How Abbott misread the politics of renewable energy

It appears Tony Abbott is about to be blindsided by a grassroots revolt over the Renewable Energy Target.

In the end, it seems the Prime Minister has pushed too far, failing to appreciate that the Renewable Energy Target is not simply the carbon tax just a bit smaller.

Reports from a variety of sources in the media – and corroborated by stakeholders – indicate that government MPs are extremely dissatisfied with the PM's Office over how the review of the RET has been handled.

Industry Minister Macfarlane and others within the Coalition are now publicly disowning the recommendations of the Warburton Review. Macfarlane told The Australian: "No one’s talking about scrapping the RET – no one." 

Macfarlane has also sought to reassure investors that any amendments to the scheme will not undermine the value of past investments, rebuking the Warburton Review's suggestion that recommended changes reflect a regulatory change that should have been anticipated.

Privately, a substantial proportion of Coalition members are looking for a way to make this issue go away, via some kind of negotiated settlement with the Labor Party. However, they face a major problem because the party’s views on the policy are severely skewed by unrealistic expectations among the camp which refuses to accept the scientific evidence on global warming. Abbott has pandered to this group rather than listening to ministers Hunt and Macfarlane, who best understood the issues.

This means the government is putting forward a cut to the large-scale target (from 41,000 to 26,000GWh) which the partyroom sees as a significant concession, but which the renewables sector views as a disastrous cut which is completely unacceptable. It’s not clear how the Coalition’s unrealistic expectations – which have been fanned by Abbott – will be realigned.

It is an open secret that the ministers with responsibility for energy and climate change and therefore direct ownership over the Renewable Energy Target – Hunt and Macfarlane – were sidelined by the Prime Minister. The PM's Office chose to directly intervene in the process by putting control of the review within the Department of Prime Minister and Cabinet. The PMO also sought to control the appointments to the review panel.

This went to the extent, it is understood, of almost appointing right-wing warrior Alan Moran – formerly of the Institute of Public Affairs – to head the review. Moran has a long and very public record of vociferously criticising renewable energy and efforts to control carbon emissions, more generally. 

It indicates an almost tone-deaf ear for the politics surrounding this matter (or utter and complete arrogance) that Moran was seriously considered, and that Dick Warburton and Brian Fisher were ultimately appointed. All were well-known to hold strongly predetermined views that Australia should do very little to control its carbon emissions. The review process was nothing more than an elaborate charade and this was obvious to the media and all stakeholders, undermining its credibility.

Abbott has completely misread the politics surrounding this issue where, one suspects, ministers Hunt and Macfarlane would have been more careful.

It seems he expected that he could re-run a campaign he pioneered on axing the carbon tax ... his hand-picked review team would find the RET was significantly driving up household electricity prices, and undermining industrial competitiveness. He would then move to abolish the scheme on the basis it would lower household bills and improve job security ... so simple.

But those close to the issues knew it wasn’t this easy.

Of course – most importantly – the RET isn’t having a significant impact on electricity prices and, on balance, is likely to reduce them. But this isn’t the whole story, because the carbon price didn’t have a serious impact on the cost of living either, particularly after compensating tax cuts.

The interesting thing is that while carbon pricing lacks a meaningful business constituency, the RET does not.

Snowy Hydro and Hydro Tasmania are really the only two substantial businesses which saw a very major upside in the immediate term from carbon pricing. The gas industry – in particular, Origin and Santos – had been a supporter in the past but, with the establishment of their LNG export facilities on the east coast, this changed. The other beneficiaries are, for the most part, quite small and employ few people.

Consequently, the Coalition faced little organised and meaningful resistance from any alliance of businesses on its axing of the carbon tax. Meanwhile, it had lots of businesses echoing its grossly misleading claims of 'economic Armageddon'.

In terms of the RET there are several thousand businesses employing about 20,000 people – including a number of large multinationals – who have a very large proportion of their revenue riding on the continuation of the RET. For some it is a matter of life or death for their Australian business. Even power equipment giants such as General Electric and Siemens, which work across fossil fuels as well as renewables, have far more to lose than to gain from cuts to the RET.

At the same time, the general public finds it much easier to understand how a renewable energy target benefits the environment compared to a new tax. In addition, households see direct benefit from the scheme through subsidies for solar systems which shield them from power price rises.

Abbott and several vocal members of his partyroom don’t appear to have appreciated these vital differences between the carbon price and the RET.

Macfarlane now faces the unenviable task of cleaning up Abbott’s mess. However, the Industry Minister must first reset his party’s expectations to something more realistic than cutting the target to a 'real 20 per cent', which would reduce the amount of new renewable capacity by 60 per cent.