We're zeroing in on a climate peace of mind - Grattan Institute

It’s one thing to boast about ending the climate wars. It’s another, much tougher, thing to secure the peace

The Albanese government’s climate legislation has passed the House of Representatives and looks sure to pass the Senate.

And once it does, the government will be forced to put policies in place to achieve the target of a 43 per cent cut in carbon emissions by 2030 and net-zero emissions by 2050.

Here’s the thing: net zero requires every part of the economy to change.

The electricity sector is on its way – in part thanks to householders buying solar panels, and much of the rest thanks to the policies of state governments.

But the rest of the economy isn’t moving in the right direction. The emissions from industrial sites, mines, gas plants, cars, planes, and trucks have all been growing.

The Albanese government has a big task ahead of it, but it shouldn’t try to tackle everything at once.

Step one should be limiting emissions from big industrial sites, mines, and gas plants.

The so-called Safeguard Mechanism (introduced by the previous Coalition government) puts caps on pollution from big industrial sites, mines, and gas plants.

These caps are pretty light at the moment, but the Albanese government has committed to push them down over time. And it should ignore hysterical claims of massive job losses and economic doom as it does so. Two-thirds of these big industrial sites have already made their own commitments to reach net zero. They would not have done this if they thought it would be bad for business. It’s time for them to make good on what they’ve told their shareholders.

Step two is fixing the electricity market.

Climate Change and Energy Minister Chris Bowen inherited a diabolical mess of patchwork regulation, half-completed reforms, and poor relationships with the states.

All these, plus the weather and the war in Ukraine, are pushing prices up.

Cheaper electricity is the key to emissions reductions across the economy – whether through electric cars, cleaner manufacturing, or zero-carbon mining. It’s wellaccepted that the market is a mess in part because the previous government refused to provide it with clear direction about when coal and gas would leave the system. Chris Bowen can work with the state energy ministers to fix this.

Set a clear emissions target for the sector for 2030 and a date for net zero. Business can then get on with the job of building new generators to replace failing coal; regulators can get on with market reform to keep the system stable. And we’ll all benefit by getting cleaner, more reliable electricity sooner – at prices we can afford.

Step three is the hardest part: making sure that ordinary Australians don’t bear the brunt of the historic transition to net zero.

Filling up the car, putting food on the table, and paying the rent or the mortgage are already more expensive than they were last year.

Two well-executed government backflips could protect households from immediate and future price rises.

Energy companies have made a motza since February, thanks to high coal and gas export prices and electricity market chaos. These windfall profits will come out of our pockets, in the form of higher electricity and gas bills.

Treasurer Jim Chalmers should offer the energy companies a deal: make gas and coal available to the domestic market at a reasonable price, to help keep energy bills down. Or, if you won’t do that, I’ll slap a tax on your windfall profits, and use the proceeds to help Australian households.

And as the petrol excise is reinstated next month (as per the decision of the former government), Bowen should impose a ceiling on allowable vehicle emissions. That would force the car companies to supply Australians with better cars that use less fuel.

Don’t worry: this doesn’t mean giving up your HiLux – it means being able to buy a HiLux that uses less fuel for the same grunt.

A vehicle emissions ceiling – with the ceiling gradually being lowered to further reduce emissions – would mean Australian car buyers could get the latest electric vehicles too.

If the federal opposition wants to block either of these two measures, they would need to explain why they want Australians to pay more for electricity, and gas, and petrol.

History shows us it’s not enough to win a war – political survival depends on securing the peace. General Albanese and Brigadier Bowen have some minor Senate skirmishes to face yet, but they can see victory in sight.

General Dutton and his troops need to decide if they will surrender gracefully and help secure the peace.

Or, like Japanese soldiers on remote Pacific islands, fight on for decades oblivious to the changing world around them.

Alison Reeve

Energy and Climate Deputy Program Director
Alison Reeve is the Climate Change and Energy Deputy Program Director at Grattan Institute. She has two decades of experience in climate change, clean energy policy, and technology, in the private, public, academic, and not-for-profit sectors.

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