Garnaut re-advocates his failed policy approach

Ross Garnaut  plays out his previous government agenda in criticising the White Paper on Energy.

He says it is deficient because it has no carbon tax and fails to enhance the merits of the Renewable Energy Target.

He says “do the math” and you will see that forcing the substitution of energy that is three times the cost of energy otherwise available will lower prices.  This from an economist who claims some renown!  Yes if one forces high cost products on a market that is oversupplied and where supplier exit entails costs, prices will fall as existing suppliers battle it out.  But the outcome beyond the short term sugar hit can be nothing other than high prices.

The carbon tax is just one manifestation of a penalty on energy  designed to drive up its price.  The more sensible people within the government are trying to ease us away from all these imposts, although there are key ministers who are believers in harmful global warming and seeking ways to introduce it by another means.

Price rises primarily as a result of network charges (with RET and other regulatory measures having a secondary role) have placed the spotlight on the industry.  Electricity prices are likely to fall over the coming years and in the case of gas falls in demand have eased concerns about availability. The falls would be even greater if sensibe privatisation and competition policies are in place and the White Paper seeks to nudge governemtns in that direction.

The RET is largely absent from the White Paper  to avoid the impasse that was the ALP’s White Paper where four years of deliberations amounted to an absence of any progress  due to the greenhouse policy remaining unresolved.

There is likely to be an agreement on the RET future shortly as the 33,500 GWh by 2020 that the rent-seekers have called for is now quite close to the 32,000 offered by the Minister.  This is an appalling decision and here  is my own take on it.

The Government’s greenhouse policy to be taken to Paris in December will be determined by mid year.

The key reforms in the White Paper are to promote privatisation, cost reflective pricing, and competition in supply as a means of getting better economies.  And the arbitrary and highly ambitious goal is to achieve a productivity increase of 40 per cent by 2030.

The 40 per cent improvement is to come from a mixture of efficiencies presently in the pipeline (retail competition, better pricing of poles and wires, a younger car fleet) plus building regulations forcing energy efficiency.  Elimination of cross subsidies to renewables and peak users is seen to be crucial and smart meters better enables this to take place. There are also regulations in the pipeline like on buildings which force energy use reductions but do so at a cost of general efficiency by distorting producers’ designs.

On top of that are specific measures being implemented in the form of market reforms but the estimated outcome looks to be difficult given:

• Political setbacks to privatisation in Queensland and steps being taken in that state to reregulate supply.  A single government generation business is to be created and the single tariff for all of the state beyond the SE corner offers little scope for distributed generation and other innovations.  And continued government ownership of poles and wires means efficiency dividends are unlikely
• Practical difficulties in getting cost reflectivity of tariffs. These include: consumer resistance to the complex tariffs this entails; regulatory inflexibility, e.g. in Victoria where a five year distribution tariff is to be set in place by September of this year, which provides little scope to change.
• The continued moratorium on gas exploration in Victoria and on-going constraints in NSW.
• Increased pressure to divert gas from export markets through a domestic reservation policy which is likely to be officially adopted by the ALP.
• The RET itself which drives out the higher productivity fossil supplies replacing them with wind at two times plus the cost.
• It requires the rationalisation of subsidies so that they focus only on things of use to Australia – especially regarding coal – but ARENA and the CEFC remain in place as wasteful conduits of funding and cannot be dismantled without legislation.

Some bright clouds are indicated with takeover activity – Shell (Arrow) and BG may bring a better balance between domestic and export usage and other rationalisations are likely.

One aspect that has received some publicity is the need under IEA rules for Australia to double the storage capacity for oil.  In fact there are over 30 ships en route to Australia at any one time and the security that a strategic facility offers would be negligible. Its cost would be $5.5 billion at present oil prices and although there is a Senate Committee examining it, the likelihood of this being given priority is slim and this would be a great excuse for Australia to leave the membership of the utterly useless regulatory, exhortative IEA.

