In the blink of an eye we are confronted by a national energy pricing and supply crisis. This is the cost of virtue signalling — that propensity for those on the political left, including moderates in the Liberal Party, to advocate policies aimed more at demonstrating their moral superiority than delivering practical results.
This nation’s most pressing economic challenge, it is also the most volatile political dilemma that threatens to derail Malcolm Turnbull’s career for a second time. (It cost him the Liberal leadership in 2009.) Climate and energy are set to define the next decade of national affairs just as they have plagued us since 2007.
To comprehend the politics we need a helicopter view; to examine first principles and the true aims of the policies. Far too much of the debate is predicated on gestures rather than results.
We are an energy-rich nation. Last year we exported 388 million tonnes of coal (valued at $35 billion) to supply affordable and reliable energy to countries such as Japan, China, South Korea and India. Our liquefied natural gas exports are doubling from 30 million tonnes a couple of years ago to almost 80 million tonnes (valued at $42bn) by 2019.
Australia also remains one of the largest exporters of uranium (nuclear energy is the silver bullet if we ever get serious about emissions) and, after a price and volume slump, trade will rebound to values of more than $1.2bn during the next few years.
While we happily export our energy advantage, we have deliberately sacrificed it at home. Households are paying some of the highest electricity prices in the world and manufacturing industries have been closing or downscaling because of cost pressures created in part by rapidly rising power prices. Energy bills are also creating commercial hardship for struggling retailers as well as hospitality and other sectors.
The largest single factor in the power crisis is the renewable energy target demanding 23 per cent of electricity be supplied by renewables, which are subsidised by consumers. When the renewables (mainly wind turbines) supply power they can do so at zero cost, thereby undercutting the viability of baseload generators and hastening their demise. The trouble is renewable energy can’t supply all our needs at any time and, crucially, is intermittent and unreliable. So we still need all of the baseload and peaking generation.
Under this formula we must either be caught short of supply or need to almost double our investment in energy so every megawatt of renewable energy is backed up by storage or thermal generation.
And just when we need more rapid-response gas generation to back up wind energy we have a gas supply/price issue courtesy of long-term export contracts and state restrictions on exploration and exploitation. What a mess.
What we don’t ever hear our major party politicians ask is why we are doing this to ourselves. We might also expect this would be a line of inquiry for media in fearless pursuit of their audiences’ interests. But no; incurious acceptance of the imperative for emissions reductions is universal in the public broadcasters and love media.
News Corp papers and Sky News are the only mainstream media likely to offer a plurality of views. Journalists who sail with this zeitgeist will justify their position by pointing to the political consensus on the emissions reductions targets set in Paris. But public and media debate should not be about accommodating convenient bipartisan compromise; it should be about reality and the public interest.
If the justification for our self-imposed energy crisis is saving the planet, then any reference to the facts will expose the futility. Australia’s carbon emissions make up about 1.4 per cent of global emissions and we are looking to reduce them by 26 to 28 per cent by 2030. Simultaneously, emissions are rising elsewhere by quantities that dwarf our total emissions, let alone our inconsequential reductions.
As this newspaper reported this week, China has 299 coal-fired power stations under construction and India 132. Indonesia, Japan, Vietnam, South Korea, The Philippines, South Africa and other nations also are expanding coal-fired generation so that an extra 621 plants are under way. Yet we disrupt our economy, surrender a natural economic advantage, shed jobs and reduce our standard of living to phase out a handful of plants.
On the first principle of whether our efforts do any environmental good — no matter the urgency or otherwise of climate action — the answer is our efforts are pointless. So we are then left with the diplomatic commitment to Paris that both major parties support.
Astonishingly, less than a day after Donald Trump won the US election promising to abandon Paris, Malcolm Turnbull announced Australia’s ratification. The Prime Minister thumbed his nose at the obvious opportunity to hold out, see if the US withdrew (as it has) and perhaps forestall our own commitment.
The accord is dramatically weakened without the world’s largest economy, especially given other powerhouses such as China and India will continue to increase their emissions. (Ironically, perhaps no country is making a greater contribution to emissions reductions than the US through its innovation in areas such as fracking and battery technology.)
The Paris Agreement is not binding, so we don’t need to meet our targets anyway. Yet the political-media class seems viscerally locked onto them.
Turnbull talks about the energy “trilemma” of affordability, reliability and emissions reductions. But even the Finkel review noted these objectives are at odds with each other.
Chief Scientist Alan Finkel tried to prescribe “policies that simultaneously provide a high level of energy security and reliability, universal access to affordable energy services, and reduced emissions. This is easier said than done. There is a tension between these three objectives.”
Neither Turnbull nor Finkel or Labor are willing to compromise on the third leg of the trilemma. Their starting point is emissions reductions; and they accept that reliability and affordability can be compromised to meet the target.
Finkel says: “The uncertain and changing direction of emissions reduction policy for the electricity sector has compromised the investment environment in the NEM.” But his solution — and that of the Coalition and Labor so far — is to try to formulate a settled, preferably bipartisan, emissions reductions scheme.
So the aim is to provide investment certainty even if it locks in higher electricity prices. The obvious alternative of relegating emissions reduction aims in favour of cheap, reliable power is simply not considered, even though we know it would have no discernible impact on the global environment. (We can always run other carbon abatement and energy efficiency schemes if we feel the need.)
The only pragmatic argument against scrapping the emissions reduction imperative is that it, too, may fail to break the investment strike because potential investors will still fear a future carbon pricing scheme. The political temptation is to lock in expensive and debilitating long-term policy solely to deliver the certitude of bipartisanship. This is the antithesis of seeking bipartisanship in the national interest.
All the federal government has succeeded in doing so far is taking ownership of the energy mess from the states. The Coalition will not admit that the RET — which it has backed, along with Labor, out of political convenience — is the heart of the problem.
On present settings the government is doomed to fail at the next election and then we will see a Labor government lock in permanently higher energy costs through a carbon pricing scheme. Perhaps the only salvation for the Coalition — and the economy — would be to call time on this green folly in the interests of protecting consumers, boosting jobs and rebooting a competitive advantage.
It would be a risky gambit contested by the rent-seekers in the energy sector. But it would be a fight for the national interest. The question is whether Turnbull, who has always claimed to be as green as Labor, can find it within himself to make the case.