Tony Abbott’s carbon war shifts to renewables

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Prime Minister Tony Abbott is determined to rid Australia of all carbon mitigation it seems. From the AFR:

Tony Abbott has sparked a war with the renewable energy sector by claiming their product was driving up power prices “very significantly” and fostering Australia’s reputation as “the unaffordable energy capital of the world”.

…The attacks came as Nobel laureate and Columbia University professor Joseph Stiglitz and former Reserve Bank board member Warwick McKibbin told the Crawford Australian ­Leadership Forum, co-sponsored by The Australian Financial Review, that Australia should have a carbon price.

…All players told the Financial Review that modelling conducted by ACIL Allen for the government’s Warburton review into the RET found that power prices would fall as more renewable energy was deployed.

Andrew Richards, head of external affairs at Pacific Hydro, said the RET added about $40 a year to average household power bill. This, he said paled into insignificance against recently approved gas price rises in NSW which will add up to $240 a year to the average household bill.

“Let’s keep things in perspective. Changing the RET to lower energy prices is mucking around in the shallow end of the pool,” he said.

Correct. If the RET inquiry’s own modelling shows that the policy will provide cheaper prices in the years ahead than without it, that rather begs the question what’s driving the PM’s objection.

Here is the chart again showing the real cause of the major electricity price rises from the Garnaut Review:

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electricity

68% is from the distributors (poles and wires) not the producers. Why aren’t we reforming them? Add in the rush to export gas and the RET contribution falls even further.

Now, I agree that the RET is flawed. A carbon price would be much more efficient, as McKibbin and Stiglitz say. But given the deal with Clive Palmer is going to scrap both the carbon price and the alternative “Direct Action” policy which uses regulation, what else is there except the RET to meet Australia’s UN carbon mitigation obligations of 5% reduced emissions by 2020?

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The combination of the carbon price and RET has got us tracking towards a better than 5% reduction but without either or direct action we’ll have nothing at all driving change. Last year, Treasury modeled what it would cost the budget to make up the difference in meeting the target if only the carbon tax was scrapped and direct action went ahead:

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Modelling by the Treasury for the CCA…shows that abatement at the price incentives required by the budget constraints on the ERF the Government has announced (around $5-8/tonne) would fall well short of the abatement required to achieve Australia’s emission budgets. They conclude “an effective carbon price rising to over $65/t CO2-e by 2020 would be required to achieve the minimum 5 per cent target through domestic reductions alone.” At these prices, this would require spending $8.5 billion in 2020 alone to achieve the minimum emission commitment.

What’s is it going to cost without any mitigation policy if there’s a mad scramble to catch up later amid punitive tariffs from offshore?

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The Prime Minister’s anti-climate change zeal is damaging the national interest.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.