Tackling climate change is not negotiable
by Tony Wood
Human-caused climate change is affecting the lives and livelihoods of all Australians. Yet the political debate ahead of the next federal election is focused on the cost of the energy transition and its impact on power bills. That narrative must change.
Australia has a bipartisan commitment to achieving a net zero economy by 2050. A key policy challenge is to meet this commitment while ensuring electricity is reliable and affordable. The political response has been unrealistic promises of lower prices. The risk of false promises is to lose voter support for the energy transition when the promises are unrealised.
Labor was elected in May 2022 promising households an annual power bill saving of $275 – about 20 per cent for an average house in Sydney. Instead, those households are now paying 10 per cent more in real terms than they were on election day in 2022. If they receive the government’s bill relief payment, their bill is 12 per cent lower – obviously welcome, but not what was promised, and delivered via government largesse, not a better energy system.
The prospect of a broken promise has created a political line of attack for the opposition: it claims Labor’s renewable energy policies are the cause of high power bills and therefore the pace of the transition must slow down. The first contention is dubious. The second is highly dangerous.
The opposition’s plan is to slow down investment in large-scale renewables and replace them with an extension of ageing coal and more gas until nuclear can be deployed. However, coal plants are already increasingly unreliable, gas is painfully expensive, and the cost of small modular nuclear reactors is unknown. Such a path would also overspend Australia’s limited carbon budget at just the time when it is already under pressure.
The reality for both sides of politics is that delivering lower emissions and reducing power prices is a false target. The need to pay for environmental damage due to fossil fuel combustion is a simple fact, as is the need to address climate change. This is not negotiable – we cannot negotiate with physics.
There is an alternative. It begins with the recognition that tackling climate change is not an ideological choice belonging to the green left. It is an existential necessity.
At a recent Senate inquiry hearing, the CEO of the Australian Energy Market Operator, Daniel Westerman, was asked if he could guarantee that prices would be lower under its Integrated System Plan (ISP). Unsurprisingly he declined to do so. Rather, he explained to the senators that the ISP, an integration of generation, transmission, and storage, provides the lowest-cost pathway to net zero.
Financial analysis published by Grattan Institute in 2021 showed that Australia can move to 70 per cent renewables across the National Energy Market with little risk to reliability or affordability. Achieving 90 per cent renewables will be more expensive but will slash emissions at a relatively low cost. Big price reductions are unlikely, but neither are big price increases.
The question is not whether we make the journey to net zero, but whether we do it well or badly. Lowest cost will lead to lowest prices, provided the market is well-regulated and competitive.
The path to a successful energy transition leads through essential market reforms:
- Extend the role of the ISP to underpin a credible plan for delivering a least-cost, reliable, net zero energy market.
- Develop the case for, and design of, a market structure that will help ensure adequate energy resources in a post-coal, high-renewables electricity system. Better integrate and orchestrate all forms of distributed energy resources, including household rooftop solar systems, batteries, and electric vehicles.
- Signal the introduction of a clear and enduring carbon price for the electricity sector to guide investment decisions, including gas plant entries and exits. Reforming and operating the market becomes easier if participants have predictability over when, and how much, they must pay to pollute.
This will not be easy.
Recent surveys by IPSOS and CSIRO reported a softening in Australians’ support for the energy transition due to concerns about cost of living and power system reliability.
Yet the latest State of the Climate report, published last week by CSIRO and the Bureau of Meteorology, makes it starkly clear: Australia’s climate has already warmed by more than 1.5 degrees. How bad it gets will depend on the speed at which global greenhouse gas emissions are reduced.
Australia urgently needs a change in the political narrative, to one that explains what must be done, in what way, and with what consequences. Australians deserve no less.