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A cautionary tale…
Sucking the RENT out of RET
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The capacity of the Australian Parliament to bastardise good policy and turn it into a feeding trough for rentseekers and other parasites is truly remarkable. You can’t move in this place or open a paper without the bottom-feeding filth of the political economy springing out, hands extended, threatening disaster unless they can fasten tightly onto the public teat. And it’s getting worse, as more and more sectors heed the example of lowlifes like the Minerals Council of Australia and come in for their chop. The Coalition and the Government managed a deal yesterday on the Renewable Energy Target, or what’s left of it. Just in the nick of time before a Question Time in which the Government would assuredly have contrasted its success in facilitating the Gorgon deal with the inability of the Coalition to even agree amongst themselves on a bill they had committed to support. In the event, Western Australian backbenchers — Mal Washer and Judi Moylan honourably excepted — found another way to ruin Malcolm Turnbull’s afternoon, but the Coalition demonstrating it is a rabble is now so common as to no longer be newsworthy. Bear in mind that the RET is a dud idea improved only by the fact that the Government’s ETS is even worse. As Ross Garnaut noted, a renewable energy target should be wholly unnecessary and in fact counter-productive if you have a proper emissions trading scheme that will allow the market to effectively respond to the price of carbon emissions. But now that’s the counterfactual. The Government’s ETS will be almost completely ineffectual (and may be rendered entirely ineffectual in negotiations between the Government and Opposition over the next couple of months) and that means the RET is now the only game in town in terms of driving any sort of move to a lower-carbon economy. It already had flaws, like the bizarre solar multiplier component, in which solar panel power will generate five times more credits than it should generate, artificially bumping up the scheme. But the RET, like the Government’s emissions trading scheme, has been further degraded by rentseekers and whingeing industries demanding a free kick. As Lenore Taylor notes this morning in a great little piece, the industries eligible for “interim assistance” under the RET bill were initially only a small number with an electricity intensity above a certain threshold of megawatt‑hours per $million revenue. That, as the Government’s own explanatory memorandum made clear, was expected to include only the aluminium smelting, silicon production and newsprint manufacturing sectors. Well, scratch that, because under the deal with the Coalition everyone who is getting a handout of free CPRS permits will now be getting assistance under the RET bill, at the same thresholds, for the cost of Renewable Energy Certificates. And if the price of price of RECs goes above $40, there’ll be additional assistance for big electricity users for complying not just with the RET but with the current renewable energy target of 5%. At least the CPRS debacle hasn’t yet led to the softening of existing greenhouse reduction schemes. Now, bear in mind that those big electricity users are going to enjoy a fall in the cost of wholesale electricity as a consequence of the RET, because it will bring renewable energy sources online that big users won’t have to pay for, increasing overall generation capacity. That will go straight onto the bottom line of big electricity users, at everyone else’s expense. Despite this, the aluminium industry, taking its cue from the Minerals Council on the CPRS, is still whingeing about the RET and demanding even more assistance. And in a sop to the Nationals, the “food processing industry” will get a special review by the Productivity Commission to consider the impact of the RET on it — along with any other sector the Government decides has made a case for exemption. The “food processing industry” is a fiction and in fact is an agglomeration of otherwise unrelated food, drink and even pharmaceutical producers and manufacturers. And we all know the likes of Coca-Cola and the fast food industry need more help from governments. You’ll recall that at the start of this week, the Australian Food and Grocery Council — i.e. Coles and Woolies — tried to whip up a scare campaign over the impact of the CPRS on food prices, using the regular Big Retail mouthpiece, Glenn Milne. Council chief Kate Carnell, showing the political smarts she demonstrated during her reign in the ACT which produced an unused futsal slab, grass painted green and a dead child, waited until after the CPRS bill had been defeated to raise the issue, and then couldn’t actually produce the “modelling” she reckoned formed the basis of the Council’s claims. Still, early days for the Council — eventually they’ll be rentseeking with the best of them. There are a number of reasons why we now have a political system apparently structured to reward the basest instincts of our business sector. The proliferation of lobbyists — frequently former politicians and staffers — is one. The rise of economics consultancies who will “model” any outcome clients want — and the unwillingness or inability of journalists to call bullshit on such modelling — is another. The finely-balanced nature of the Senate also plays a role, especially when unpredictable dropkicks like Steve Fielding hold a swing vote. But ultimately it’s because we don’t have politicians — on either side, but this is primarily a fault of the Government — apparently capable of resisting rentseeking. At least John Howard knew a try-on when he saw one, and refused to let the GST be ruined by concessions until he absolutely had to when confronted with Meg Lees. Paul Keating sent rentseekers of any kind away with a black eye and a warning not to come back. Bob Hawke was adept at crafting outcomes that looked after those genuinely affected by reforms without undermining what he was trying to achieve. Oh for a small part, just a lousy bloody fraction, of that sort of political courage now. |
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12 Comments
Yep, let’s instigate schemes that have no significant impact on anyone, that’s sure to drive change and innovation.
Okay, no doubt some allowances have to be made but, like BK, I’m very frustrated by the fact that very few in power seem to be taking “carbon” seriously… I’ve had a gutful.
Putting coal seam gas in the scheme was a terrible piece of stupidity. Ditto the 5x solar credits. Are they restricted to domestic PV? That’s a little less bad, but goodness it could pervert the market.
