Australian politics quietly reaches a truce in the climate wars

Hang out the bunting. Release the doves. Australia’s climate policy wars may finally be drawing to a close as the major parties flirt towards a more bipartisan approach to climate and energy policy.
  1. Hang out the bunting. Release the doves. Australia’s climate policy wars may finally be drawing to a close as the major parties flirt towards a more bipartisan approach to climate and energy policy.

    True consensus will come at a price, or rather, the absence of one. Pricing emissions is on the way out and spending is in. Green jobs for everyone, multibillion-dollar handouts and a punters’ confidence in picking technology winners. Why didn’t we think of this before?

    Since taking over as Opposition Leader Anthony Albanese has been quietly moonwalking away from Labor’s bruising odyssey on carbon pricing, launched 13 years ago by Kevin Rudd as the solution to “the great moral challenge of our generation”.

    At the time carbon pricing seemed like an idea whose time had come. The Howard government had begun its belated rear-guard action on emissions trading, the European Union had launched a cap-and-trade scheme and other developed economies seemed to be moving towards a similar policy model.

    Limiting greenhouse emissions and trading the right to pollute was, and is still, considered by economists as the most efficient, lowest cost way to tackle climate change. It keeps governments away from picking winners and lets business and markets solve the problem.

    As Rudd and successive Labor leaders soon discovered, carbon pricing is also politically vulnerable and challenging to apply in an open, trade-exposed economy like Australia without substantial global commitment to shared pricing systems.

    Any sense of global climate co-operation was obliterated by the global financial crisis in 2008 and has not returned. Carbon tariffs are now more likely in the retreat from free trade and open borders.

    Labor nevertheless persisted with carbon pricing for more than a decade, but it took its political toll: never ambitious enough for the inner city, a perceived threat to key parts of regional Australia, painted as globally out of step and economically self-harming by its opponents.

    By contrast a much happier political experience for Labor has been the Renewable Energy Target, which didn’t directly try to price or curtail any activity, just helped build $20 billion worth of clean and popular electricity generation projects.

    With this in mind at his recent National Press Club speech, Albanese offered the hand of bipartisan agreement on a new energy investment framework – some sort of RET 2.0 – where we spend our way out of climate change, like it was an atmospheric recession.

    This is both more populist and more aligned with the Coalition, which is demonstrably relaxed about letting high emissions assets hang around for as long as they need to, whether it’s a coal-fired power station or a plumbers’ ute.

    The Morrison government’s narrative on climate change is future-centric, relying on new technologies to solve the problem.

    This has evolved into a growing library of technology road maps backed by billion-dollar funding and a healthy dose of optimism. Emissions reduction is now a purely voluntary affair, a personal matter between a company and its shareholders.

    Inventing our way out of a tight spot sounds exciting and clever, part James Bond, part Harry Potter. It veneers over the risk of failure, but at least it does obliquely address the biggest barrier to date in the underwhelming global response to climate change: the lack of industrial scale alternatives to high emissions processes.

    Despite two decades of global campaigning, policy debates and technology funding, global emissions have increased 43 per cent since 2000, and coal consumption has increased by 60 per cent.

    The biggest success over the past decade has been falling emissions intensity in Europe and the US mainly because cheap, lower emissions gas has replaced coal.

    The geopolitical centre of coal has simply moved from the Atlantic to Asia. China, India and other Asian economies have been building new coal power stations faster than the developed world can close them.

    That’s not because they don’t care about climate change, but because they prioritise development. Coal is cheap and reliable, still the go-to technology to drag millions out of poverty using the well proven formula of industrial scale electricity and cheap labour.

    Nuclear remains prohibitively expensive. Renewables have become cheap and can displace emissions at lower levels, but their intermittency means they are functionally still dependent on the generators they seek to replace.

    Perhaps the most useful contribution Australia can make to climate change is to continue the journey of developing a renewables-based electricity system that we inadvertently started a decade ago.

    Progressing our accidental experiment of making big renewables work will require careful redesign of electricity markets, and sometimes unpopular decisions that increase costs and constrain popular technologies, like rooftop solar PV. It will be technically challenging and not without price and reliability risks. It will require leadership.

    It could use some. Currently we are doing this by default, not government policy. The transformation is being led and managed by relevant agencies out of necessity rather than political design. Yet it is probably the most useful climate policy Australia could have right now.

    Source: Financial Review