A new analysis on the state of Australia’s low-carbon investment market has called on the federal Coalition to cut down on the climate double-speak – a well-honed feature of the Abbott-Turnbull administration that is currently proving a much bigger hindrance to local market confidence than weak, short-sighted policy.
As we noted earlier this month, despite a decision on the RET and other signs of low-carbon policy progress, it is arguable that the current brand of Coalition climate and renewables discombobulation is worse than it was on Tony Abbott’s watch, when the message was clear and unequivocal.
According to leading energy and emissions market analysts RepuTex, while federal policy uncertainty remains an “Achilles heel” for the Coalition, “government rhetoric – not policy design – (is) the key impediment to local market confidence.”
And their report, published on Tuesday, concludes that even if current policy remained the same, “the government may be able to restore certainty to the market by simply changing its rhetoric and more clearly communicating its existing policy to the market.”
To do this, RepuTex recommends the Turnbull government gets real about its Direct Action Plan, and particularly the Safeguard Mechanism, and sells it for what it is – a ‘soft start’; “a fiscally responsible scheme, whereby the flexibility provided to companies (as currently designed) may be utilised to prepare high emitting companies for future compliance obligations.”
This sort of ‘under promise, over deliver’ approach would be well suited to the current Australian policy environment, says RepuTex, and comparable to markets like Europe, eastern US, California and China, where initial policy was intentionally set with low compliance obligations to provide companies with time to “learn by doing” ahead of the future scale-up of policy.
“Given Australia is able to increase its emissions and still meet its Kyoto commitment, we believe that a ‘soft start’ scheme is far more befitting the current political and economic climate,” the report says.
But taking this approach – “whereby the Coalition may be able to maintain its current policy, yet simply provide greater transparency on the long-term direction of its Safeguard Mechanism” – will require some straight talk.
Happily, it also offers some advice on how this might be done.
“This may be done by communicating ‘market phases’ that more accurately match the design of its existing policy, as outlined within this Market Update,” it says.
“Moreover, this may buy time for the government to defer the detail of its policy, such as rules, trading, ambition, etc, to a later consultation process (such as the policy review), while enabling it to immediately restore confidence in the market, without any change to its policy.”
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