| Sourced From Businessspectator.com.au |
The closer we get to the end-game on the debate over the proposed emissions trading scheme, the deeper we slip into the theatre of the absurd.
The latest, we hear, is that the collapse of Australia’s leading solar energy company, Solar Systems, is to be blamed on the structure of the ETS, and the failure to provide adequate compensation to coal-fired polluters.
Solar Systems, if you remember, called in the receivers last month after failing in an 18 month search for new funds that began just two days after the collapse of Lehman Bros. TRUenergy, wrote down the value of its stake in its entirety, although its funding support for a 154Mw solar plant remains in place. It was a balance sheet entry, no matter how unfortunate the timing, and not even TRUenergy, a trenchant critic of the ETS, claimed it to be related to the structure of scheme, a company spokesman reaffirmed this week.
No matter, Greg Hunt, the opposition’s spokesman for climate change, thinks differently. In an extraordinary performance on ABC’s Lateline program on Monday, Hunt began by claiming rising energy prices are not good for the renewable energy industry. “There’s a big difference between inaction, which is unacceptable, and bad action,” he said. “And bad action, which is what’s being proposed here of driving up power prices, can actually halt the transition to a clean energy economy.” Clearly, he needs to do more reading on the subject.
He insisted that TRUenergy “pulled its funding” from Solar Systems because it would not receive enough compensation for the yet-to-be-enacted ETS. “They couldn’t invest in the new energy,” he blathered. “If you simply provide an incentive to change over rather than to drive businesses into the fear of collapse, then they can deal with new energy. But the Solar Systems example shows how a bad design can actually hurt the clean energy economy.”
TRUenergy has since sought to have a quiet word in Hunt’s ear, but the fact that a person like Hunt is now prattling such nonsense is particularly depressing for many, as he is otherwise regarded as a deep thinker about the issue, unlike Barnaby Joyce and his apocalyptic visions of an unsustainable soy latte economy. But the pressure to confirm to a party spiel, which itself is borne from a craven capitulation to certain powerful business lobbyists, bodes ill for rational comment.
The government’s ETS is clearly too soft on certain sectors, but is structured in such a way that is said to be “politically acceptable”. It’s struggling on that point, but the opposition’s position is that key heavy emitting sectors should be compensated so much that they need do nothing to abate their emissions.
The Alice-in-Wonderland argument is that not having to do anything will provide them with the incentive to do something. No, me neither, and it clearly hasn’t worked to date. It’s a fairly simply economic principle. Companies do little to abate when there is no price incentive to do so. They don’t do things out of charity.
There are increasing signs that the business community has been split asunder by the nature of the debate. One going all out for maximum compensation, as they would argue their shareholders would expect them to do, and the other urging for sanity to prevail, fully conscious that increased compensation on one side of the ledger means an increased burden on the other.
This latter group is hardly enamoured by the details of the CPRS, feeling the targets are feeble and the compensation too generous and poorly directed. But it is all they have to work with and the overwhelming feeling is that at least it provides some mechanism to deliver the message that carbon emissions must carry a price, and boards across all industries must learn to act accordingly.
The group that is taking the leading role in this debate, the Investor Group on Climate Change, representing about half of the money managed by fund managers in the Australian economy, is becoming increasingly strident in its attempts to balance the debate.
The IGCC think it’s laughable that coal-fired generators be given more compensation in the manner prescribed by the opposition, absurd that fugitive emissions coal mines be excluded from the scheme, and ridiculous that farmers should be offered the opportunity to cash in on carbon offsets but receive permanent protection from their emissions. It’s a simple matter of recognising both sides of a balance sheet.
“As portfolio investors, we consider that compensating generators sets a precedent in the government, and ultimately other sectors in the economy in which we invest in, picking up the costs for a sector not effectively considering investment risk,” it says.
“Such a precedent for compensation will fundamentally change the risk/return equation important for the appropriate and efficient investment of capital within the sector and the Australian economy.”
Some wag suggested at conference last week that such proposals would be like might compensating OPEC because the world will end up using less oil.
Well, it turns out that Saudi Arabia and other Gulf nations made such a demand at the recent climate talks in Bangkok, arguing that they were “seriously disadvantaged” by the move away from fossil fuels.
They disputed estimates by the International Energy Agency, a body established some 40 years ago to protect the interests of oil producing countries, that OPEC revenues would increase four fold to a total of $23 trillion in the years from 2008 and 2030, courtesy of rising prices. No they said, the IEA has deliberately fudged the numbers, and OPEC member nations should receive subsidies for lost revenues. Perhaps they could borrow a leaf from Hunt’s portfolio of arguments and insist that a failure to provide compensation to the Gulf sheiks would be bad for renewables.
