What we have achieved and where the parties will lead us with energy policy

• Labor favours ratifying the Kyoto agreement which would both put greater pressure of Australia to undertake abatement activity and, arguably, open up international markets for the trading of emissions;
• Labor also favours "lifting the (MRET) from its current two per cent of energy to five per cent". The current target is actually 9,500 GWh by 2010 which is to rise to 20,000 GWh by 2020. Although the current target is expressed in energy units, the ALP proposal for five per cent of energy is an approximate doubling of this and has been estimated by the Government to bring a cost of $11 billion compared to $5 billion from the present plans;
• NSW already has in place a supplementary MRET provision which entails a further $40 million annual cost to consumers, and the State ALP Ministers are consulting on how to bring in a more ambitious scheme in the event of a re-elected coalition government;
• Aside from its MRET scheme, the Commonwealth Government's greenhouse related energy policy is strongly focussed on subsidies for emission reductions and for the creation of carbon "sinks". Its program, Securing Australia's Energy Future, announced in July 2004, contains new expenditures addressed to greenhouse gas reductions of over $700 million. Annual Commonwealth expenditures, including MRET and other existing programs, are of the order of $840 million per annum. 

These major differences are narrowed by two considerations. First, the present government is acting as though it has, in effect, ratified Kyoto and accepted the scientific view that significant human induced global warming is taking place. Australia negotiated a relatively low target (eight per cent above 1990 levels by 2010-2012), a position that reflects some acceptance internationally that Australia, as a major resource based economy, competes more directly with developing nations which do not have onerous greenhouse gas emission obligations. In addition, some felicitous re-definitions of the level of obligation, plus the policies already introduced, mean that Australia is in fact much closer to its target than all but a handful of those that have ratified Kyoto.

The Government's expressed concerns at formally ratifying Kyoto stem from the universal acknowledgement that the reductions encapsulated in the treaty are totally inadequate for bringing about a stabilisation of greenhouse gas emissions. The Government argues that ratification will bring future costs in terms of allocations below business-as-usual on a scale that is unaffordable. In this respect, the Australian Constitution (like that of the US) tends to lock-in such legislation in contrast to the European Constitutions where decisions of the Government of the day can readily be changed. The Government therefore is not contesting the view that global warming is a real threat but opposes incurring additional costs from the Kyoto tax or tradeable rights approach to its mitigation as inferior to using R&D to find technological solutions. 

For its part, a Federal ALP Government, if elected, would doubtless re-visit those of its policies with major cost implications and consequent impositions on households and industry. After all, it was a federal ALP Government that stood out against many of its own advisers and insisted upon Australia's relatively low Kyoto target.

In the event of a continuing coalition government in Canberra, state ministers have indicated that they will consider a cooperative approach to bring about a substantial further movement towards greenhouse gas abatement. There is little chance of this succeeding if only because of the imperatives of state based development priorities. The Victorian Minister, for example, has been careful to claim a special position for the intrinsically more CO² emitting brown coal generators. More importantly, it is implausible that Queensland will accede to an agreement among state ministers. This is because, in essence, such an agreement would require Queensland to relinquish its apparent destiny (derived from its low cost coal) to become the centre for the siting new electricity generation and entail subsidies to the southern states. 

Concluding Comments

Considerable advances have been made in the electricity and gas supply industries in bringing about a national market and ensuring market forces do their job in driving down prices and ensuring consumers obtain the quality of supply for which they are prepared to pay.

Tensions remain about the appropriate policy approach to greenhouse gas emissions. Though differences between the coalition and the ALP are real, these are easy to overstate. The key difference is the increased requirement under ALP policies for the replacement of fossil fuelled electricity by wind power. Wind and other renewable alternatives are more than double the cost of coal based electricity generation. In addition, the intermittent nature of the lowest cost major renewable resource, wind power, brings about a need for increased capacity to ensure reliability - a study for the South Australian Government (pdf, 560kB) indicated that only 8 per cent of the capacity for large scale wind power can be classed as firm, hence this form of power requires back up for 92 per cent of its capacity. 

In the event of a continued coalition government in Canberra, it is possible for ALP controlled State Governments to reach an accord on emission reductions and impose this nationally. However this is an unlikely outcome since it would involve States voluntarily foregoing - indeed, reversing - particular natural advantages in comparative energy costs.