The government's Energy White Paper is here. Years in the making, it's the closest thing we've got a national blueprint for the future of energy in this country.
New Matilda readers will be aware that we've conducted an in-depth investigation into energy in Australia this year. Many of the themes we touched on are raised in the White Paper, from coal-seam gas to the gold-plating of electricity infrastructure.
Politically, Labor has tried to frame the White Paper around electricity prices, with a view to addressing the bill shock enraging voters. "The Australian Government recognises that rising energy prices are hurting households and businesses," Energy Minister Martin Ferguson said yesterday. "While there are no quick fix solutions, carrying out the energy market reforms outlined in the Energy White Paper will help to ease price pressures over the longer-term."
As we know, the reasons that electricity prices have been spiking for ordinary consumers is mostly because of the huge investment binge undertaken by electricity networks and distributors over the past decade — some of which, it has to be said, was demanded of state governments by voters angry at blackouts. The White Paper acknowledges this, citing Australian Energy Market Commission data that explains, "The rapid rise in Australian network costs has been the most significant driver of recent electricity price increases."
To combat this, the White Paper plans to crimp the power of the energy networks to pass on the cost of huge capital infrastructure outlays. The approach seems to be about shaving the profit margins that poles and wires companies are creaming off the top of their network charges by regulating for a smaller rate of return and lower incentives for capital expenditure.
At the retail level, the White Paper calls for full deregulation for retail electricity pricing. This is code for pushing the states, particularly New South Wales and Queensland, into abandoning price controls for electricity consumers. "Regulated tariffs are inherently less flexible and efficient, and there is an almost certain risk in markets where effective competition exists that regulators will set prices at levels that do not reflect the competitive price of supply," the paper states.
To do this, the federal Labor government will need the support of the states. Electricity regulation is largely a state responsibility, and the state governments have far more control over the important legislative and regulatory levers. Unfortunately for the government, there's no sign that such support will be forthcoming from premiers such as Campbell Newman or Barry O'Farrell. Premier Newman was telling a business forum yesterday he was not "going to be bullied by the Prime Minister into selling electricity assets"
Reforming electricity markets will take difficult negotiations at COAG. The debacle of the Murray-Darling Basin shows just how difficult it can be to get the states to agree on anything that might cost state economies or state revenues.
But the overall thrust of the paper is very much devoted to neoliberal economics and the pursuit of export income from energy resources. At most opportunities, the White Paper explicitly affirms the commitment of Labor and the bureaucracy to market flexibility and deregulation as the true path for Australia's energy future.
Gas controls, for instance, are ruled out, while more competition, innovation, efficiency and productivity are the prescriptions for the future health of the system. "Energy is most efficiently delivered through well-functioning markets supported by effective and efficient policy and regulation," states one of the Paper's policy principles.
But in terms of the actual outcome and effort devoted to various energy issues, the real winners are clearly big energy companies. The White Paper is obsessed with the extraction and export of energy resources, especially coal and gas, and more energy development is an ongoing theme of the document. The government is explicitly committing Australia to vastly expanded production of coal, gas and uranium as key drivers of the nation's economy decades into the future.
In particular, the White Paper is bullish about gas, as more than a few commentators have noted. While the environmental concerns about fracking and coal-seam gas are not completely ignored, they are largely sidelined with some soothing words about appropriate safeguards and the "social license to operate."
In one breath, for instance, the Paper states that the federal government will work with the states "to develop a better understanding of the direct and cumulative impacts of proposed coal mining and CSG developments on groundwater and the environment". But just as quickly, it then goes on to endorse "a world-class multiple land-use framework to promote coexistence, rather than exclusion, as a key principle in land-use policy." Fracking is another policy area where the Commonwealth is beholden to state legislation.
The one important area where the White Paper offers little true commitment is climate change. While the paper acknowledges the government's undoubted achievements in pricing carbon and committing to a modest cap on domestic greenhouse gas emissions, it continues the astonishing myopia of the Australian policymakers when it comes to fossil fuel exports.
The document's double-standards here are breath-taking. At the same time that it mentions "the threat of dangerous climate change", the White Paper also enthusiastically spruiks a vast expansion of fossil fuel exports. So at the same time that Australia will move to decarbonise our economy and reduce our domestic emissions, we will put millions of tonnes of carbon onto ships and send it to factories in Asia. Once there, it will be burnt and released into the atmosphere. "Make me pure," said St Augustine to his God. "But not yet."
The blindness of this white paper to overseas emissions means it has little coherent to say about future energy trends. As it acknowledges, the scenarios included here for global fossil fuel demand are factored on a relatively weak global response to the threat of climate change.
This is no doubt a conservative estimate, given the disastrous failure of worldwide efforts to constrain global emissions. But it exposes Australia to huge risks down the track, should our trading partners get their act together and decarbonise more quickly. A real global commitment to reducing fossil fuel consumption will put this future demand at risk. In that case, Australia's world-class reserves of coal and gas won't be the gold rush Australian governments fervently hope for.
Indeed, the White Paper spends little time and effort on other long-tail risks for the hoped-for export boom, particularly disruptive technologies. If renewable technologies become cheaper than coal and gas, then the price of those commodities will quickly fall, leaving Australia with tens of billions of dollars worth of stranded assets in the form of coal ports and gas terminals. All commodity booms eventually end. The reasons can be structural as well as cyclical.
Long before the resources boom moderates, however, future generations of Australians will have exposed to the risks of a dangerously warmed planet — risks that the policies proposed here will effectively increase. The cost of Australia's gas and coal boom will be counted in dead coral and a desiccated Murray Darling.
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