Finkel’s Clean Energy Target plan ‘better than nothing’: economists poll


Bruce Mountain, Victoria University

Few topics have attracted as much political attention in Australia over the past decade as emissions reduction policy.

Amid mounting concern over electricity price increases across Australia and coinciding with blackouts in South Australia and near-misses in New South Wales, the Australian government asked Chief Scientist Alan Finkel to provide a blueprint for reform of the electricity industry, in a context in which emissions reduction policy was an underlying drumbeat.

In a new poll of the ESA Monash Forum of leading economists, a majority said that Finkel’s suggested Clean Energy Target was not necessarily a better option than previously suggested policies such as an emissions trading scheme. But many added that doing nothing would be worse still.


Read more: The Finkel Review: finally, a sensible and solid footing for the electricity sector.


The Finkel Review’s terms of reference explicitly precluded it from advising on economy-wide emissions reduction policy, and implicitly required it also to reject emission reduction policies such as an emissions tax or cap and trade scheme.

One of the Finkel Review’s major recommendations was a Clean Energy Target (CET). This is effectively an extension of the existing Renewable Energy Target to cover power generation which has a greenhouse gas emissions intensity below a defined hurdle. Such generation can sell certificates which electricity retailers (and directly connected large customers) will be required to buy.

The ESA Monash Forum panel was asked to consider whether this approach was “preferable” to an emission tax or cap and trade scheme. As usual, responses could range from strong disagreement to strong agreement with an option to neither agree nor disagree. Twenty-five members of the 53-member panel voted, and most added commentary to their response – you can see a summary of their verdicts below, and their detailed comments at the end of this article.

https://datawrapper.dwcdn.net/Kzu9L/2/

A headline result from the survey is that a large majority of the panel does not think the CET is preferable to a tax or cap and trade scheme. None strongly agreed that the CET was preferable, whereas 16 either disagreed or strongly disagreed, and four agreed.

Of the four who agreed, three provided commentary to their response. Stephen King preferred the CET on the grounds of its ease of implementation but otherwise would have preferred a tax or cap and trade scheme. Michael Knox agreed on the basis that the CET was preferable to the existing Renewable Energy Target. Harry Bloch unconditionally endorsed the CET.

Of the five who neither agreed nor disagreed, three commented and two of them (Paul Frijters and John Quiggin) said there was not much to distinguish a CET from a tax or cap and trade scheme. Warwick McKibbin, who disagreed with the proposition, nonetheless also suggested that the CET, tax and cap and trade scheme were comparably effective if applied only to the electricity sector.

However, closer examination of the comments suggests much greater sympathy with Finkel’s CET recommendation than the bare numbers indicate. Even for those who strongly disagreed that the CET was preferable, none suggested that proceeding with a CET would be worse than doing nothing. But eight (Stephen King, Harry Bloch, Alison Booth, Saul Eslake, Julie Toth, Flavio Menezes, Margaret Nowak and John Quiggin) commented that proceeding with the CET would be better than doing nothing. Interestingly none of these eight explained why they thought doing something was better than doing nothing. Does it reflect a desire for greater investment certainty or a conviction that reducing emissions from electricity production in Australia is important?

Seven respondents (Stephen King, Alison Booth, Saul Eslake, Julie Toth, Gigi Foster, Lin Crase and John Quiggin) alluded to the political constraints affecting the choice, of which several drew attention to Finkel’s own observations. None of these seven suggested that the political constraint invalidated proceeding with the CET.

Of the 19 economists who provided comments on their response, 16 thought a tax or cap and trade scheme better than a CET. Numbers were equally drawn (three each) as to whether a tax or cap and trade was better than the other, with the remaining 10 invariant between a tax or cap and trade.

My overall impression is that in judging Dr Finkel’s CET recommendation, most of the panel might agree with the proposition that the “the perfect is the enemy of the roughly acceptable”. I surmise that in a decade past, many members of the panel would have held out for greater perfection, but now they think prevarication is more cost than benefit, and it is better to move on and make the best of the cards that have been dealt.

In emissions reduction policy the mainstream advice from Australia’s economists has not been persuasive. But this is hardly unique to Australia, as the pervasiveness of regulatory approaches in other countries shows. Perhaps an unavoidably compromised policy that is nonetheless well executed may be better than a brilliant policy that is poorly executed. Even if they could not have been more persuasive in design, Australia’s economists should still have much that is useful to contribute in execution. Hopefully more can be drawn into it.