 

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26 Responses to Garnaut re-advocates his failed policy approach

  1. Bruce of Newcastle

    Garnaut is a lefty, therefore he must believe the doctrines of the church of the left lest he be cast out.

    A carbon tax is firming up as a core doctrine, replacing the previous doctrine of the ETS. I suspect that is because it is abundantly evident now that ETS’s do not work as advertised and just produce vast graft.

    He sadly cannot do the logical thing, which is a cost-benefit between carbon tax/RET and nothing. If he did so it would be quite apparent that no action is the superior case even with IPCC levels of CO2 sensitivity. In other words the adaptation model. But adaptation is a heretical term that will get you immediately cast out of the church (eg Patrick Moore, Roger Pielke jr, Bjorn Lomborg and James Lovelock have all been cast out for that heresy).

    Of course the empirical data says that there is only a little warming caused by CO2, but he can’t acknowledge that either without being anathemised.

  2. Zippy The Younger

    Garnaut like all other champagne socialists are low life self-obsessed morons.

    These people are truly disgusting.

  3. john constantine

    Lets name the first coal burning steam train, of the class designed to use 21’st century technology to bring fuel security to the australian long haul freight task–

    The Garnaut Express.

  4. blogstrop

    It’s another bad zombie movie, and the cause is getting support now from a group of Dutch activists who are suing their government for not doing enough to avoid catastrophic warming, which the BBC in reporting this story adds that “scientists say” the warming is due to humans using fossil fuels.
    So there you go, zombies everywhere.

  5. Sydney Boy

    I’ll happily buy renewable energy. As soon as the unsubsidised price is equal to the current electricity price (generated from the mix of coal, gas, and hydro).

  6. min

    Is that the great environmentalist who was chairmen of the Oktedi mine who is so concerned ? Follow the money

  7. Mike of Marion

    Not hankering for an Abbott knighthood is he?

  8. DaveR

    As a professor at ANU Garnaut never let facts get in the way of his trenchant political dogma, allowing it to distort almost everything he did. As a far leftie for the then ALP government he did exactly the same. And now, quelle surprise, he allows exactly the same radical left agenda to dictate his analysis. A loser of the left, and definitely yesterday’s man.

  9. Baldrick

    He says “do the math” and you will see that forcing the substitution of energy that is three times the cost of energy otherwise available will lower prices.

    I don’t want to live in a country that spells ‘maths’ – math!

  10. Dr Faustus

    The renewable energy sector is having its first ‘grown up moment’ and facing a decline in demand. As rentiers, used to subsidies and worshipful public support of all kinds, this has hit really, really hard – as the CEO of Solari Energy complains to ABC 612’s Steve Austin.

    [Audio, but worth a listen for a chilling insight into the lack of self-awareness and sense of entitlement that drives this parasitic industry.]

  11. Faye

    “The more sensible people within the government are trying to ease us away from all these imposts, although there are key ministers who are believers in harmful global warming and seeking ways to introduce it by another means.”

    Please tell us which key ministers. We deserve to know who believe in the biggest CONHunt, MacFarlane? Turnbull, J Bishop?

  12. Faye

    Sorry I accidentally hit the wrong button before I had finished.

    We deserve to know which ministers believe in the biggest CON the world has ever known and are prepared to pay billions towards it. Let renewables survive and prosper on their own merit. Or is that what they’re afraid of. Hunt, Turnbull, J Bishop? MacFarlane? Please, it is important that we know who in the Liberal Party believes this junk.

  13. .

    There is still a lot of room for renewables in the free market.

    It costs about $7000-$9000 for each 100 m of line installed to a new property to be on the grid.

    I’ve seen a biogas system that starts at 500 USD a pop.

    A small, properly engineered UV/PV system with hydronics and biogas as well as atmospheric water generation or a well/bore and you can go off grid, potentially save on fixed costs and have variable costs that are wholly enviable.

