The Climate Change Authority may well spare the Coalition some blushes by electing to deliver its report on emission targets and trajectories after the federal election, but it can’t prevent the Coalition talking nonsense about climate policies.
The CCA on Monday said its review on greenhouse gas emissions gaps would publish an “issues paper” in April, but would not deliver its draft conclusions until October, a month after the September 14 poll. The final report is due in February next year, if the CCA has not already been disbanded by the Coalition, as it promises to do.
The CCA review is commissioned to look at the latest science and international action, as well as Australia’s 5 per cent emissions reduction target, and whether or not it should be increased. It will propose a series of trajectories from 2015-16 to 2019-20 and look at the costs and benefits of different cap settings. It will also have its long-term target of an 80 per cent reduction by 2050 in mind when it does that.
Given the state of the science, it is almost inconceivable that the CCA would reach any other conclusion than that Australia’s emissions reduction targets need to be increased. The main question will be to what extent, and how this fits in with international action.
This, though, puts the conservative Liberal-National Party Coalition, the assumed government-in-waiting according to the polls, in an impossible position, because its “direct action” plan is designed only to meet a 5 per cent target, and is considered by most experts to be ill-suited for even that goal, let alone a more ambitious one.
Still, the Coalition’s climate change spokesman Greg Hunt was insisting on Monday night that the Coalition would never favour a carbon price – even though it is recognised by just about any economist as the most efficient and cost-effective way of achieving ambitious targets.
Hunt used two pretty lousy examples to illustrate why. The first was his reference to President Barack Obama’s promise to take direct action if the US Congress did not act first. Hunt wants people to believe that it’s an endorsement of Direct Action, even though most recognise it as a threat by Obama to use the bluntest and least cost-effective instrument if party politics gets in the way of more sensible solution – such as the carbon price that Obama endorses.
As the Republican ex-Governor of California, Arnold Schwarzenegger, said on the weekend, the deadlock in Congress – where a carbon pricing bill that looks remarkably like Australia’s has just been presented, and is doomed to be rejected – was purely ideological, and he intimated it was likely the product of Tea Party extremism.
“I’m an optimist and very hopeful [Congress will agree action on climate change],” Schwarzenegger told a conference in Germany. “There are a lot of smart people in Washington, but it’s just getting over that hump in ideology,” he said.
Getting over that Tea-Party inspired ideological hump – which he highlighted here and here – appears too much for Hunt and his Coalition colleagues, however. He even insisted that China is “not going anywhere near” a carbon price, before it was pointed out that the country had around seven state- and city-wide pilot schemes under preparation. Well, Hunt said, he could “guarantee” there won’t be a nation-wide ‘energy and electricity tax’ – as Hunt likes to describe a carbon price – in China.
Hunt, meanwhile, continues to insist that demand for electricity is “inelastic”, meaning that demand won’t be impacted by higher prices, and imposing a carbon price merely adds to costs to consumers.
That may have been true in the past, says Deutsche Bank’s Tim Jordan, because there have been few substitutes for grid-based power. But Jordan says opportunities in rooftop solar and energy efficiency mean that households and commercial and industrial electricity consumers can invest to reduce their consumption of grid-based power.
And he says – and this graph below shows – that in recent years there has actually been a striking correlation between higher retail electricity prices (shown in dark blue on an inverted scale) and falling electricity demand (in light blue).
Jordan says that over the last five years, real retail electricity prices have risen by around 60 per cent, and demand has fallen by 6 per cent – although he might also have pointed out that demand is down almost 20 per cent below predictions of just a year or two ago.
“The elasticity of electricity demand is probably not constant: the rate of change in demand is likely to change with the price level. But data since 2007 suggests that with a lag, increases in retail electricity prices lead to lower demand for grid-based electricity,” Jordan said.