Politics wins as Turnbull’s flagship energy policy teeters


Any move to cross the floor would probably see Abbott voting alongside Greens MP Adam Bandt to destroy the NEG – one because he thinks it does too much, the other because he thinks it does too little. They cannot both be right.

This is the dismal world of energy and climate politics in Australia, where legislators splinter on every decision. The repeated message to voters is that those they elect to parliament are incapable of a consensus. The federal and state politicians continue the uncertainty, which means investment stalls and prices rise.

Frydenberg’s meeting with state and territory ministers on Friday did not reject the NEG. This is a fundamental point. No vote was taken to halt the policy. Instead, a decision was made to proceed with the draft state legislation to set up the scheme. This delays the final decision on whether the scheme goes ahead.

The state bill will be released in draft form early next week, in parallel with the discussion in the Coalition party room on the separate federal bill that is needed to cut carbon emissions by 26 per cent in the electricity sector.

The next deadline is set by the four-week consultation period of the state bill, giving Frydenberg a trigger for another discussion with the states and territories in the second half of September.

A decision is impossible once the end of October arrives because Victoria will enter caretaker mode for the November 24 state election.

A compromise is difficult. Victoria is probably asking too much. The key demand from Victorian Energy Minister Lily D’Ambrosio is that the emissions target should be increased by regulation without the need for legislation in federal parliament.


This raises an enormous question. Should a future energy minister be able to increase the target at the stroke of a pen? This would turn the tables on parliament, because the Senate would have to gain a majority for a “no” vote to overturn any change to the target.

Many routine government decisions are done by regulation, but the emissions target is not routine.

Why would the Coalition party room vote next week to offer this concession, allowing a future federal Labor government to make a huge policy decision without seeking the prior approval of parliament? Frydenberg rejects this condition.

This is a nightmare political scenario where the stars must align perfectly for the NEG to proceed. History suggests this rarely happens in climate politics. To kill off the energy policy is to raise the stakes on all sides at the next federal election.

Turnbull would have to go to voters with the NEG as a policy pledge rather than a legislated scheme. Opposition Leader Bill Shorten would have to reveal his own mechanism to deliver his promise of a 45 per cent cut to emissions – unless he chose to repudiate his Victorian Labor colleagues and endorse the NEG in principle and adjust some of its settings.

In the meantime, Andrews would have to fight a state election against accusations he is denying households a policy that might help with reliability and prices.

There is, however, a slim chance the NEG is released from its holding cell.

The dispute over process tells Australians this is all about politics. Who goes first? The Labor states have engineered an outcome where Turnbull faces the party room before he goes back to the states and territories to ask for their final decision. The process took priority over any question about the actual design of the scheme.

It is also revealing that those who raised objections to the NEG did not put forward an alternative. When asked what would be better than the NEG, even the most vocal Labor or Green minister did not advocate an emissions trading scheme, an emissions intensity scheme or a carbon tax.

The NEG has been over-sold with the promise of a $550 price cut that is inherently unreliable, but the failure of the scheme would lead to a policy vacuum that offers nothing except greater uncertainty and higher prices.

The weight of informed opinion is in favour of the NEG. Some of those who fought for action on climate change over the past decade acknowledge the scheme is capable of scaling up to deliver an emissions target of 45 per cent.

Those charged with overseeing the scheme, like Kerry Schott of the Energy Security Board and Audrey Zibelman of the Australian Energy Market Operator, say the NEG is needed as soon as possible. One of the depressing aspects of climate politics is the way they come under personal attack for expressing their considered opinion.

GetUp! urges politicians to dump the scheme. One industry association, the Smart Energy Council, argues Australia will be fine with nothing for a while. Its chief executive, John Grimes, would prefer a new version of the renewable energy target, the subsidy that has been operating for years.

The message from the loudest critics is that there is no reliability problem. They want the NEG dead. Even so, not a single minister in the talks on Friday uttered the same call.

That means the NEG is alive, just, for now.


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