They didn’t make a big deal of it, but the Productivity Commission’s new five-year overview report, commissioned by the Federal Government, has recommended the introduction of a carbon price.
The productivity commission is of course an advisory body, and the Government has explicitly ruled out a price on carbon or anything that can even remotely be referred to as a tax. Like many other recommendations of the Government, this will be ignored.
Nevertheless, it is worth hearing what the Commission has to say. In a section in the report titled ‘Fixing the Energy mess’, it writes:
“Australian energy markets, particularly those in eastern Australia, are in a fragile state. While the statewide blackout in South Australia, on 28 September 2016, was initially caused by nature, the duration of the blackout brought issues about the security and stability of the national electricity grid to the fore.
“The estimated cost of the statewide blackout in South Australia was $367 million. With electricity and gas making up 2.5 percent of GDP, and being an essential input for all industries, the cost of failure to resolve the problems will only rise in the future.
“It is too difficult to put a price tag on getting energy policy right, in large part as the counterfactual — what would happen if we continue to try to muddle through without clarity on carbon pricing — is impossible to define. Nonetheless, the returns from the reforms outlined here would be worth many billions.
“Lack of clarity on emission reduction policies, increasing reliance on intermittent and variable renewable energy, moratoria on gas exploration and development, and the commencement of gas exports from the east coast, have all contributed to a system under pressure.
“The challenge is how to resolve these issues while maintaining an affordable, reliable and sustainable supply of energy going forward — dubbed the ‘energy trilemma’ by the recent Finkel Review.”
Then, the clincher. A recommendation that Australia should “stop the piecemeal and stop-start approach to emission reduction, and adopt a proper vehicle for reducing carbon emissions that puts a single effective price on carbon.”
The idea of a price on carbon is quite simple. The burning of carbon-based fuels increases greenhouse gas emissions, which impose cost on the broader community. When there is no price on carbon, this consumption is essentially subsidised.
The Government has announced the end of the comparatively modest subsidies given to renewable energy sources, while retaining the massive subsidies given to the carbon economy.
Last week the Conservative United Kingdom Government announced the introduction of a carbon price. But not only has Australia’s conservative party ruled it out, it actually repealed one already in existence.
On carbon pricing and renewable energy subsidies, Australia is going backwards. The country still has no clear energy policy, and while the Government dithers and appeases its troglodytic climate change deniers, a lack of investment caused by policy uncertainty continues to drive energy prices up.
Quizzed about the government’s new back-of-the-envelope National Energy Guarantee last week, Energy Minister Josh Frydenberg, like the Prime Minister, refused to guarantee prices would come down. He said he was very confident they would, but the Guarantee is no guarantee.
The Productivity Commission and many economists have recommended a price on carbon. The Government’s Chief Scientist has recommended a renewable energy target. The Government has overruled them both. Although it presided over the mess we now find ourselves in, is asking us to trust it.
There are none so blind as those that will not see.
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