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| Labor has promised 50% of electricity will come from renewable sources by 2050, but has left the detail for after the election.
Wind turbine image from www.shutterstock.com |
Labor has announced the
climate policy it will take to the federal election, including a return to carbon pricing under an emissions trading scheme.
The detailed policy includes multiple market-based mechanisms. Among
these are an emissions trading scheme, a domestic electricity
cap-and-trade scheme, and a mechanism to close brown coal power
stations. The package would also increase investment in renewable
energy, instigate a major review of the electricity sector, tighten
vehicle emissions standards and create a “trigger” to account for
climate change in land-clearing.
Climate policy is the football of Australian politics. So as the
election campaign ramps up, grab your popcorn and settle in for the
showdown.
World agrees on need for action
Politicians of almost all persuasions, as well as the
majority of scientists,
now agree that action needs to be taken on a global scale if the world
is to continue to enjoy the benefits of a stable climate.
The
Paris climate agreement sets out the long-term goal of limiting warming to well below 2℃ and if possible below 1.5℃. It needs to be
ratified by at least 55 countries and represent 55% of global greenhouse gas emissions.
To do this, these emissions must eventually reach zero (or be completely offset) by mid-century. This is currently
not matched by short- and medium-term pledges by countries to reduce emissions.
So while the Paris agreement was uplifting in terms of its
aspirations, it was less inspiring in terms of its practical execution.
What does good climate policy look like?
All countries need to develop strong climate policy to be able to
ratify the Paris agreement. This should be about pragmatic action, not
ideology. The huge challenge facing the world means that the action
taken needs to be strong and urgent.
In Australia, emissions from energy make up
75% and agriculture 15% of total greenhouse gas emissions, so climate policy should be primarily about reducing the combustion of fossil fuels.
As energy and agriculture are key to our economy, economists
generally agree the most efficient way to reduce carbon emissions is
through an emissions trading scheme (ETS) or a carbon tax.
Alongside strong financial incentives and disincentives for reducing
emissions, institutional support is needed to shepherd and adapt policy
to ensure it can be applied. This is not just a matter for government;
the private sector must be included and committed to both the policy and
their part in the pursuit of abatement.
Last but not least, the public needs to understand the problem and be
confident of the ability of policymakers to craft policy that will help
to resolve it.
In recent years, the game of political football over climate policy has intensified. Labor’s
carbon-pricing package lasted just two years before being axed and
replaced under the Coalition government. The Renewable Energy Target was introduced with bipartisan support, expanded under Labor, then
reduced under the Coalition.
Supporting institutions have similarly been created, restructured, defunded and dissolved.
Public support for climate policy, too, has waxed and waned from a
high level around 2007 – at the height of the droughts in Queensland and
New South Wales – to cynicism about the carbon tax and the perception
of its impact on electricity and industrial competitiveness to, more
recently, a
return to support for renewable energy and climate action.
How will Labor play the game?
Labor’s plan to resurrect an ETS is an attempt to return to a policy supported by economists, but with a tentative introduction.
Labor has announced that multiple market mechanisms will be
introduced. Phase one, to run from 2018-2020, includes a scheme for the
electricity sector that will simply cap the emissions of high carbon
emitters according to an industry benchmark and encourage generators to
trade with each other to meet their cap. This will aim to stop emissions
increasing to 2020, and make cuts after that.
This differs from the previous carbon tax in that initially there
will be little cost for electricity generators and therefore electricity
consumers. There will be greater pressure on emissions reductions after
2020. But if it is opened up to international schemes the cost of
emissions reductions will be in line with prices overseas, reducing
impacts on competitiveness.
Other large emitters will be part of a separate ETS, also with caps
on emissions but the ability to offset or trade internationally.
Phase two of the ETS will link the ETS with other international
emissions trading schemes. The detail on phase two for the electricity
sector is less clear. There is also a plan for a market mechanism to
close brown-coal-fired power stations.
While the Coalition’s Emissions Reduction Fund seeks to buy emission
reductions from agriculture and vegetation management out of tax income,
it ignores emissions reduction from electricity generation. This is an
important point of difference between the two policy approaches.
Beyond emissions trading
Labor also intends to prevent further land clearing in Queensland and
New South Wales. This may may well put Labor offside with the NSW
Coalition government, which is considering land-clearing laws. Land
clearing can add significantly to Australia’s greenhouse gas emissions,
so it is an important element of national climate policy.
As with all policy, though, the detail will define the ability of the Labor policy to deliver the emissions cuts required.
For now, we know only that Labor seeks to decrease emissions by 45%
and increase renewable energy to 50% of electricity generation by 2030.
Labor’s policy depends on how the party sells it to a public weary
and wary of climate policies after relentless campaigning against the
carbon tax by the Coalition during the last election. Labor is at pains
to point out that it would like to initiate dialogue with the Coalition
to gain consensus on climate policy.
Promisingly, it includes the necessary support and funding of
transition for trade-exposed industries (which are disproportionately
affected by carbon pricing), community power workers who may be
displaced from coal-fired power stations, and solar thermal generation.
Solar thermal generation is important for a large roll-out of
renewable energy because of its ability to stabilise the network. While
solar panels and wind power are affordable sources of energy, our demand
for electricity does not often match availability from solar panels and
wind power. For this reason we need electricity to be able to be stored
for use on dark, windless nights or oppressive, rainy days.
Hydroelectricity can do this job but Australia has a dry climate and
limited hydro resources. The hype around batteries is a little premature
in terms of both the cost of battery storage and its ability to
integrate with the electricity grid. So solar thermal is an important
element of a fleet with large levels of renewable energy.
The use of emissions trading with incentives for increasing renewable
energy is crucial for reducing emissions and shifting to cleaner forms
of energy. Without an ETS, investment in renewable energy is likely to
produce a disappointing reduction in emissions. So it is important that
both be rolled out together.
What about electricity prices? Phase one is unlikely to have a large
impact on electricity prices and the detail on phase two is too sketchy
to predict the impact on prices. It will however depend on how effective
the solar thermal funding is at securing baseload power, and the extent
to which Labor will be able to garner industry support for closing
brown coal power stations.
Ultimately, the success or failure of this policy gambit will depend
on whether Labor can calm the public’s nerves over their future power
bills.
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