NEG: A Bipartisan Agreement To Disagree?

Fairfax - Oliver Yates*

Energy infrastructure is a long-term investment.

Energy investment is a long-term game. Energy infrastructure lasts 20, 30, 40 years. It doesn’t matter whether you’re talking about powerlines, fossil power stations or solar farms.
So certainty about government policy is absolutely critical.
When you’re investing in the energy sector you need to know what the targets are going to be for reducing greenhouse gas emissions.
The Australian government’s National Energy Guarantee (NEG), as revised late last week, is making good progress but currently still could lock in uncertainty unless both major parties act in our national interest.
At the moment, we have a situation where the government is only backing a 26-28 per cent  reduction in electricity emissions, whilst the opposition is saying it would immediately increase it to a 45 per cent reduction in government.
Nothing could be worse for Australia than an agreement to disagree. We must agree to have national policy consistent with the obligation we have to fellow planetary residents, to keep global warming at less than 2 degrees at the lowest economic cost possible.
There have been many reviews of how we address the transition to a lower emission future. None have suggested an emission reduction profile in the electricity sector as weak as the 26-28 per cent proposed by the Liberals with emissions from coal stations expected out until 2070.

Oliver Yates says the federal government needs to act with economic logic by supporting stronger emissions reductions in the electricity sector.

The Climate Change Authority, Climate Council, ClimateWorks and others have demonstrated that the electricity sector is the easiest and cheapest sector of the economy in which to achieve emissions reductions and therefore it must do much more than 26-28 per cent by 2030 and that all coal stations must close before 2050.
If we are only cutting emissions by 26-28 per cent in the electricity sector, we need to do much heavier lifting in other sectors of the economy to meet our international climate change commitments.
Not only would that be much more expensive for all consumers, but also the government just does not have policies in place to reduce emissions in other sectors. That means there is no way Australia could meet its Paris climate change targets, and if we could it would be at a higher cost to the economy.
The Turnbull government needs to act with economic logic by supporting stronger emissions reductions in the electricity sector and develop real policies for reducing emissions in other sectors of the economy. That means reducing emissions faster in the cheapest sector.
The ball is in the Turnbull government’s court to be economically rational and support stronger emissions reductions in the electricity sector whilst in government. That will be the trigger for the federal opposition and the state governments to move towards a bipartisan position.

*Oliver Yates is a former chief executive of the Clean Energy Finance Corp, and is now a board member of the Smart Energy Council.

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