Just a green gesture

THE federal Government has taken a necessary but dangerous step with John Howard's embrace of a new national clean energy target by 2020 - a repudiation of his May 2007 taskforce report and its pledge of low-cost abatement.

THE federal Government has taken a necessary but dangerous step with John Howard's embrace of a new national clean energy target by 2020 - a repudiation of his May 2007 taskforce report and its pledge of low-cost abatement.

The risk is obvious. It is that Australia, driven by gesture politics and climate change populism, will remain locked into rising clean energy or mandatory renewable energy targets, a "winner-picking" high-cost option that destroys an effective response to greenhouse gas reduction.

The condundrum is whether Howard, once a climate change sceptic, aspires to be a climate change populist. Indeed, the issue posed this week is whether any PM can dictate terms to the climate change lobby and its media-driven momentum.

After an intense cabinet debate, the Howard Government has rejected a cardinal principle of its taskforce report headed by Howard's departmental head, Peter Shergold. It has embraced instead a de facto 15 per cent clean energy target by 2020 (arising from its decision that 30,000 gigawatt hours each year come from low energy sources by 2020).

This was a victory in cabinet for Environment Minister Malcolm Turnbull. It was a win for Turnbull's politically realist argument that the federal Government had no viable option other than to embrace such a scheme. It compromises the policy goal of greenhouse gas abatement "at the lowest possible cost". It is proof that politics dictates Australia's solutions to climate change, with unpalatable consequences.

There is one certainty in this process. Howard will lose the populist debate to Rudd. Opposition environment spokesman Peter Garrett made clear this week that Labor will have a higher MRET than Howard. In political terms, Labor owns the climate change issue so its confidence is conspicuous. Having avoided any such target so far, Garrett said Labor will unveil its target "in good time". His message is that Australia needs a "significant increase" in its renewable energy target and that means, presumably, a target of about 20 per cent to show superior virtue to Howard.

In keeping with gesture politics, the media will applaud Labor's credentials when this policy is announced. In this debate, having a policy that imposes unnecessary higher cost on consumers and industry and constitutes energy pork-barrelling is a public good worthy of applause.

Given this mind-set, the new Howard-Turnbull position is hardly a surprise. Their problem, as ever, is that the Government has waited too long. It starts too far behind on climate change, confronting ideas now entrenched, where it is hopelessly devoid of the credibility to put persuasive alternative arguments.

Howard's main response to climate change is his commitment to a comprehensive national emissions trading regime by 2011 or 2012, its rationale being "to lower emissions at the least cost". This is a sensible and bipartisan policy.

The taskforce report strongly argued that setting a carbon price creates a market-based solution that generates investment into low-emission energy sources. Its Treasury-based philosophy was that low-emission technologies such as nuclear, clean coal, gas, solar, wind, hydro and geothermal, "should compete on an equal basis". Australia needs a mature policy "that minimises government interventions and, in particular, does not attempt to pick winners".

In Australia this is an unpopular minority position.

The taskforce argued "all Australian schemes that set mandatory targets for deployment of particular technologies should be wound up over time and new ones forestalled". In case you missed the point, the report was explicit: the MRET arrangements should be abolished over time.

This was an attack on the climate change lobby's prized concept and state governments that have generated such schemes.

The problems created by state MRETs are serious, a point not lost on Ross Garnaut. Garnaut has been commissioned by Rudd to report by mid-2008 on national Labor policy and told The Australian in May it was imperative "to get the framework right". That meant "letting the winners emerge in the marketplace" and not by an industry policy devised by politicians.

But Turnbull put a different series of arguments to federal cabinet. He warned ministers the states would not abandon their own renewable energy schemes (and obviously it would be political madness for the federal Government to use its constitutional powers to force their abolition).

The upshot was that the Government decided to create a new clean energy target to absorb the state schemes.

Garrett attacked Howard and Turnbull, in effect, for not going beyond the state government targets. Yet the one desirable policy outcome from this decision is that proliferating state-based MRETs will be replaced with one national scheme.

Garrett confirmed to The Australian yesterday that Rudd's MRET model, when unveiled in the campaign, will replace all state government schemes, as does Howard's. This will not be an easy political decision but any other arrangement would be farcical. Since Rudd is overriding the states on public hospitals and the Murray-Darling basin, he has few qualms about doing so onMRETs.

The core policy dispute here is apparent: much of the climate change lobby opposes abatement at the lowest cost to the economy in preference to its philosophy of mandating investment in renewables. This sentiment has strong support in the media, where higher cost solutions are favoured over lower cost solutions because they seem to be purer and cleaner. Once public opinion settles along these lines the chance of getting good public policy is remote.

"The big risk is that these clean energy targets become entrenched," says Brad Page, chief executive of the Energy Supply Association of Australia.

"The critical issue is how to change the emissions shape of baseload power. And the clean energy target doesn't get you there. The effect of this decision will be to promote wind power. But building wind farms is no substitute for addressing the emissions from baseload power."

Turnbull argues that in the near term there is no conflict between emissions trading and the clean energy target. This is because the initial carbon price will be low and the clean energy target will be necessary to encourage investment into renewables.

This is likely to be correct. But it does not gainsay the risk in the longer run. The renewables sector will keep demanding a higher target: first to make wind viable, next to make solar viable and so on.

The energy industry welcomes the Howard-Turnbull attempt to rationalise multiple schemes and targets. But Page warns that a clean energy target should not compromise a national emissions trading scheme based on a price for carbon.

Ultimately, the market scheme and the mandated scheme are incompatible. There comes a point when the price of power from coal costs the same as renewable energy.

Page identifies the political malaise: "Green groups reject the least-cost abatement approach because their preference is for feel-good policies based on renewables that are more expensive. The public debate in Australia about greenhouse is poorly informed."