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Business to go it alone on energy, climate policy

Business to go it alone on energy, climate policy

The nation's energy companies and biggest electricity users have given up on politics and begun backroom talks about a self-regulated package of measures to reduce greenhouse gas emissions, restore energy reliability and improve investor stability.

In a move that leaves the Morrison government isolated, the go-it-alone initiative is being led by the Business Council of Australia and involves more than 20 companies that comprise the BCA's Energy and Climate Change Committee.

They include energy generators and retailers, manufacturers, mining giants and gas and oil multinationals.

The companies supported the National Energy Guarantee, which would have mandated emissions reduction targets and reliability targets for energy retailers.

The policy was used by right-wing Liberals to mount the leadership push against Malcolm Turnbull.

Subsequently, new Prime Minister Scott Morrison dumped the federal government's commitment to the NEG and stripped from the energy portfolio any requirement to drive down carbon emissions.

Australia has pledged to meet its Paris target of reducing emissions by 26 per cent to 28 per cent on 2005 levels by 2030. The lack of policy once more has left the business and industry sectors frustrated and bewildered.

The Australian Financial Review can reveal that an industry-led, go-it-alone approach was discussed by the BCA's Energy Climate Change Committee at its quarterly meeting on Tuesday. It was also tossed around at a separate gathering of chief executives on Monday that discussed a range of policy challenges.

While the concept is still embryonic, sources said it would be an industry-wide program that would place obligations on participants and help ensure Australia met its Paris commitments.

It would not involve carbon trading or a cap and trade mechanism.

"It's a package, not a scheme, for industry, versus waiting for government to come up with something else, another acronym which becomes the anti-Christ for the political right or left," said one source involved in Tuesday's talks.

"Someone has got to do something here. This has to be industry led unless government wants to take over markets.

"Is there stuff industry can get on and do why politics sorts itself out?"

The plan to nut out an emissions reduction pathway, independent of government, was alluded to by Origin Energy chief executive officer Frank Calabria at The Australian Financial Review National Energy Summit on Wednesday.

"I do believe that the recent 12 months is another example where I'm not sure we will get that leadership, or co-ordinated leadership on emissions," he said.

"And as a result the industry needs to focus on how it can ... determine a way with the various operating bodies to determine what we can do on emissions and at the same time focus on getting supply in, prices down and making sure we have the lights on over summer."

The industry was shocked when new Energy Minister Angus Taylor, in his first major speech, played down the importance of investor certainty, which was one of the aims of the NEG.

An industry source said the new plan "is about stability, not certainty". An energy company, for example, which owned a coal-fired power station and was looking to upgrade it or convert it to gas, had no guidance any more and, even if there were rules, could not be sure that would change with a change of government.

"At the moment, we don't know what the rules are," the source said.

The concept of business and industry going it alone was first predicted in February last year by former Treasury secretary Ken Henry, as he lamented the poor state of politics.

"The biggest challenge confronting the energy sector is that climate change policy in Australia is a shambles," he said.

The frustration was underscored on Wednesday when business and regulators at the Summit slammed the lack of policy certainty ahead of next year's federal election, with no bipartisanship on energy policy and a major divide between the Coalition and Labor on how to reach the country's international climate targets.

The government believes Australia will meet the Paris targets "in a canter"; without doing anything while Labor has proposed higher emissions reduction targets.

Mr Taylor was unrepentant and said he had a simple focus of cutting power prices and ensuring reliable supply.

"There is no room for bipartisanship when we have a 26 per cent [reduction target] and the other side has 45 per cent," he told the Summit.

He says the "big stick" of a threatened royal commission into energy prices he will wield to ensure energy companies reduce prices for businesses and households can be put away if the industry works with him on cutting prices.

Mr Taylor said his preference is for industry to lead the drive to reduce energy costs and in particular what he views as excessive prices on many standing agreements with small businesses.

"Work with me to deliver, and the big stick can go back in the bag," Mr Taylor warned.

The chairman of the Energy Security Board, Kerry Schott, whose board was behind the development of the NEG, is still fuming that it was ditched by a deeply divided federal government.

Ms Schott said she was still going through the traditional stages of grieving over the death of the NEG and she "hasn't left anger yet".

However, she thought it premature to label the NEG as "dead" and called for reliability measures to be implemented by the states, something Mr Taylor supports.

Labor's energy spokesman, Mark Butler, told the Summit Labor was consulting widely with various stakeholders on whether it would revive the NEG should it win the next federal election due by May 2019.

But he pointed out the foundation for it was that there be bipartisan support.

"The NEG rests on a principle that the two major parties agree the rules," Mr Butler said.

But it was highly likely that Labor would back the reliability mechanism components of the NEG.

"I think it would be a real pity if we lost that work particularly in the reliability part of the NEG."

Mr Butler also said the Australian Competition and Consumer Commission's report on retail pricing was a robust and very worthwhile document.

But it was much more important to have a clear and consistent set of over-arching rules put in place by government so that investment certainty could occur for companies wanting to invest.

"I think there is much to like in the ACCC report," Mr Butler said.

"The ACCC report is not an alternative to good investment rules."

This week, the government all but dismissed the latest report on global warming by the International Panel on Climate Change.

Financial Review

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