THE DISTILLERY: Energy test

The government's energy white paper is widely seen as a step forward by jotters, but is it missing something?

Each day, Distillery selects the three or four best ideas that have been put forward by the nation’s leading business and economic commentators (and lists other items they have covered). Readers are invited to comment on the Distillery selections in The Conversation.

Australia’s energy debate has been undermined at times by an unwillingness to face two confronting ideas. The first is that an enormous amount of investment is required to lessen our reliance on cheap coal in exchange for more expensive but less carbon intensive alternatives, which means cheap energy is a thing of the past on two accounts. The second is that nuclear energy, with all its apparent dangers and drawbacks, is a legitimate candidate to secure our long-term energy future. The Australian’s John Durie finds progress being made on both of these fronts this morning through the government’s draft white paper, but The Australian Financial Review’s Tony Boyd says the backflip on emissions standards will ultimately cost us. Elsewhere, another commentator offers a glimpse at the preparations banks are making for a European nightmare, while the appetite amongst US business leaders for budget austerity is also in the mix.

Firstly, The Australian’s John Durie couldn’t help but be encouraged by energy minister Martin Ferguson, who said yesterday that if the renewable energy industry can’t offer a workable alternative to coal, the nuclear debate would be rekindled.

"That was a direct challenge the industry should take seriously. The trouble is, as the minister also highlighted, there is an election cycle that doesn't do much for the certainty required by an industry that will be asked to invest $240 billion over the next two decades to meet Australia's energy needs. That explains why he also demanded support from the state governments and, in particular, the federal opposition, to give the industry what it needs… Australia needs to accept that the era of cheap energy is over, as implied by the cost of the investment necessary to meet demand.”

However, The Australian Financial Review’s Chanticleer columnist Tony Boyd says Australian energy policy took two steps forward and one step backward yesterday. The writer starts by explaining that the gist of the white paper is to let market forces decide what the best energy investments are – obviously a worthwhile move.

"However, Ferguson takes the market forces approach too far by saying that there should no longer be government intervention to ensure emissions standards for power generation. This includes emissions standards on all new coal-fired power stations. He says the carbon price, which comes into force from July 1 next year at $23 a tonne, will ensure the most efficient investment outcomes. That is a step backwards because it raises the prospect of investments being made in energy infrastructure that does not have maximum flexibility to cut carbon emissions and operate efficiently over the long-term.”

Meanwhile, as Europe continues to stumble towards a seemingly unconvincing attempt to address its debt burden or ultimately collapse, The Age’s Eric Johnston gives an inside perspective on what the big four banks have been doing to prepare for the latter.

"Measures taken by chief financial officers of the Australian banks over recent months are believed to have involved updating internal risk models, raising liquid-asset levels as well as reopening private funding placement channels with big investors in Japan and elsewhere in Asia. Australian banks have also been reducing their already low holdings in euro-denominated assets. NAB, which owns British-based Clydesdale Bank, is believed to be among those most advanced with plans, given any fractures in the euro would jolt Britain's finance sector.”

And fourthly in this edition of Distillery, The Age's Malcolm Maiden has just returned from a trip to the US and found that while the business community is not impressed with US President Barack Obama’s apparent bout of ‘class warfare’, it’s a different story when it comes to austerity.

"… The chief executives, economists, investment bankers and hedge fund managers I spoke to during my trip to Wall Street also believe that even the announced path of the US government's retraction of stimulus from the US economy is dangerous. None of them believe that the accelerated attack on America's public debt overhang that right-wing Republicans are calling for and the ratings agencies and the markets themselves are forcing should occur until the US economy is stronger, and the baton-pass from public spending to private spending more secure.”

Rounding out the rest of this morning’s musings from the nation’s business writers, The Age’s Peter Martin finds the Business Council of Australia suffering from "selective memory,” by distancing itself from support for a tax on super profits. Martin also finds a similar, much better-known example of a lobby group backtracking on this very issue. Meanwhile, The Sydney Morning Herald’s economics editor Ross Gittins tries to figure out whether Prime Minister Julia Gillard is a standard Labor leader or a soft Liberal because, when her policies are measured up against each other, it’s quite difficult to tell. Elsewhere, The Australian’s Jennifer Hewett throws some weight behind Treasurer Wayne Swan’s move to build a deep Australian corporate bond market.

The Age’s Garimpeiro columnist, Barry Fitzgerald, finds some encouraging forecasts from the Bureau of Resources and Energy Economics for export earnings next year – specifically iron ore – making the government’s surplus promise not exactly likely, but less unlikely.

In company news, Fairfax’s Insider columnist Ian McIlwraith speculates on changes at the top of media rival News Corp, while The Australian’s Bryan Frith examines Sir Ron Brierley’s latest move.

And finally, the Herald Sun’s Terry McCrann begins an angry spray at Martin Ferguson with a few relatively nice compliments.