Business gives up on Coalition, turns to Labor and states on energy, climate

Here’s the most damning assessment of the Coalition’s energy and climate policy, such as it remains after the crucifixion of Malcolm Turnbull and the elevation of conservatives Scott Morrison as prime minister and Angus Taylor as energy minister:

Business has all but given up. There is now no expectation of any meaningful moves on policy from the Coalition government between now and the next election, which must be held by the end of May next year.

The Coalition government, after five years in power, has stopped pretending to anyone in the local market – to domestic and international investors, to business, and to consumers – that it intends to do anything about climate change, or get real about energy.

Business is horrified. Rightfully so, even if it ought to put up one hand as an admission of shared responsibility, given its role in killing the carbon price and fighting other measures like energy efficiency, renewables, and crucial changes to market rules such as the 5-minute settlement period.

But here we are, and an advisor to one of the most prominent business lobby groups admitted to RenewEconomy late last week the unthinkable:

“There is no longer any point engaging with the Coalition on climate and energy policy. ” Instead, the business lobby now turns to the states, and to federal Labor, which proposes a 45 per cent cut in emissions by 2030, and a 50 per cent renewable energy target. Individual states, like Queensland and Victoria, have similar targets.

Business now understands what the Coalition refuses to admit – that the way to achieve a durable lowering of prices is by embracing renewable energy rather than fighting it, or, more absurdly, trying to engineer the construction of a new coal-fired generator.

There is even some hope that Australian states could take a leaf out of the US playbook, where individual states have created regional markets and agreements in the absence of any serious initiatives.

That means, despite everything, that the National Energy Guarantee is not quite dead.

Buried in its present form, yes, but there are discussions about including some of its more attractive aspects – such as locking in a mechanism into the National Electricity Rules, to allow for any federal moves to be more enduring. And more Abbott proof. Even NSW and South Australia, both Liberal governments, appear amenable to this thinking.

That’s on the domestic front. In the international arena, Australia’s pretense on climate is maintained, out of necessity, because to do otherwise would have significant repercussions, both in Australia’s own neighbourhood and in the broader world.

This week, new foreign minister Marise Payne (but not prime minister Morrison) travels to Nauru – where, away from the gaze of media other than News Ltd, Australia will come under intense pressure from Pacific states to finally Do Something on climate change.

This demand has existed for years. But, of course, under this Coalition government, it won’t be met.

Payne has and will utter the empty phrase that climate change and its impact on Pacific islands “is a top priority” for Australia. It will be harder for her to explain, in Nauru, why then after five years in power the Coalition has no emissions reduction policy in place, and no strategy to meet its weak down-payment to the Paris climate treaty.

In Bangkok, another round of meetings to try to finalise the rules around the Paris climate treaty is underway. Australia has not quite reached the pariah status it enjoyed and boasted of under the Howard and Abbott governments, but it’s not far short.

Indeed, the past few weeks are about as dramatic on climate and energy policy as they were back in 2013, when Tony Abbott seized power and immediately threw policy grenades at the UN climate process.

Australia, in Bangkok, will have only a technical negotiating team led by Australia’s ambassador for the environment, Patrick Suckling. But its every move will be carefully scrutinised by other negotiators, and observers.

Also watching carefully is the EU. Indeed, it seems clear that the only thing holding Morrison back from following Donald Trump out of the Paris accord is the realisation that this could do serious damage to Australia’s trade position, particularly as it seeks to negotiate new free trade deals with the EU.

As Climate Change News reported last week, Australia and the EU had some €70 billion ($A112 billion) in bilateral trade in 2017 and negotiations on boosting that through a free trade agreement will depend on Australia adhering to the Paris Agreement.

In the near term, that means not dropping out of the treaty, despite the demands of the Far Right in the media and the Coalition.

Over the medium term, it will mean actually meeting its targets of 26-28 per cent cut in emissions by 2030, and more likely lifting that ambition to reflect the Paris goal of keeping average temperature rises “well below” 2°C, and hopefully capped at 1.5°C.

When asked how Australia’s new approach to climate policy might affect the ongoing talks, a Commission spokesperson told EURACTIV that “it would be difficult to imagine concluding a broad trade agreement without an ambitious chapter on trade and sustainable development”.

The biggest damage of all, of course, comes from the domestic market, where the Coalition simply refuses to seize the opportunities of Australia’s enormous wealth in wind and solar; and how to use this to not just decarbonise its grid and export its expertise, but to export cheap, green power.

Over the past month, the government has been presented with reports from the CSIRO, chief scientist Alan Finkel and the Australian Renewable Energy Agency about the immense prospects for a renewable-based hydrogen export industry.

Just imagine, the local grid at near 100 per cent renewables, aided by the long-term storage possibilities from hydrogen and its various and vast arrays of wind and solar creating renewable-based exports of clean energy to the hungry economies of east Asia that have no such domestic opportunities.

The states have been very enthusiastic and have asked Finkel to do more work on a strategic plan.

Ditto their enthusiasm for the Australian Energy Market Operator’s Integrated System Plan, which proposes a 20-year blueprint on how Australia’s grid will deal with business as usual, or higher emission reduction targets.

In either case, Australia is heading close enough to the 50 per cent renewable energy target touted by labor for 2030, and repeatedly demonised as crazy and irresponsible by the Coalition. No wonder the Coalition had nothing to say about the ISP nor the renewable hydrogen reports.

As for the Coalition’s own agenda, it is focused on lowering prices while at the same time ignoring the very technologies that can achieve that over the long term.

And the renewable energy industry sighs in frustration, highlighted by Marco Stella’s monthly renewable energy market report, which shows renewable energy certificates gaining ground, and small-scale solar certificates falling.

But as the Clean Energy Council, the Smart Energy Council and others have warned, international investors are nervous, and are prepared to re-assess their commitment to Australia if no sensible policy emerges after the next election.

Something, though, is afoot.

Environment Victoria’s Erwin Jackson, a veteran policy observer, notes that everyone is waiting for that next election. “If the Coalition is saying that emissions don’t matter in the electricity sector, they don’t have a policy.

“Until they come back to the real world, it is pretty hard to see how anything sensible is going to happen, at least until the next election.”

But of the states digging up the NEG, Jackson says: “The idea has been floating around for a state-based NEG. People are thinking about the principles, and one of core ones remain durability.” That is what makes changing the rules of the market attractive in this case. It is impervious to Abbott and whoever succeeds in his role.

Meantime, most of what else the Coalition is promising won’t come easy. The proposed price caps for consumers may not come in because it is going to take some work to determine what is a sensible cap – one that protects those too lazy or unable to pursue a better deal, or one that eliminates competition?

The idea of working on “underwriting” new dispatchable generation is no less complicated – and while Taylor insists that the Coalition is working on it “expeditiously”, the fact is that this is also incredibly complex, and requires commercial agreements to be put in place before the government can step in.

Labor, meanwhile, is moving forward with its own proposed price caps, gas reservation policy, and of course its targeted emissions cuts and renewable energy share. In the end, presuming that states and the corporate sector do the obvious and continue their uptake of renewables, it might not actually have to do much.

But at least having a government that states the bleeding obvious is a lot better than one that tries to deny it.