  14. Up The Workers!

    I’m not a big fan of basing national taxation policy on a collection of kiddies’ bed-time stories which have all the scientific gravitas of “Humpty Dumpty”, or “Goldilocks and the Three Climatologists”.

    Can we buy the wormed ‘Gerbils’ an air conditioner and send Risky Ross Guano back to Nauru, with instructions to the residents there, to bury him deeper?

  15. Fred Lenin

    Why does anyone take any notice of anything Alf Garnot says ? The man is a green/ alp/ communist / union mafia. Pardee muppet ,who has bludged on the Taxpayer all his lfe ,even whenhe a worked for that great representative of the working man Bribes Obeid he should be judged by the crims he associates with .dickhead !

  16. rich

    A small, properly engineered UV/PV system with hydronics and biogas as well as atmospheric water generation or a well/bore and you can go off grid, potentially save on fixed costs and have variable costs that are wholly enviable.

    You wouldn’t be allowed to build it… safety concerns (or more truly, those RET warriors will spot you skimming their take of the rent). The solution must come from (and be sanctioned by) the government.

    “Don’t steal… the govt doesn’t like competition”

  17. Andrew

    There is still a lot of room for renewables in the free market.

    It costs about $7000-$9000 for each 100 m of line installed to a new property to be on the grid.

    Yes and remote locations routinely and without subsidy have done so for decades. Telstra runs towers on the WA highways with solar and batteries – a useful thing where there are no poles, wires or rain.

    Don’t see why they should be awarded “carbon credits” for it though.

  18. Andrew

    Can there now be any doubt after
    – Standard and Poors
    – the CEF fraud
    – the RSPT fraud (and almost a fraud that COST us tens of billions of dollars of loss subsidies)
    – the 2011 “stimulus” that destroyed the economy years after the GFC
    – ongoing douchebaggery like this

    that the economics profession is a net detractor from society and should be abolished?

  19. Dr Faustus

    There is still a lot of room for renewables in the free market.

    Where people can make practical and economic sense of going ‘off grid’ they should always do it.

    My concern is that the economic cost of most of the small-scale, and all of the large-scale renewable generation is supported by government attempts to satisfice the Green environmental lobby – and sits a million miles from the free market. As evidenced by the constant whinging and pleading by the renewables industry for more government fiat spending of my fucking energy dollars.

  20. .

    Andrew – there is no such thing as a left wing economist. By rights they should hand back their degree.

  21. Driftforge

    In fact there are over 30 ships en route to Australia at any one time and the security that a strategic facility offers would be negligible

    And at any time there could very rapidly cease to be 30 ships en route. The ease at which a short term or partial interdiction could be imposed by even a relatively minor nation today cannot be ignored.

    Which is kind of the point of having storage locally.

    Nothing that is happening geopolitically at the moment suggests the next 25 years are going to be as reliably stable for world trade as the last 25 have been.

  22. Andrew

    Dot, even nominally “right-wing” economists caused horrific economic devastation after drinking from the Enormous Trading Scam Kool-Aid. al-Gore just needed to tell them it was a “market-based solution” to Da Carbon and they collaborated in his $trillion fraud.

  23. And at any time there could very rapidly cease to be 30 ships en route. The ease at which a short term or partial interdiction could be imposed by even a relatively minor nation today cannot be ignored.

    Driftforge, I mentioned in passing the other day that it’s not bombs or torpedoes that stop shipping in the prelude to hostilities – it’s the insurance companies.

  24. Yohan

    He says “do the math” and you will see that forcing the substitution of energy that is three times the cost of energy otherwise available will lower prices.

    You have too much common sense Alan. This is a perfect example of leftist economics.

  25. Combine Dave

    How much would maintaining a massive strategic reserve cost vs having a decent military?

    The only nations that could readily interdict our ships are our allies and unlikely to do so, and the ones that might want to could be easily perturbed if we had a decent military (unlike now).

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