‘NDIS of energy’ claim, but Anthony Albanese says no new cash
Economists have called the emission reduction target modelling the ‘most appalling bit of policy analysis that has ever come out of Treasury’.
Anthony Albanese says his government will not need to provide any extra funding towards reaching Labor’s ambitious 2035 emissions-reduction target, putting the onus on the private sector to invest up to $500bn to lower Australia’s carbon footprint by 62 to 70 per cent by the middle of next decade.
After Treasury analysis released on Thursday left out predictions on the cost to the budget of hitting the 2035 and 2050 climate targets, Macroeconomics Advisory head of research Stephen Anthony described it as the “most appalling bit of policy analysis that has ever come out of Treasury”.
Treasury did not reveal the expected budgetary cost of the Albanese government’s turbocharged climate policy but it released modelling claiming Labor’s 2035 and net-zero-by-2050 targets would lower wholesale electricity prices by 10 per cent and contribute to the economy being $2.2 trillion bigger by the middle of the century.
Mr Anthony, who chaired the independent Pricing Committee for its review of National Disability Insurance Scheme pricing, said Labor’s net-zero plan was “going to be the NDIS of energy” and the Treasury modelling was merely “set up to validate the government’s approach”.
Mr Anthony and energy economist Bruce Mountain said the government would need to spend far more on climate and energy policies than the extra and redirected $8.3bn it unveiled this week to hit the 2035 target.
Mr Mountain, director of the Victoria Energy Policy Centre, also disputed modelling that electricity prices would go down under Labor’s plan, arguing the costs of the transition would be felt by consumers and taxpayers.
“I don’t think that is plausible at all,” he said.
As the Coalition bungled its response to the government’s climate plan, the Prime Minister on Friday refused to predict whether electricity prices would decline under his plan, despite this being assumed in modelling backed by Treasury and the Climate Change Authority.
Climate Change and Energy Minister Chris Bowen said the Australian Energy Market Commission modelling that the CCA invoked – which predicts average household energy costs would drop by $1000 a year over the next decade – was “not a political promise”.
Coming under pressure to outline the cost of the 2035 target, Mr Bowen declared this week’s extra commitments brought total government funding in the climate and emissions-reduction space to $75bn since Labor was elected in 2022. The $75bn figure outlined by Mr Bowen and backed by Mr Albanese did not include funding for the commercial-in-confidence Capacity Investment Scheme, which is bankrolling the renewables rollout to underpin Labor’s 43 per cent 2030 target.
When asked if the government would need to spend more than the extra $8.3bn committed on Thursday to hit its climate goals, Mr Albanese said: “No.”
He used a recent report by the Business Council of Australia to declare a target in the government’s range would “see between $400bn and $500bn of private sector investment”.
“What we did in the press conference yesterday was outline our funding that we will commit, have committed going forward,” Mr Albanese said.
“We know that this isn’t just about government effort; it’s also about private sector effort.”
Despite Mr Albanese saying the BCA report was about private sector investment, the peak business body’s report made clear part of the investment cost would need to be funded by taxpayers.
A senior government source said Mr Albanese was not disputing that the BCA report included the need for public investment.
Although Mr Albanese talked down the need for new funding to hit the 2035 target, a government spokeswoman left the door open to bankrolling more climate and emissions reductions policies in future budgets. “As an orderly, methodical cabinet-led government that has delivered two budget surpluses in a row, you can anticipate that any future expenditure in this area would be announced in the usual way,” she said.
The $8.3bn of policies announced this week included a $5bn Net Zero Fund within the National Reconstruction Fund to help industry decarbonise, $2bn for the Clean Energy Finance Corporation to invest in renewables, $1.1bn for clean fuels production and $40m for kerbside EV charging stations. Experts doubt whether this will be enough to deliver a target the CCA says requires more than 90 per cent of electricity to be generated by renewables, half of new car sales to be electric, tougher requirements on industry and a reduction in native logging.
Mr Mountain said the “rapid change” required to hit Labor’s goal meant current funding commitments from the federal government would have to “massively” increase.
“That $8bn is not going to touch the sides at all,” he said. “For example, I estimate 2GW of offshore wind, which is the Victorian government’s 2032 target, will require $14bn of (commonwealth) subsidy.”
Grattan Institute director of climate and energy Tony Wood said it was too early to tell whether the government would have to increase its funding to reach the 2035 target, arguing the CIS would likely cease in 2030. Mr Wood said the most likely trajectory for electricity prices would be to stay the same, rather than go down, although household energy costs would decrease.
Macquarie Group chief executive Shemara Wikramanayake has described the new emissions-reduction target as “very ambitious” and said she expected Australia to maintain strong investment in renewables to help achieve the target.
Ms Wikramanayake, who attended the government’s economic roundtable in Canberra last month, said she was hopeful about the level of private sector investment that would flow into the construction of renewable energies required to help achieve the target, but that government investment would be crucial.
“I think the reforms are important to getting this done, things that they’re doing such as expanding the capacity investment scheme, and more funding for Clean Energy Finance Corporation,” she said.
Infrastructure Partnerships Australia chief executive Adrian Dwyer estimates that there are currently $599bn worth of named renewable projects in the system in Australia but that “less than half” of them will hit their stated deadline. “The biggest problem with meeting the timelines is regulation and planning,” Mr Dwyer said. “But we are going to need all of the $599bn plus more to meet targets. There will be some government money in that. You can’t pass it all on to the customers.”
The debate over Labor’s plan came as Sussan Ley bungled her position on climate change and energy policy, raising further pressure over her leadership. The Opposition Leader said the Coalition opposed setting climate targets in opposition and in government, a move that would force a government she leads out of the Paris agreement. Ms Ley later corrected herself and declared the Coalition did not support setting targets in opposition.
“We do, of course, recognise the importance of targets in government when we have the full information in front of us,” Ms Ley said.
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