“…Putting coal seam gas in the scheme was a terrible piece of stupidity…”
Pretty much sums up the whole scheme.
Is this what the best and brightest come up with?
Next they’ll be telling us that it is entirely possible - and ficnancially plausible - to extract that same ‘renewable’ ‘carbon’ from the air and pipe it underground where it will sit in peace and quiet for the next epoch.
This kind of comedy just writes itself.
Surely you must be thoroughly ashamed and embarrassed to support these people?
“…I’m very frustrated by the fact that very few in power seem to be taking “carbon” seriously…”
It is abundantly clear that YOU have no idea what “carbon” is yet you are so easily duped by meeja hacks, cereal box scientists and greentard dog whistlers that “carbon” is a pollutant.
Carbon is the fourth most abundant chemical element in the universe.
Yet it does not exist anywhere on Earth in its pure elemental form.
Most of the world’s “carbon” is contained in the world’s oceans.
Tell me what’s your “Carbon” “Pollution” Reduction Strategy for them?
No wonder Aussies are so cynical about politics and politicians. Sure, you expect some compromise, but this really seems to be taking the p-ss.
Which reminds of a great ABC radio national backgrounder on JK Galbraith, the war time economist/govt manager, two times US presidential Medal of Freedom winner, arch enemy of Richard Nixon - imagine that star on your CV.
Apparently the captains of industry during WWII would go to him whinging about their profit margins and his advisers would silently starting waving their forefingers in unison.
It was intra office code for their mentor’s parable of the Ant Queen - my rough memory is that the worker ants were worried about the cows doing unmentionables on their ant nest. Whenever the bovines appeared nearby the worker ants would run to the nest and tell the Queen with their antennas waving that there was danger of cow sh*t impending. Only one day there was a big storm and torrent of water had rush down the valley picking up all the cow dung in one almighty torrent. All the worker ants rushed the Queen and all waved their antennae in unison: Look out Queen Ant there’s a giant pile of bullsh*t heading this way.
Hence the waggling forefingers at the meeting with captains of industry during WW2 in the USA. Apparently he JK got his medal for keeping prices down, inflation similar etc etc. No war time profiteering on his watch. Lord be praised.
“The proliferation of lobbyists — frequently former politicians and staffers — is one. The rise of economics consultancies who will “model” any outcome clients want — and the unwillingness or inability of journalists to call bullsh-t on such modelling — is another. “
Sez it all really. One expects journos. to be innumerate but surely they can recognise weasling?
Sounds a bit like the terminal phase of the various Chinese Empires, with too many powerful players gaining tax-exemption for their estates and/or access to Imperial revenues for their own private uses.
Revenue goes down and is disproportionately provided by the poorest, who cannot get out of their obligations. Government becomes enfeebled, poverty and discontent spread.
And then the Mandate of Heaven is withdrawn…
I dunno about Keating being quite so virtuous — he caved in to the REIs when he ‘quarantined’ negative gearing to being claimable only on income derived from investments rather than all income, just as was being done in the US — a short while later the decision was reversed leading to today’s pathological property ‘investment’ market. Rents didn’t particularly go up, there were just a lot of threats from the REIs.
I think the ALP is just getting better and better each decade at managing the rorts and taking the party corporate donors’ bribes as real party membership dwindles, and increasingly borrowing from the US playbook of political corruption — which involves both major US parties.
I agree with Bernard. It’s appalling that the government has kowtowed to the fossil fuel industry through legislation designed specifically to support the renewable energy industry.
Fossil fuels are already subsidized up the wazoo. Tax breaks, “clean coal” funding, public funded infrastructure, all manner of job programs, state governments bending over backwards…
What happened to the pre-election talk of re-training coal miners for the renewable energy sector?
Our government should look to emulate countries that have gotten results with renewable energy policy, like Spain and Germany. For starters, there should be a guaranteed base price at which renewable energy is sold into the grid, and this deal should be open to all generators, from the bigwigs down to the home owners.
If mums and dads can load their roof up with solar panels and collect a cheque from the power company every month, a lot of them will make the long-term investment.
Especially given news that energy prices are going to double/triple/explode over the next decade.
I am no Labor supporter, but I can see why most of these exemptions were granted given the large export/import market distortions which would otherwise occur.
RE: coal seam gas. My understanding is that the legislation actually covers fugitive gas emissions from coal mines, usually containing large amounts of methane which you do not want entering the atmosphere. The legislation is attempting to provide an incentive for this to be burnt to produce power than allowing it to act as a global warming gas. I believe it is also not classified as a renewable energy source (rightly so) but only an acceptable energy source.
The real issue for me is why we are not seeing more pressure from Rudd about the introduction of a global emissions trading scheme.
Not quite right Greg. It does count as a renewable; ie it generates RECs. The old GGAS/NGACS scheme (in NSW, there were parallels in other states) had a mechanism to capture methane destruction, but I don’t think there’s one in the CPRS.
I think it’s an extremely weak move. Not including it would have meant the coal miners were liable for their fugitive emissions and would have already had an incentive to clean up their act. It should be a business as usual decision! Giving them renewable credits for burning fossil fuels is a dreadful distortion of the market.