In an Abbott Government, the Secretary of the Climate Change Department, Blair Comely, might find himself unravelling much of the green tape he has advised upon and administered.
Meanwhile, in the context of the future policy of linking the Australian price with that of the EU, he told a Senate that it was not “inconceivable” that the price in 2015 could be $50. He said, “When you look at what the Treasury modelling was trying to do, it is still the best information we have available. You are talking about a price which is three years away. There are reasonable arguments that [$29] is not an implausible estimate in 2015.”
He would say that wouldn’t he? Having been head of the department that argued for a fixed price a few months later he declared for a procedure likely to mean a flexible price of under $10 per tonne.
A $50 price increases wholesale electricity costs by 120 per cent and household costs by 50 per cent.
Unfortunately, Canberra policy agencies have failed to offer estimates of what we are actually forking out for climate change measures. I have a piece in The Australian today on this, which was cut down a bit from the following.
There are four families of such measures in place: the carbon tax, the Renewable Energy Target (RET), direct budgetary expenditures, and standards on a range of products.
The carbon will cost energy users $8 billion a year in its present format. Linking it to the EU, price effects aside, will also gift about $1 billion a year from Australian consumers to EU businesses.
The RET, currently requires 20 per cent of electricity by 2020 to be derived from a mix of large scale sources, dominated by wind, and small scale installations, which include solar water heaters, heat pumps, and solar panels. Wind requires a price of over $110 per megawatt hour to be economically viable and small scale systems at least twice that. Coal generated electricity costs $35-$40 per megawatt hour.
Together, the RET schemes, including the need for back-up systems, mean an impost by 2020 of around $5 billion a year.
The third family of costs comprises direct budgetary expenditures, which in the current year are $2.7 billion, plus the incidental expenditures that every department, including Treasury, must incur to addressing climate change. Added to these costs is the $10 billion “Clean Energy Fund” under a board of worthies who, as with those selecting the departmentally favoured expenditures, fill in the gaps that a myopic market fails to see!
Finally there are regulatory measures incorporated into product standards that force suppliers to incorporate energy saving features in the products they offer. Many of these standards started life as measures to conserve energy and stemmed from a previous scare – the now discredited forecasts that the world was running out of fossil fuels. Energy conservation regulations morphed into greenhouse gas mitigation measures, which are mandatory standards on domestic appliances and buildings.
Few of these standards are costed, but the 6 Star standard on new housing has been subject to considerable scrutiny. The Victorian Competition and Efficiency Commission accepted a cost estimate for this of at least $5,000 per new house, an estimate that would translate into an annual Australia-wide cost of over $500 million for that regulation alone.
The combinations of greenhouse emission measures therefore impose a cost in regulations and taxes of at least $15 billion a year and perhaps considerably more than this.
Yet the debate on the issue has been largely confined to the carbon tax. The Opposition seeks to replace through “Direct Action” measures that select and target the most promising emission reduction sources.
“Direct Action”, which also features in the government policy arsenal, suffers from its very selectivity. Thus, while it might appear cheaper to target a particular source of emissions, emissions are fungible – closing down one source may see something very similar replacing it.
Moreover, “Direct Action” costs can be far in excess of those estimated. For example, the government’s proposed replacement of the Hazelwood Power brown coal station by a gas station aims to halve the current facility’s annual 16 million tonnes of carbon dioxide emissions. At a cost of $3 billion if the life of the existing facility is 20 years, that translates into a carbon price of around $50 per tonne. Not only is this well above the carbon tax but the operations of the National Electricity Market higher cost new facility would bring an increase in price for all electricity.
Why, in spite of the massive resources allocated to developing and analyzing the policy alternatives, does the government not provide public estimates of the combined costs of these imposts? Could it be that it is no longer proud of these expenditure levels and doesn’t want people to know their true extent?