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Tuesday, 2nd September 2014

COAL-FIRED POLICY

We usually try to avoid taking unambiguous positions in PoliticOz editorials. There are generally at least two legitimate sides to every story. But if there are two positions on the Abbott government's energy policy, only one of them aligns with the public interest. The other is rent-seeking of the first order.

The Coalition has consistently misrepresented the cost to energy consumers of the carbon pricing scheme and the renewable energy target (RET). It has asserted that these regulations, intended to transition Australia's economy toward a low-carbon future, are the main reason power bills have doubled over the past five years. But that's just not true. The real driver of power bill increases is another regulatory framework, one which provides an incentive for network companies (whose profits are tied to the fortunes of coal-fired power) to charge power consumers for the unnecessary "gold-plating" of grid infrastructure. Because its companies never invested in the renewables sector, the coal industry is now effectively in competition with the renewables industry. Abbott appointed noted climate-change skeptic Dick Warburton to head a largely unnecessary (because one had already been done) review into the RET. Warburton's report concludes that the RET represents regulatory failure because it does what it was designed to do – namely, drive business away from coal-fired power and toward renewables – and that this is somehow unfair. It's a conclusion that only makes sense from within the coal industry.

All this amounts to aggressive support for the incumbent coal industry, which earns profits by externalising most of its environmental and public health costs. The Warburton review also concludes that the renewables industry should get by without regulatory support, though that ignores the enormous subsidies which go toward coal power generation in the form of tax breaks and "compensation". Fascinatingly, as Peter Martin points out in The Age, the carbon-reduction scheme which would best satisfy the Warburton review's concerns about cost is none other than (wait for it) an emissions trading scheme based on a floating carbon price, which was to be Australia's policy next year before the government "axed the tax".

Russell Marks
Politicoz Editor

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