricity bill increased by 53 per cent in just one year.

And BlueScope steel, which employs 6000 Australians, saw its electricity and gas costs rise by some 92 per cent in just two years.

All told, more than 65,000 jobs have been destroyed in the energy-intensive manufacturing sector in the past decade, in part because of high and rising electricity prices.

That is 18 jobs lost each day — 18 fewer Australians who are able to experience the dignity of work.

Mr Harwin doesn’t mention these people or businesses.

Perhaps that’s because they don’t count to policy-makers obsessed with reducing emissions.

What is worse is that these economic and social costs are being imposed without a discernible environmental benefit.

Australia accounts for just 1.3 per cent of global emissions from human sources. NSW accounts for just a fraction of that — and humans account for just 3 per cent of all emissions from human and non-human sources.

Even the entire Australian economy shutting down would make no noticeable difference to global emissions or the global climate.

Sitting underneath emission reduction policies is the idea that there is an inevitable global transition taking place from coal to wind and solar. But this is demonstrably false.

Global spending on renewable energy declined by 7 per cent in 2017; the largest drop in 15 years

China recently removed targets for the construction of solar farms and issued orders for local governments not to approve solar farms that need subsidising.

There are some 2240 coal-fired power stations currently in operation around the world.

A further 708 have been announced, or have received pre-permission or permission to be constructed.

A report released by the International Energy Agency on Tuesday found that coal still provides the largest source of electricity in the world and will continue to do so for some years.

And the jewel in the crown of the environmentalists, the Paris Climate Agreement, is disintegrating.

The largest emitter of greenhouse gases, China, is completely unconstrained by the agreement and is expected to increase its emissions by 150 per cent by 2030 on 2005 levels.

The second-largest emitter, the United States, has announced it will exit the agreement.

And not one of the nations in European Union, who are collectively the third-largest emitters of greenhouse gases, are on target to meet their emission reduction targets.

This wrangling over energy policy gets to a much deeper divide within the Coalition at the state and Commonwealth level, which in turn reflects a divide within the Australian electorate.

It is a contest between Penrith and Paris.

Between lower power prices and lower emissions.

And between the hardworking suburban working- and middle classes and the inner-city elites.

The permanent political class in Canberra and on Macquarie street have for years disregarded the interests of anyone who lives more than 10km from the city.

Whether on energy, population growth or the culture wars, the interests of the out-of-touch elite has taken precedent.

Now is the time for the NSW and Commonwealth governments to provide leadership by getting out of the Paris Climate Agreement, removing subsidies and allowing Australia’s resources sector to flourish.

Daniel Wild is director of economics at the Institute of Public Affairs.

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