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Australian energy policy: getting the balance 'right'

By Geoff Carmody - posted Thursday, 15 June 2017


Two opportunities to improve our energy policy have emerged

On 1 June, Donald Trump announced he would pull the USA out of the non-legally binding 2015 Paris Agreement and seek a better deal for the USA. On 9 June, the Chief Scientist, Dr Alan Finkel, delivered his electricity review Report to Commonwealth and State governments.

These provide opportunities to reform Australia's unbalanced energy policies – if we want to. Can we use the Finkel Report to re-balance domestic policies, giving much greater weight to local matters we can control? Can we use Trump's decision to reconsider what sort of global agreement we should support?

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We can restore our own energy reliability and affordability – if we want to

The Finkel Report is generating strong debate. People are arguing about what it means, and what it should mean. The Report provides a framework. Politicians must agree on the detail and join up the dots.

We could use this framework to achieve a better balance between reliability, affordability and sustainability than the blackouts and soaring prices seen recently and in prospect – if we want to. But Alan Finkel can't force us to do so. That's the community's call. It will be too easy for our political leaders (sic?) to stay in their Tower of Babel, squabbling over detail and labels, driven by perceived short-term political advantage.

If they do – the signs are not good – more reliability/affordability crises will emerge. The 'Rome of the South' will continue burning, beset by blackouts and price hikes, as politicians fiddle the electorate.

For our incomes and jobs, we should seize opportunities afforded by the Finkel Report.

There are sensible proposals in the Report. Here are two examples:

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  • Requiring all new intermittent renewable energy investments to have matching back-up, however supplied, to ensure reliability, is a good idea. This will also put the true cost of intermittent renewable energy supply in better perspective. If we want reliability, it's nowhere near as cheap as some 'levelised' cost measures imply. Let's be up-front about that.
  • Having a 'technology-neutral' approach to emissions reductions (and other policy goals) helps affordability. With a level playing field, we can get closer to the most cost-effective sources of supply.

A big political fight about where the Finkel Report's Clean Energy Target (CET) subsidy thresholds are struck has started. Will any coal make the cut? The political disagreement on this issue could be a deal-killer.

Sadly, too, politicians will continue tippy-toeing around whether emissions reduction policies put a price on carbon. They all do, of course. There's no reward for transparency. There's a political price on it instead.

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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