Read the panel’s full responses below:

https://cdn.theconversation.com/infographics/115/8c22ecaf49b3a727fb96e8c3b50da37fd0c28f49/site/index.html


The ConversationThis is an edited version of the summary of the report’s findings originally published by the ESA Monash Forum.

Bruce Mountain, Director, Carbon and Energy Markets., Victoria University

This article was originally published on The Conversation. Read the original article.

Critical backbenchers push back on Finkel clean energy target plan



File 20170613 30327 yxk821
Josh Frydenberg’s task of garnering broad support for the Finkel scheme is proving to be more difficult than expected.
Lukas Coch/AAP

Michelle Grattan, University of Canberra

A sizeable slice of his backbench has sent Malcolm Turnbull a forceful message that his road to implementing the clean energy target (CET) proposed by the Finkel inquiry will be rocky even within his own ranks.

After Energy Minister Josh Frydenberg gave an extensive briefing on the Finkel plan to the Coalition partyroom on Tuesday morning, MPs later reconvened for nearly three hours of questions and debate.

About one-third of the 30-32 who spoke expressed misgivings, according to Coalition sources. There was broad support from another third. The rest didn’t express a firm view, asking questions and seeking more information.

The report from the panel led by Chief Scientist Alan Finkel says a CET “will encourage new low emissions generation [below a threshold level of carbon dioxide per megawatt hour] into the market in a technology neutral fashion”.

A key issue will be where the government, which is disposed to adopt the Finkel plan, sets the threshold. It is clear that to accommodate the Nationals and a section of the Liberal Party it will have to be at a level that allows for the inclusion of “clean” coal.

The meeting was to gauge backbench views ahead of cabinet considering the report. Ministers, apart from the minister with carriage of the issue, don’t speak on these occasions.

Tony Abbott, who had publicly flagged his belief that the Finkel scheme represents a tax on coal, spoke strongly at the meeting.

The degree of pushback against a CET was stronger than had been anticipated, given the intense lobbying of the backbench that Frydenberg had done ahead of the meeting.

Frydenberg said afterwards: “I want to emphasise that this meeting was not making any decisions about Dr Finkel’s proposal. Rather, it was an information-gathering session.”

A common theme from backbenchers was that it was vital to be able to be confident the Finkel plan would make energy more affordable. A number of MPs, especially from outer suburban and regional areas, said affordability was what mattered most to their electorates.

Some questioned the Finkel modelling showing that prices would fall. The chairman of the backbench environment committee, Craig Kelly, said: “If you believe that you can lower prices by replacing existing coal-fired generation with higher-cost renewables, then I have a harbour bridge to sell you.”

Concern was expressed about the place of coal, and there was criticism of Finkel’s projection of an effective renewable energy target of 42% by 2030. Some backbenchers believed it would take the Coalition too close to Labor, which has a 50% target. There were also queries about the status of the Paris targets.

But Frydenberg told the ABC: “There was an overwhelming feeling among those in the party room tonight that business-as-usual is not an option.”

Asked on 7.30 “are you going to be able to get your colleagues to agree to support a clean energy target?,” Frydenberg replied: “It is too early to say.”

Finkel met with the government’s backbench environment committee on Tuesday to explain his plan and answer questions.

Frydenberg conceded that backbenchers “are concerned about the future of coal”. But he flatly rejected the Abbott suggestion that the Finkel plan amounted to a tax on coal, saying it was “absolutely not”.

“Dr Finkel has made it very clear he is not putting in place any prohibitions on coal or any form of generation capacity. He is putting in place incentives for lower emission generation. It is not a price on carbon or a tax on coal.”

The CET had “similarities to what John Howard put forward back in 2007”, Frydenberg said – a point he made in his briefing to the party meeting.

Deputy Prime Minister Barnaby Joyce also slapped down Abbott’s proposition that the CET amounted to a tax on coal, telling Sky that “Mr Abbott’s entitled to his opinion” but “there is no penalty placed on coal.

The Conversation“There is an advantage that is placed on those that are below the line. An advantage, because they get a section of a permit, which is like a payment. Those above the lines don’t … I suppose ipso facto it could be seen as not having the same advantage.”

https://www.podbean.com/media/player/icjdu-6b9a25?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Global clean energy scorecard puts Australia 15th in the world


Alan Pears, RMIT University

Australia ranks equal 15th overall in a new World Bank scorecard on sustainable energy. We are tied with five other countries in the tail-end group of wealthy OECD countries – behind Canada and the United States and just one place ahead of China.

Called the Regulatory Indicators for Sustainable Energy (RISE), the initiative provides benchmarks to evaluate clean energy progress, and insights and policy guidance for Australia and other countries.

