If you make investments on the basis of probability rather than blind hope, you’d be mad to expect that in five years time Australia will have a carbon price in place and a $10 billion fund to invest in energy efficiency and renewable energy.
Labor will lose the next federal election and Tony Abbott will follow-through on his blood oath to rescind the carbon price and abolish the Clean Energy Finance Corporation.
There is a belief amongst many people close to carbon pricing issues that Abbott will get into power and find that the practicalities involved in rescinding a carbon price are too hard and quietly shelve the idea. They are deluded.
By all means entertain the idea that Labor might stick to its principles for once and block the Coalition in the Senate. But why wouldn’t Abbott go to a double dissolution election, and how could he afford not to?
Tony Abbott has made unequivocal statements that he would call a double dissolution, and based on current poll results, would embrace it as an electoral opportunity. The Coalition would make huge gains under such an election to gain control outright in the Senate. This would completely remove the Greens from a balance of power situation, making Abbott’s life infinitely easier on issues well beyond the carbon price. Not to mention the fact that backing away from his blood oath would represent a breach of trust far greater than Gillard’s “there will be no carbon tax” promise.
So unless there is a huge turnaround in the polls, investors, and those that are concerned about climate change, should assume that by around 2016 the carbon price will fall to zero.
That’s why those businesses with a commercial interest in reducing carbon emissions need to be thinking about, and articulating, a plan B for reducing carbon emissions. This goes well beyond simply trying to nail down the Coalition’s Direct Action policy.
Right now the carbon price is being used as a battering ram for preventing or removing a range of policies that would be important to a plan B. For example, the federal government dropped an election commitment to prevent new coal power stations from being constructed that did not have carbon capture and storage fitted. Dropping such a policy was perfectly appropriate if the carbon pricing scheme was here for decades to come. But it isn’t.
A range of other greenhouse initiatives, most admittedly useless window dressing, but some that are quite important, are also being targeted for abolition.
This abolition is being sought under the guise of removing ‘green tape’ based on the proposition that these measures are duplicating the carbon price. Yet the only real duplicity is that of groups like the Australian Chamber of Commerce and Industry and Minerals Council of Australia. These groups argue on the one hand that we must remove measures that duplicate a carbon price, while on the other hand are doing their darndest to ensure that a carbon price disappears.
Until the Coalition, at a federal level, supports the continuation of a carbon price, there is absolutely no basis for removal of greenhouse reduction measures based on the premise that they duplicate the carbon price. Instead they act as a safety net in case the carbon price is rescinded.
In fact, the Greens and the Labor Party, if they are genuine in their desire to reduce emissions, should be looking to legislate new ‘plan B’ measures such as:
-- Emissions of greenhouse gases from new projects above a certain threshold becoming a trigger for evaluation and approval under the Environmental Protection and Heritage Act;
-- The establishment of an independent authority of engineers (with ten years of block funding) to evaluate and develop carbon emissions best practice standards for existing and new industrial facilities; buildings and energy consuming appliances.
-- Imposing a greenhouse intensity limit on new power stations of 0.5 tonnes of CO2 per megawatt-hour generated where the power station has a capacity factor greater than 10 per cent;
-- Insertion of environmental criteria into the energy market objectives; and
-- Extending and increasing the Renewable Energy Target out to 2030 and dividing it into sub-targets for specific classes of technologies to support a portfolio of low emission technology options.
Also the Coalition, if they are genuine about reining in budget expenditure, should support such measures too. This is because they will reduce the financial burden associated with implementing their Direct Action policy. The first three of these measures would be required anyway to effectively implement the Direct Action Policy.
Plan B will not be pretty and will most likely cost more than a more streamlined approach built around a strong carbon price. But plan A is about to go out the window.
Implications for businesses and investors outside the clean energy sector
Those businesses that are members of Australian Chamber of Commerce and Industry, the Minerals Council, and the Business Council of Australia should realise that environmental activists will soon confront the reality that plan A is out the window. This means they will be working on all manner of creative ways to make businesses’ lives hell, well at least those that emit high levels of greenhouse gases. These will be random in nature and highly concentrated on particular companies, often in ways that are incredibly difficult to predict and mitigate.
Anyone who thinks this would still be better than a reasonably predictable carbon price with 60 per cent or 90 per cent free permits should consider the fate of timber company Gunns.
Projects will be held-up and occasionally shut down. Companies will be subjected to boycott campaigns. Individuals will be personally targeted and their names dragged through the mud. Corporate brands will be trashed. Financiers will become nervous about funding new projects for fear of costly hold-ups in construction and operation.
Maybe, just maybe, it would be in these businesses’ best interests to stop complaining about the carbon price and instead get behind it.