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The Emissions Trading Scheme Should Not Have Gone Up In Smoke

It took less than 24 hours to scuttle a policy approach that has near universal support from relevant stakeholders.

08/12/2016 9:36 AM AEDT | Updated 08/12/2016 1:37 PM AEDT

Vision Courtesy: ABC News 24

One of the great policy challenges facing Australia is how to transition to a clean electricity system.

Earlier this year, I took this challenge, along with others in the climate change area, to an extensive consultation process with business, workers, environmentalists, policy experts and the general public. On the question of how to transition our energy system, the feedback was almost unanimous: an electricity emission intensity scheme (EIS).

Essentially an EIS puts declining emissions baselines on electricity generation and requires generators who operate above those baselines to pay a fee to those that operate below. This transfer payment makes cleaner electricity cheaper and dirtier electricity more expensive, giving a competitive advantage to clean sources of electricity, and minimising the impact on wholesale electricity prices.

In fact, just this week the CSIRO and Energy Networks Australia released modelling that showed an EIS would actually save the average household $216 per year on their electricity bill compared to the Government's existing approach.

This is one reason why an EIS is so popular among both electricity generators and large electricity users. It cleans up our electricity generation sector, represents a minimal cost policy approach and eliminates the policy uncertainty that is a straightjacket on industry investment; which itself is putting affordability and security of supply at risk.

An EIS is supported by the Australian Energy Markets Commission, CSIRO, Energy Networks Australia, AGL, Energy Australia, the Australian Energy Council, the Climate Change Authority and the Grattan Institute, to name just a few.

Not only is it the lowest cost option to address an urgent policy challenge, and not only is it supported by the vast majority of stakeholders, but until recently it offered that holy grail in climate change policy; the possibility of bipartisan support.

In my discussions with industry, there has been a widespread and hopeful view that the Turnbull Government were moving to an EIS. The expected plan was simple and widely shared by stakeholders. The 2017 Climate Policy Review would recommend an EIS as the most cost-effective policy option to transition to clean electricity generation and end investment uncertainty.

The Government, supported by industry, would commit to one. They would talk to the Opposition about implementation details, and Australia could look forward to one area of bipartisan achievement in climate and energy policy.

However, in a spectacular backflip this week, the Government has refused to ever support an EIS. After flagging an EIS when announcing the 2017 Climate Change Review's terms of reference, the predictable hard-right Government backbenchers rushed to call an EIS a Carbon Tax and "stupid", neither of which it is.

In a momentous and immediate capitulation, Prime Minister Turnbull blamed Environment and Energy Minister Josh Fydenberg for having raised an EIS, while denying it was ever to be considered. The Minister, having been sacrificed by his boss, denied ever having raised an EIS, even though he can be clearly heard doing so on a ABC radio recording.

By mid-morning Wednesday one thing was clear, an EIS was off the table in the context of the 2017 Climate Policy Review and would not be supported by the Turnbull Government. It took less than 24 hours for the extreme right of the Coalition to scuttle a policy approach that has near universal support from relevant stakeholders, actually safeguards electricity affordability and addresses a desperate issue that is verging on becoming an economic and energy crisis.

The Government has effectively committed to continued policy and investment uncertainty for our energy system. This is a dangerous development that every Australian should be concerned about, regardless of their politics.

Others have and will continue to dissect what this series of events says about the Government and the Prime Minister's ability to lead. That is not my concern here. My concern is sensible climate and energy policy.

I will continue to argue for good climate policy but I or Labor will not change the Prime Minister's mind about an EIS scheme. That is why I call on Australian industry to attempt to do so. In our private discussions, business leaders have often asked me: "How can we better influence the Government to adopt an EIS?" I say to those leaders now; take your case to the Australian people directly. Make the case for leadership from our Prime Minister to deliver sensible policy and an end to damaging uncertainty publicly. Tell the Australian people the truth; their prosperity is being held to ransom by their Government's weakness in standing up to its most extreme and irrational members.

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