The carbon repeal hangover

Both the Australian Industry Group and the Business Council of Australia are now making sounds that we still need an emissions trading scheme. Meanwhile consumer savings from repealing the current carbon price are hard to pin down.

Well the emissions trading scheme or carbon tax has now been consigned to the rubbish bin and now everyone is scratching their heads trying to work out what we’re left with, and what on earth all the fuss was about.

The Australian Industry Group, while cheering the repeal of the carbon price, seemed to also be acknowledging that we actually probably should have hung onto the thing. Their head Innes Willox said Australia in the end “has to find a market-based mechanism for action on climate change to work properly”.

He is also quoted sounding rather sceptical about the Government’s proposed replacement, “We’ll see how far Direct Action gets us and how it looks in its final form, but we think the government is going to have to look at a range of other policies, including purchasing international carbon permits, and some kind of market mechanism to reach our target”.

Market mechanism – what exactly does this mean?

Well basically it’s another way of saying emissions trading but in a way that avoids having Coalition backbenchers go into hysterics and label you a communist.

The Business Council of Australia’s chief executive, Jennifer Westacott, also resorted to the old favourite of “market mechanism” but was brave enough to also mention that dreaded term ‘carbon price’. She’s quoted in the Guardian today saying, “Our preference is for a properly designed price on carbon and a market mechanism, but we have to go back to basics.”

So we’ve now just abolished a scheme for which design work essentially began in earnest back in 2005 with a joint State Governments initiative, and are going to start this all over again. And for what benefit exactly?

According to Tony Abbott back in June 2011 “the hit on Australian’s cost of living [from the carbon tax] is almost unimaginable” and for workers it was going to “clean out their wallets and it will wipe out jobs big time”.

Now they are in government they are rather more circumspect, deferring to the modelling estimates by the Australian Treasury which the prior Labor Government relied upon.

But in the wash-up it looks like even the $550 the government is promising is all a bit uncertain.

Woolworths and Coles have already said we can’t expect any savings on our groceries. But much of the savings were to come from use of electricity ($200 per annum) and gas ($70 per annum).  

Yet of the big three energy retailers on the eastern seaboard and Synergy on the west coast, only Origin Energy has been able to give a clear estimate of the bill savings.

As reported yesterday they said they deliver a price reduction of 7% for electricity and 5% for gas, lower than the government percentage estimates of 9% for electricity and 7% for gas. Other energy retailers have been a lot less brave then Origin.

Synergy in Western Australia said it is “currently working to determine the carbon cost savings and how long it will take for our customers to see these cost savings.” They estimate that it will be another 6 to 8 weeks before they can implement any bill saving changes.

However given its prices are already regulated below the cost of supply they are essentially completely under the control of the government. So they were willing to say they “expect” the average residential electricity bill would decrease by about 8% or $126 per year as per the WA Minister for Energy’s statement.  Not quite the Federal Government’s $200 saving claim.

But Synergy weren’t willing to venture a number on the likely savings for their business customers stating, “For our business customers we are currently working through how these changes will impact our various tariff and contract options for both electricity and gas.”

Energy Australia wasn’t willing to put any number on the savings to consumers from the repeal of the carbon tax. Their Executive Manager – Corporate Affairs, Clare Savage, said, "Unfortunately implementing system changes to remove carbon is not as simple as pressing a button - altering prices is a highly complex process and it's important we make sure the changes are done correctly".

AGL Energy also hasn’t been willing to indicate the likely savings. In a statement they said, "Once changes to our billing system have been implemented and tested, price reductions will be backdated to 1 July 2014.  We expect this process to be complete in August or September."

Queensland’s Energy Minister, Mark McArdle, said average household consumers in his state should expect a $170 annual saving on electricity. Although he also acknowledged that prices would still rise by 5% thanks to what he now labels as “gold plating” by the power network companies that his government own. It kind of makes you wonder if prices are being hiked due to unnecessary upgrades by companies that he is responsible for, then why isn’t McArdle putting a stop to them? 

This of course leaves all the way back where the political debate should have been which is electricity market regulation and pricing. Interestingly the NSW network businesses are now seeking further hikes in their revenue allowances, which seems extraordinary given the inflated allowances they were given in the last regulatory price review. These could mean NSW households just like those in Queensland find themselves with electricity bills that continue to rise.