Could the NEG spell the end of negative politics?

The so-called climate wars have been running for a decade and it was bold for Malcolm Turnbull to claim he delivered the “breakthrough” that would allow the nation to “break free” and consign the wars to the past. He has opened a new front — it could become the defining one — but the battles will continue for now. Apart from providing an acronym in keeping with the politics of the past decade, the National Energy Guarantee is a clear break from the market mechanisms advocated and implemented so far. Gone is the focus on emissions trading, carbon taxes, an intensity scheme or even the clean energy target recommended by the Chief Scientist and endorsed by the Prime Minister five months ago. Replacing these tools is the NEG which, simply put, will require retailers to purchase a minimum amount of dispatchable or reliable power as well as a minimum of low-emissions electricity. This means the market rules will demand sufficient consumption of baseload power to maintain energy security while separately mandating a level of low-emissions energy — which would include renewables — that would be enough to meet the Paris emissions reductions commitments.

After tortuous machinations, policy missteps and political acrimony, this option of regulating minimum baseload and maximum emissions is deceptively simple. The complications to come will involve the challenge of winning parliamentary support in Canberra or the co-operation of the National Electricity Market states and the industry. The government is already off to a promising start with qualified endorsements coming from the Business Council of Australia, the Australian Industry Group, Chief Scientist Alan Finkel and energy giant AGL. Even the initial scepticism and resistance from the Labor opposition and the Labor premiers has waned on the promise of further consideration. Bipartisan support would encourage investor confidence and therefore benefit the nation. It also would rob the Prime Minister of a volatile issue with which to differentiate the Coalition from Labor but save him from marching to the next election with an electricity sector in a state of obvious disarray and aimlessness.

There is a fundamental myth about this proposal that no side of politics wants to expose. Labor is committed to significant emissions reductions and won’t rush to oppose or approve the plan as it waits to weigh the details and consider the economic and political implications. Desperate to virtue signal on deep emissions cuts with no regard for economic consequences, the Greens are indulging in infantile rants about “climate terrorists” and “selling the Great Barrier Reef down the drain”, so we can forget about any insight from them. Even One Nation is too busy trying to claim credit for the Coalition’s new policy to point out the weaknesses.

This is not a plan focused only on delivering electricity affordability and reliability. Mr Turnbull adds the term “responsibility”, which is code for the emissions cuts. Because this plan is designed to deliver the Paris target of a 26-28 per cent cut in emissions, it will necessarily encourage investment in renewable and lower emissions technology and therefore make prices higher than they otherwise would be. At first blush it looks like a simpler, less costly and more technology-neutral way to deliver this outcome. But let us not pretend this policy imbroglio is not predicated on the difficult task of making emissions cuts that — if you look to the science and maths — can have no discernible impact on the global environment.

Former prime minister Tony Abbott is one of few critics, complaining the plan still aspires to the Paris targets (which takes some chutzpah given Paris happened on his watch) and lamenting there is no government plan to build a coal-fired power station. But if Mr Turnbull’s plan — which won warm support in his partyroom — can deliver investment certainty for thermal generation it is a far better outcome than direct government subsidies. Despite rancour from some of his colleagues, Mr Abbott rightly can claim credit for pushing his party to dump the CET and find a better way. There is much to be wary of and plenty of detail to be scrutinised but Mr Abbott must be careful not to transform from policy whisperer to wrecker.

Environment and Energy Minister Josh Frydenberg also is implementing regulatory changes, retail practices and gas supply moves to improve the NEM. But little will ease supply issues this summer or put downward pressure on prices soon. The Coalition faces a tough battle to win co-operation from Labor in Canberra or the Labor and Liberal premiers, or both. If that doesn’t happen the climate wars will descend into hand-to-hand combat. If it does, implementation will be complex and time-consuming while it will rob the Coalition of the political bonanza of pointing out Labor’s costlier and riskier plan to introduce a carbon price and mandate a national 50 per cent renewable energy target.