The Senate’s climate change inquiry kicked off this morning with the first of its hearings. Given the inquiry was a joint Coalition and Greens initiative, the line-up of witnesses is, to put it mildly, rather varied. This morning the Australia Institute’s Dr Richard Denniss sat with Michael Hitchens from the Australian Industry Greenhouse Network; this afternoon Queensland climate crank Bob Carter will, absurdly, be speaking just before credible experts like the CSIRO’s Mike Raupach and Melbourne University’s David Karoly.
Don’t expect a great deal of sense from much of the committee report. There’ll probably be a dissenting report from Ron Boswell on why the planet is headed for an Ice Age.
The committee is supposed to consider the vexed issue of compensation under the Government’s proposed ETS. The issue is vexed primarily because, having designed a scheme that rewards the biggest polluters with billions of dollars’ worth of free permits, the Government is still facing demands from industry for more compensation.
Rather in the manner of saving the best until, the most outrageous demand emerged yesterday from the Electricity Supply Association, which used an “industry survey” to conflate the impact of the financial crisis and a recent decision by the Australian Energy Regulator on rates of returns as the basis for demanding even more free permits under the ETS than the industry is already getting.
It’s a big effort to top the special pleading and the self-serving “modelling” offered by most of the country’s major polluters and their peak bodies like the Minerals Council, but ESAA managed it easily.
“Electricity generators estimated they will need additional credit facilities to finance over $20 billion worth of emission permits in the period to 2014,” the survey concluded.
“Increasing the initial allocation of permits to coal-fired generators will not subsidise them or keep them in production any longer than necessary,” ESAA CEO Clare Savage said.
Perhaps Ms Savage might care to look up the meaning of “subsidise”. And while she’s got the dictionary open she could check on “magic pudding”. Between all the extra compensation demanded by polluters, the revenue from the ETS would be allocated two or three times over.
Under the ETS, the Government will hand over nearly $4b over five years to electricity generators. The biggest beneficiary of this bonanza will be the UK firm International Power, which will pocket more than $1b from Australian taxpayers courtesy of the ETS. Hong Kong’s CLP Power International will trouser nearly three-quarters of a billion dollars. The NSW Government will get nearly $400m. The Queensland Government will get over $100m.
The most remarkable statement from ESAA, however, was Ms Savage’s claim that “coal-fired generation assets were built at a time when there was no cost on greenhouse gas emissions and no clear prospect of when or how such a cost might be introduced.” This is either staggering ignorance or a blatant lie. At least seven coal-fired generators have been built in the last decade alone. How many more have been built since the Kyoto Protocol? How many have been bought and sold in recent years in Victoria?
No private owner of an electricity generation asset in Australia can have entered this industry unaware of coal-fired power’s critical role in Australia’s massive per-capita carbon emissions, and the long-term need to address it. The notion that a carbon price is some form of sovereign risk for power generators is nonsensical given extended period in which the critical need for government action to curb carbon emissions has been on the public policy agenda in Australia.
Compensation for the electricity sector isn’t just unmerited, it also channels funding away from research and investment in renewable energy sources, meaning the transition away from coal-fired “stranded assets” will take far longer than necessary. It’s another reason why the Government’s ETS should be rejected. And calls for more compensation only strengthen that case.