Coalition fudge in Australia means a NEGative outcome

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An energy policy devoid of emissions reductions is what the Australian federal government, under Prime Minister Malcolm Turnbull, is now proposing. After an extraordinary capitulation to a motley crew of climate policy wreckers led by former PM Tony Abbott in the ruling coalition, the federal legislation required to set an emissions reductions target will not be introduced into parliament.

The much-maligned National Energy Guarantee (NEG) had been promoted as a solution to the energy ‘trilemma’ of securing lower costs while reducing emissions and ensuring security of supply. It now addresses a plain old dilemma – kind of. It was also the policy intended to replace the Renewable Energy Target (RET) which will terminate in 2020.

Australia’s state governments, and the Australian Capital Territory, will now be asked to pass legislation enacting the reliability component of the NEG but there will be no clean energy ambition, nor any emissions reductions.

“The NEG can operate to create investment certainty without an emissions intensity standard,” said Turnbull at an extraordinary press conference yesterday, flanked by Treasurer Scott Morrison and Energy Minister Josh Frydenburg. “At this stage, we cannot secure sufficient support… but the important thing, in addition to getting lower electricity prices, is to keep the lights on. We think it would be very valuable to continue with a reliability guarantee.”

Early indications, however, is that there will be great reluctance to do so – wasting many months’ effort that went into negotiating the policy.

Opposition appeal snubbed by coalition

“The NEG is dead,” said ACT Energy Minister Shane Rattenburg – a Greens representative – in an official statement. “Federal energy policy is being determined by the worst, climate-change denying elements of the Liberal Party.”

Others took to less formal means to respond but were no less scathing. Queensland Energy Minister Anthony Lynham said on Twitter he was: “Sad that national energy policy has descended into chaos and confusion.”

Victoria’s Lily D’Ambrosio, fresh from announcing her government’s proposal to subsidize more than 2 GW of small-scale solar, told Guardian Australia: “I am not sure Malcolm Turnbull knows what the NEG is any more, or if it still exists.”

The Turnbull government’s strategy to press pause on NEG emissions reduction legislation came with a complete repositioning of its policy towards energy cost reduction. That had been trailed for some time in government messaging but is now formalized in the policy agenda.

“Our energy policy remains the same, but we will not present a bill into [the] House of Representatives until we know that it will be carried,” said Turnbull. “Obviously we need the support of a sufficient number of our colleagues, which means substantially all.”

At the press conference, Turnbull was repeatedly reminded that with bipartisan support, the NEG emissions reductions legislation may well have passed. It was a point opposition leader Bill Shorten was quick to emphasize.

‘Labor wants to drive up energy prices’

“We would like to talk about energy prices, as long as it includes more renewable energy, lower prices and less pollution,” said Shorten in a press conference alongside Shadow Energy Minister Mark Butler. “The real problem is Mr Turnbull believes bipartisanship is when he can get the two wings of his own party to agree – he is not talking about us. I say to Malcolm, you have my number, we are down the hall from you, on other issues we have worked together.”

By contrast, Turnbull, Morrison and Frydenburg did all they could to distance their coalition policy from Federal Labor’s.

“I have not discussed the measure with the opposition but the reality is that Labor’s position is quite clear, they want to drive prices up… 45% [emissions reduction] instead of 26%,” said Turnbull. “We are poles apart from Labor when it comes to energy policy. That’s the difference, Labor is for higher electricity prices.”

Replacing the NEG, Turnbull pointed to a series of measures the government will take aiming to put downward pressure on prices. Largely following on from the Australian Competition and Consumer Commission (ACCC) recommendations, the measures will beef up the ACCC and the Australian Energy Regulator’s role – and provide them an additional $32 million (US$23.5 million) in funding.

Business groups unimpressed

The new measures have been cherry-picked from the ACCC’s recent report, and will take a multi-faceted approach to delivering lower prices – from underwriting dispatchable generation investment to price regulation, and the ability to direct and punish market participants. At the extreme, the measures could involve utility divestment, a recommendation the ACCC had shied away from. They could also, it seems, be used to force a generator to keep facilities – like the aged Lidell coal-fired power station – running.

In a positive sign for solar, there was no mention of the ACCC’s recommendation to wind up the Small Scale Renewable Certification scheme early.

At the press conference it appeared likely the states will also have to agree to work with the Commonwealth to enact the regulations. Whether they will do so, in light of the NEG fiasco, remains unclear.

Business groups and utilities have, perhaps not surprisingly, reacted angrily, having previously lined up in support of the NEG.

The NEG, it appears, is dead. Long live the RET?