Coalition in the dark on energy
In a Thursday video for the Wentworth by-election, Malcolm Turnbull’s son Alex has denounced “extremists on the hard Right” who, he says, have taken over the Liberal Party.
The younger Turnbull called on voters in his dad’s old seat to register a protest about the party’s direction, and deliver a message on climate change. Don’t vote Liberal, he said.
By the way — for the conspiracy theorists — Alex Turnbull didn’t give prior notice to his father, who is a strong supporter of Liberal candidate Dave Sharma.
Apart from the leadership coup, Alex Turnbull, a Singapore-based investment manager, highlighted in his video energy policy to make his point about the hard Right’s “crazy agenda”.
“As an investor in energy, I’ve seen that in particular there’s no way coal can compete any more. Renewables have gotten too cheap, firming costs are reasonable, and really there’s no trade-off any more between lowering your power bills and reducing emissions. And yet still some would like to prosecute a culture war over this issue,” he said.
Kerry Schott, head of the Energy Security Board, is coming from a rather different place but this week she delivered an equally blunt message about the politics of energy, describing “the general state of affairs right now as anarchy”.
Anyone with an eye for decent policy, for getting some order into an area that’s long been the plaything of chaotic hyper-partisanship, would be there with Schott. As for investors in the sector, they’re in despair. Scott Morrison stepped into the prime ministership amid the smouldering ruins of the National Energy Guarantee — which he quickly declared dead — and the Liberal right wingers’ scepticism about emissions reduction targets and hostility to the Paris climate agreement.
His approach has been to load all the emphasis on to price, with Angus Taylor “the minister for getting electricity prices down”. As for emissions, the 26 per cent to 28 per cent reduction target has stayed, but it is played down, with Morrison’s line being that it will be reached “in a canter”.
Morrison has, however, fended off the Right’s persistent calls for Australia to exit the Paris climate agreement, arguing firstly that Australia should stick to its commitments and secondly that climate is an important issue for Pacific nations, which are in turn important to us strategically.
More broadly though, Morrison avoids dwelling on the significance of climate change. To deal with energy in all its aspects — policy and politics — a government requires a linked, multi-pronged approach that manages, at the most efficient price, the inevitable transition to cleaner energy.
For business, the policy needs to set an investment framework providing predictability; for consumers it has to constrain prices; for the general citizenry, it should pay regard to their concerns about global warming. The Morrison Government isn’t doing much on the first or the third requirement, and is likely, when the election comes around, to have fallen short of significant progress on the second.
After the collapse of the NEG there is no certainty for investors. According to one independent source close to the industry, business has given up on this government. Another source says business is trying to work out its own way ahead.
Morrison reacted with disdain yesterday. “If the big businesses want to go out there and play footsie with the Labor Party, well, that’s often what they do.”
Business is more tuned into, and willing to talk about, the emissions challenge and climate change than the Government is. For the Government, going there takes it down the alley of internal ideological conflict.
When the Intergovernmental Panel on Climate Change’s report came out this week, the coalition was unimpressed by its call for the international community to phase out coal by mid-century in order to contain the temperature rise.
After all, the Government is still under internal pressure to underpin investment in new coal-fired power, if investors can be found.
In contrast, Alex Turnbull said the IPCC report “frankly was terrifying”.
Obviously the Government is correct when it judges voters are focused on power prices.
But it errs in its apparent belief that the public don’t care much about emissions, and it under-estimates people’s commitment to renewables. Its views are out of kilter with the polling evidence. The Government’s near-total focus on price translates into what it characterises as a “big stick” approach towards companies.
But the biggest stick can only do so much, and prices will still be high when people vote.
While measures at the consumer end have an essential place, the core of the issue is further back in the chain — getting the proper settings to encourage investment. That is what the Government can’t achieve, because of its own divisions. As on other fronts, the coalition has handed an advantage to Labor on energy and climate policy.
The ALP has a controversially ambitious target for emissions reductions (45 per cent reduction on 2005 levels by 2030), but the Government’s ability to run a scare campaign about the implications for price and reliability is diminished by its own gaping policy hole.
Labor is looking to pick up the discarded NEG. It is currently grappling with the question of how, if it brought in a NEG, it could maximise certainly for investors in a political situation where a coalition opposition could play “the politics of repeal” — as Tony Abbott did when the then ALP government introduced its carbon policy. After the Government’s shambles, Labor has a reasonable story to tell investors. But the story those investors really wanted to hear was a bipartisan one, and that won’t be delivered.
Illustration: Don Lindsay