Walking away from a carbon brawl

To achieve affordable energy solutions in a lower emissions world, we need to agree on the facts and muster some political decisiveness.

Having been involved in the greenhouse gas debate in Australia since the late 1980s, I am wondering how we can still be stumbling about the woods, bumping in to each other and mouthing imprecations, as seen in the exchange on carbon policy and climate change perspectives between Bob Gottliebsen and Tristan Edis (The carbon revolt, April 4; CLIMATE SPECTATOR: Gottliebsen's misinformed carbon revolt, April 5).

After all, the facts of our current energy situation are not so hard to understand.

First, notwithstanding a substantial minority – including scientists – having real concerns about how climate trends are being modelled and interpreted, as a country we have decided we would like to take action to reduce the growth of greenhouse gas emissions domestically.

And we have said we are willing to do more about abatement if there is ever a global agreement to do so, knowing full well this is unlikely to occur any time soon.

Second, our policymakers have proven quite incapable of coming up with a clear, integrated plan to give effect to this domestic desire despite years of studying the costs and benefits.

Third, we would not be in our present carbon price position if a relative handful of voters in a half dozen federal seats had cast their ballots differently in 2010.

If they had supported Labor, Julia Gillard would have stuck with her pre-election promise on carbon taxation.

If they had supported the Liberals, we would be on a different road, although it is unclear just in what direction.

Either way, a carbon price – which regulators are estimating will add just over 8 per cent to electricity bills in its initial stages – would not be a current issue but the rising cost of power would still be of concern.

Fourth, regardless of who won the 2010 election, we would be pursuing a mandatory renewable energy target intended to deliver a fifth of all electricity consumed in 2020 from zero emission sources, also adding to costs but not to the extent some claim.

It is bipartisan policy.

Fifth, because most Australian are affluent enough to afford to pursue air-conditioned comfort, we have an ongoing problem of peak power demand that is adding billions to electricity infrastructure costs and flowing back in to end-user prices.

Handwringing by policymakers is not an adequate response.

Sixth, because state politicians played games with residential tariffs over more than a decade and regulators went along for the ride, we have a substantial problem with aged network assets and cannot sustain energy security unless we replace a kit that is 30 to 50 years old, adding to the power bill shocks.

The same state pollies also pushed up power reliability standards, apparently oblivious to the cost implications.

Seventh, we have proved unable to come to terms with a strategy for sustaining manufacturing in Australia, despite the sector directly employing a million people, and are now wrestling with a slew of awkward employment problems that are a product of national and international factors, none of them related to climate policies.

Meanwhile, out of political necessity, the Gillard government is adding to manufacturers’ costs and reducing their trading prospects with a carbon price and uncertainties about how energy policy may develop.

Eighth, because the deity has a sense of humour, all these chickens are coming home to roost just as we have to confront higher domestic wholesale prices for coal and gas.

Why? Because supply contracts are running out.

Ninth and last (for the moment; there are plenty of other issues that could be dragged in), although continuing to rely mostly on relatively cheap coal-fired power is not a politically viable option in Australia, and therefore new coal plants are not "bankable” with money lenders, we have so far failed to articulate a clear-cut, affordable alternative generation approach.

The most obvious one, given the circumstances, is to rely on the large gas resources that have become available on the east coast, but we are mired in disputes over land use, with unhappy rural communities sooled on by radical environmental agitators with their own agendas.

It is rather too easy to land this sea of troubles solely on Labor’s shores, and to blame it on Julia Gillard in particular, but we have actually missed the boat at important times thrice in a quarter century.

The first time was with the "Energy 2000” exercise promoted by Gareth Evans in the late 1980s – and rendered useless because the bureaucracy persuaded the Hawke government to cut and run from consideration of greenhouse gas issues – and the second was when the Howard government essayed an energy white paper in 2003-04 and then failed to come up with an effective way forward.

The third slip is down to Kevin Rudd’s regime. It is obvious from the national energy resource assessment published in March 2010 that Rudd’s government had all the hard yards travelled on the road to an energy white paper.

His inefficient and sometimes downright peculiar way of governance meant that the crucial policy statement to go on top of the assessment didn’t happen.

The present white paper process is a catch-up exercise and is handicapped by the inevitable mess that has resulted from the lack of strong strategic planning over at least the past eight to 10 years.

It is caught up in a troublesome cost of living environment for many Australian consumers at a time when the global economic stars are misaligned, the situation is driving up our dollar’s value and international negotiators on carbon abatement have comprehensively lost their way, no matter the spin coming out of the Durban Indaba a year ago.

The immediate domestic energy challenge for our policymakers is (a) to ensure supply security – the community will cope with most things but not the lights going out, (b) to properly explain the inescapable energy price pressures and to reassure consumers that, while the era of cheap energy is gone, strenuous efforts are being made to ensure the market is efficient, and (c) to sort out the mishmash of abatement policies to deliver not only the most viable low-emission supply options for our time but also to help drive energy consumption efficiency while taking some hard-nosed decisions on which future power technologies are worth meaningful taxpayer support for the longer term.

Blind Frederick can tell Australians where electricity production is heading over the next quarter century: roughly 70 per cent of power will come from fossil fuels in 2035 and 30 per cent from renewable energy (including our long-built hydro-electric systems).

This the considered view of not just the Bureau of Resources and Energy Economics but both the leading consultancies hired by the Gillard government for the "clean energy future” exercise.

The biggest single decision a federal government could take in this space in the next three to five years is whether, despite all its baggage, Australia should finally embrace nuclear energy in some form.

John Howard flirted with the idea, but delayed too long in taking it up seriously.

Rudd and Gillard have not had the political balls to pursue the debate.

If we are, finally and definitely not going down a nuclear path, then we had better get very serious about which low and no emission baseload power sources we want to pursue.

The recent Grattan Institute report on options highlights the questions that then need answering.

Pare away the "clean energy future” spin and the (apparently doomed) Gillard government thinks the answer may lie in major use of carbon capture and storage for coal and gas power stations by 2050 – but its successor can’t allow policy to continue to drift.

Apart from anything else, we may get to 2025 and find that we must have a much harder go at carbon abatement.

As for the warmists and deniers, they should feel free to carry on shouting at each other – but the rest of us need to get out of the woods as soon as possible.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.


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