How to get the best bang for your climate buck

Around the turn of this century, when global warming was still mostly a future threat rather than a present grim reality, it was common for people to debate whether it was real.

I recall reading something that accurately predicted the deniers’ playbook in a climate change version of the stages of grief. First they would deny it was happening. Then they would acknowledge it was real, but deny that humans had caused it or could do anything about it. Next they would appear to acknowledge the reality of anthropogenic climate change and the need to act, but ensure the debate became bogged down in the minutiae of what to do about it.

Global warming is now a present reality, not an abstract future threat.Credit: Getty Images

Deniers still exist, but for the most part, we are in stage three. A case in point is the fact that we just fought an election in which a major party was proposing with a straight face that we should start a nationally owned, domestic nuclear energy program mostly from scratch. Whatever you think of nuclear energy, nearly all experts agreed this would cost too much, be too slow and keep ageing coal-fired power plants going well past the point of viability.

There are still endless debates that we don’t need to have. No, electric vehicles will not “ruin your weekend”, as former prime minister Scott Morrison once said. Yes, wind turbines really are green. No, offshore wind farms don’t kill whales.

Then there is legitimate policy debate. Taxpayer money is not a magic pudding, so governments wanting to fund emissions reduction or climate adaptation need to consider how to get the best bang for their climate buck.

Climate Change and Energy Minister Chris Bowen at an energy conference in Melbourne last week.Credit: Scott Barbour

This is a concern in the growing world of climate philanthropy, too – naturally, most donors want to ensure their money makes a difference. The question of how to get the best value becomes one of effective altruism – the philosophy that charity dollars should be spent where they will have the most impact.

Climate philanthropists sometimes join giving circles such as Groundswell Giving or Effective Altruism Australia’s Environment Fund, which conduct rigorous research to determine where to direct donations for outsized impact. The recipients may be lesser known and far from home – such as Project InnerSpace, a US non-profit organisation focused on geothermal energy globally.

For governments, the decision of where to direct a climate budget is not made purely on climate grounds. Perhaps the most efficient way to reduce global greenhouse emissions is to pay to accelerate the shutdown of South Africa’s notoriously dirty coal industry. But that’s not going to fly for any Australian parliament because governments have a primary responsibility to their constituents. Good policy means tackling climate change in a way that directly benefits citizens and residents of Australia.

Governments can offer carrots and sticks to drive change, and the beauty of sticks is that you can let the market sort out how to achieve the desired outcome. In Australia, we famously had the Gillard-era carbon pricing scheme, but we still have other mechanisms such as the renewable energy target.

On the carrot side, governments have sensibly decided that one of the biggest levers it can pull is to fund the energy transition at home, especially by helping households. This fights climate change, serves Australian voters and also provides a model to showcase what is possible and inspire other countries.

The incentives for residential solar panels over the years have been so successful that Australia has rooftop solar on 4 million homes, leading the world. Now the Commonwealth government has announced the Cheaper Home Batteries program to subsidise solar batteries in the same manner.

But governments also need to make hard choices because there are many other demands on the public purse. In Victoria, the state government has previously provided subsidies for 10,000 zero-emissions vehicles and grants for public EV charging points, but both schemes are closed for new applications.

The NSW government has recently drawn criticism for ditching its own battery incentive in favour of pushing people to join virtual power plants (VPPs).

Since last November, NSW consumers have been able to access a rebate of up to $2600 to attach storage to their rooftop solar systems. The scheme resulted in 11,400 battery installations across the state in six months.

But now the NSW government has judged that the Commonwealth subsidy, which is about double the state one, will be more than enough to encourage battery uptake. Any more could possibly flood the market and lead to poor outcomes.

Instead, the state will redirect the money into doubling the bonuses it offers households to sign up to a VPP – a scheme that allows the electricity provider to access a household’s battery at times of peak demand.

Groups such as the Smart Energy Council and the Clean Energy Council were broadly supportive, but consumer advocacy group Solar Citizens described it as a “betrayal” and gave the state government a score of “F” on its energy policy. The chief executive told me she knew of people who had been counting on the state and Commonwealth subsidies being stackable, as promised by federal Climate Change Minister Chris Bowen before the election, and could no longer afford to buy batteries.

Yet the “F” seems harsh given that NSW was one of the few states and territories offering incentives for batteries or VPPs at all. Could the angry reaction be rooted in loss aversion, a cognitive bias in which the perceived negative impact of a loss is greater than the positive impact of an equivalent gain?

The truth is there is no perfect policy, and climate change won’t wait, so it’s important not to let the perfect be the enemy of the good. It is critical to take action because inaction or a deferred decision is also a choice with its own set of consequences.

At least it is progress that the debate seems to have shifted to how to tackle climate change rather than whether to. Let’s get on with it.

Ross Gittins is on leave.

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