Economists call it rent-seeking; punters think of snouts in the trough. Perhaps we need a new term to describe the chutzpah of the coal-fired generators in their call for compensation for the “sudden” introduction of an emissions trading system (ETS) as recommended by Ross Garnaut.
Energy Supply Association chief executive Brad Page is huffing and puffing about “the arbitrary destruction of shareholder wealth through a dramatic change in government policy”.
He claims the owners of the coal-fired power plants “could not have reasonably anticipated” the introduction of an ETS. Climate sceptic and generator trustee Michael Costa (also serving as NSW Treasurer), argues that compensation “would be consistent with the democratic norm that just compensation should be provided for acts of government that have significant adverse impacts on a property right”.
Somehow power company executives have failed to take note of a policy change that was not only inevitable but seen to be inevitable by almost every other senior business person in Australia.
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Here are some of the more obvious signals that an ETS was unavoidable, signals somehow missed by those entrusted with protecting shareholder value in generators:
- In 1995 Environment Minister John Faulkner announced a plan to introduce a carbon levy. The plan was dropped after the fossil fuel industries agreed to accept voluntary emission cuts under the new Greenhouse Challenge Program. The Electricity Supply Association of Australia strongly pressured its members to sign up to the program in order to head off mandatory measures.
- In the lead-up to the Kyoto conference in 1997 the generators were at the forefront of lobbying against any treaty that would affect their interests. They claimed then that a carbon tax or ETS would have an economically devastating impact on them.
- Despite this, the Howard Government, along with the Americans, insisted that the Kyoto protocol include provision for emissions trading. The Europeans reluctantly acceded to this demand. The Howard Government agreed to the protocol then signed it a few months later (only officially going back on the deal in 2000).
- In 1999 the main fossil fuel lobby group, the Australian Industry Greenhouse Network, opposed the inclusion of a greenhouse trigger in the EPBC Act because it wasn’t a market-based instrument like emissions trading.
- In 1999 the Howard Government published four papers outlining in detail how an ETS would operate in Australia.
- In 2000 a proposal to introduce an ETS was put to cabinet by Robert Hill. It was defeated after vigorous lobbying by the greenhouse mafia, especially Woodside. After the cabinet meeting Nick Minchin announced that there would be no emissions trading until at least 2008.
- In addition to the Howard Government’s Mandatory Renewable Energy Target, state-based programs like the NSW Greenhouse Gas Abatement Scheme and the Queensland Gas Scheme sent a clear signal that restrictions on emissions are part of the new commercial environment.
- In response to these signals one or two of the more progressive coal-fired generators, such as Stanwell, began preparing for the introduction of an ETS.
- In 2002 a review of energy policy by former Howard Government minister and coal industry executive Warwick Parer recommended the introduction of an ETS.
- The Labor Opposition went into the 2004 election promising to ratify the Kyoto protocol if it won government.
- In 2006 the Howard Government appointed a task group to design an emissions trading system. Members of the task group included the head of Australia’s largest private generator, the CEO of a big aluminium company and a director of BHP-Billiton. Just to reinforce the point: the MD of Australia’s biggest generator (International Power, majority owner of Hazelwood and Loy Yang B) recommended the introduction of an ETS.
- In 2007 BOTH major parties committed to introduce an ETS (as did the Greens and Democrats).
Apart from these flashing signs in Australia, there has been so much international action that any Australian business executive that failed to see where the world was heading must have been blind and deaf. The Kyoto protocol entered into force in 2005, the same year that the European ETS began.
Various US states are introducing trading systems and all presidential candidates are committed to supporting trading. As early as 1998 Japanese power utilities began buying up rights to the carbon stored in Australian plantation forests. So while Japanese power companies were spending money in this country preparing for the inevitable, their Australian counterparts were spending money in Canberra lobbying to stop the inevitable.
In my experience the executives who run the coal-fired generators are some of the most obtuse business people in Australia. Even allowing for this, if they missed all these signals, which were always going to affect their businesses more than any others, then they have been grossly negligent and should be sacked by shareholders.
But we know in truth that their strategy for years has been to deny, obfuscate, exaggerate and delay. For them to pretend that the Garnaut report represents a dramatic change in policy should be viewed with the utmost cynicism. Although their employees need assistance, the companies deserve nothing.