RISE rates country performance in three areas – renewable energy, energy efficiency, and access to modern energy (excluding advanced countries), using 27 indicators and 80 sub-indicators. These include things like legal frameworks, building codes, and government incentives and policies. The results of the individual indicators are turned into an overall score.

The majority of wealthy countries score well in the scorecard. But when you drill down into the individual areas, the story becomes more complex. The report notes that “about half the countries with more appropriate policy environments for sustainable energy are emerging economies,” for example.

The RISE ranking.
RISE report

The report relies on data up to 2015. So it does not account for recent developments such as the Paris climate conference, the Australian National Energy Productivity Plan, the widespread failure to enforce building energy regulations, and the end of Australia’s major industrial Energy Efficiency Opportunities program under the Abbott government.

Furthermore, Australian electricity demand growth has recently re-emerged after five years of decline.

But the World Bank plans to publish updated indicators every two years, so over time the indicators should become a valuable means of tracking and influencing the evolution of global clean energy policy.

Australia

Australia’s ranking masks some good, bad and ugly subtleties. For example, Australia joins Chile and Argentina as the only OECD high-income countries without some form of carbon pricing mechanism. Even the United States, whose EPA uses a “social cost of carbon” in regulatory action, and has pricing schemes in some states, meets the RISE criteria.

Australia also ranks lower than the United States for renewable energy policy, at 24th. This is due to scoring poorly in incentives and regulatory support, carbon pricing, and mechanisms supporting network connection and appropriate pricing. But we are saved somewhat by having a legal framework for renewables, and strong management of counter-party risk. It’s not clear how recent political uncertainty, and the resulting temporary collapse of investment in large renewable energy projects, may affect the score.

I have argued in the past that Australia is missing out on billions of dollars in savings through its lack of ambition on energy efficiency. Yet we rate equal 13th on this criterion, compared with 24th on renewable energy. It seems that many other countries are forgoing even more money than us.

In energy efficiency, we score highly for incentives from electricity rate structures, building energy codes and financing mechanisms for energy efficiency. Our public sector policies and appliance minimum energy standards also score well. Our weakest areas are lack of carbon pricing and monitoring, and information for electricity consumers. National energy efficiency planning, incentives for large consumers and energy labelling all do a bit better. Of course, these ratings are relative to a low global energy efficiency benchmark.

The rest of the world

Much of the report focuses on developing countries. There is a wide spread of activity here, with some countries almost without policies, and others like Vietnam and Kazakhstan doing well, ranking equal 23rd. China ranks just behind Australia’s cluster at 21st.

RISE shows that policies driving access to modern energy seem to be achieving results. The report suggests that 1.1 billion people do not have access to electricity, down from an estimated 1.4 billion a few years ago. A significant contributor to this seems to be the declining cost of solar panels and other renewable energy sources, and greater emphasis on micro-grids in rural areas.

The report highlights the importance of strategies that integrate renewables and efficiency. But it doesn’t mention an obvious example. The viability of rural renewable energy solutions is being greatly assisted by the declining cost and large efficiency improvement in technologies such as LED lighting, mobile phones and tablet computers. The overall outcome is much improved access to services, social and economic development with much smaller and cheaper renewable energy and storage systems.

The takeaway

Screen Shot at am.
RISE report

RISE finds that clean energy policy is progressing across most countries. However, energy efficiency policy is well behind renewable energy. “This is another missed opportunity”, say the report’s authors, “given that energy efficiency measures are among the most cost-effective means of reducing a country’s carbon footprint.” They also note that energy efficiency policy tends to be fairly superficial.

Australia’s ranking on renewable energy policy is mediocre, while our better energy efficiency ranking is relative to global under-performance. The Finkel Review and Climate Policy Review offer opportunities to integrate renewables and energy efficiency into energy market frameworks. The under-resourced National Energy Productivity Plan could be cranked up to deliver billions of dollars more in energy savings, while reducing pressure on electricity supply infrastructure and making it easier to achieve ambitious energy targets. And RISE seems to suggest we need a price on carbon.

The question is, in a world where action on clean energy is accelerating in response to climate change and as a driver of economic and social development, will Australia move up or slip down the rankings in the next report?

The Conversation

Alan Pears, Senior Industry Fellow, RMIT University

This article was originally published on The Conversation. Read the original article.

China: Clean Coal Leaders


The link below is to an article reporting on how China is leading the world in the search for clean coal energy.

For more, visit:
http://www.scidev.net/en/agriculture-and-environment/news/china-leading-global-efforts-on-clean-coal.html