ACCC chooses climate over competition for first time in landmark Origin ruling

For the first in Australian corporate regulatory history, climate concerns have triumphed over competition concerns.

The Australian Competition and Consumer Commission’s decision to green light Brookfield’s proposed purchase of Origin Energy’s utility business – part of an $18.7 billion takeover – has turned out to be a landmark ruling.

According to the ACCC, it is the first time that climate change or environmental benefits have been a major factor in the public benefit analysis for a merger ruling in Australia. Some lawyers believe it might be the first time in the world.

In the case of Brookfield, the world’s biggest investor with more than $1.33 trillion under management, and its proposed takeover of Origin’s utility business – the biggest in Australia – it appears that climate change and emissions reduction was the decisive factor.

The ACCC said it had serious concerns about Brookfield’s 45 per cent stake in transmission company AusNet, which operates in Victoria, and which it said could be used to slow down or impede projects from competing renewable energy developers.

But the ACCC was won over by Brookfield’s clear intention to build 13.7GW of new wind, solar and storage over the coming decade, more than three times the amount planned by Origin itself.

Even though the ACCC doubts that Brookfield will be actually able to deliver on that number, because of the delays and bottlenecks on Australia’s main grid, it believes it will still build more than would otherwise be the case, and this would deliver price and emissions benefits to the community.

“The ACCC concluded that an accelerated build-out of Origin’s renewable energy generation would be a material benefit to the Australian public,” ACCC chair Gina Cass-Gottlieb said in her statement.

“An accelerated build-out by Origin will assist in lowering Australia’s emissions by replacing some fossil fuel generation earlier than would occur without the proposed acquisition. The ACCC considers that a reduction in greenhouse gas emissions is a public benefit of considerable weight.”

The ACCC chair flagged her intentions on this issue earlier this year, when she suggested that climate change would play a more prominent role on major decisions.

“Steps to decarbonise and develop market-based responses to climate change are rapidly emerging. As an economic regulator, this impacts many areas of the ACCC’s work,” she said in a speech to the National Press Club in April.

“We have a Taskforce within the ACCC to provide expert input on issues related to sustainability across all the ACCC’s functions, and to help ensure competition and consumer protection issues are front of mind in sustainability-related policy and business decision making.”

An ACCC spokesperson told RenewEconomy later that environmental issues had not been significant factors in previous merger authorisations “just because of the nature of the mergers put before us,” and the nature of the associated public benefit arguments raised by the applicants.

It also comes as state and federal ministers put environment into the country’s National Electricity Objective, which governs regulatory and policy matters within the electricity grid – although it does not directly impact the Competition and Consumer Act.

Environment had been deliberately cut out of the NEO by the Howard government in the last minute before the rules of the then new National Electricity Market were finalised in the late 1990s.

Since then, no consideration was given to environmental or climate benefits in any major decision, effectively hamstringing major investments in transmission lines and renewable projects, and favouring fossil fuel solutions rather than green energy and storage.

See: Regulatory madness promotes dirty diesel over renewable mini grid at Broken Hill