Climate conceit
Labor's climate policy is so full of holes that it will haunt Albanese until election day. By Nick Cater.
Anthony Albanese would have done himself a favour by announcing something a little less extravagant last week than Labor’s Powering Australia plan. He played down Labor’s policy as modest, but his ambitions were brimming with conceit.
Labor’s plan, he claimed, would fix it all. It would cut emissions, create jobs, punish big polluters, spruce up the grid, drive tens of billions of dollars of investment and subsidise electric cars.
And the cost? Less than nothing. In fact, an Albanese government would knock $275 off the average household electricity bill in its first term. It was a bold claim to make, one journalist said, pointing out there had been a lot of unfulfilled promises of this kind. How robust was the Opposition Leader’s claim of a $275 saving? “Well, I don’t think, I know,” Albanese said. “I know because we have done the modelling.”
Albanese is determined to avoid the mistakes of his predecessor, who went to the 2019 election with a policy backed by little more than virtuous intent. Albanese was one of the first to acknowledge that a target of a 45 per cent reduction by 2030 was a mistake. The new 43 per cent target, on the other hand, is modest. “We do not pretend that it is a radical policy,” he said.
This time, Albanese assures us, Labor’s target is backed by “the most comprehensive modelling ever done for any policy by any opposition in Australia’s history since Federation”. In other words, never mind the quality, feel the width. Flashing a 43-page document full of graphs at the press gallery and calling it modelling may be enough to satisfy journalistic curiosity in the short term, but if the modelling is to survive until May it will have to be good.
You would not want to assume that the wholesale price of energy will fall from about $50 a megawatt hour to $30, as Labor’s modelling does, without considering what that will do to the economics of coal generation. What would happen when coal generators rapidly exit the market, as they would be bound to do if they don’t want to run at a loss? Labor’s promise of a $275 reduction assumes existing coal generators will remain part of the mix.
Nor would you want to assume big emitters will simply be able to buy carbon offsets to comply with Labor’s mandate to accelerate emissions cuts without asking how much that will cost consumers or how many jobs will be lost. The cost of carbon credits is about $40 a tonne and rising. How much will emitters be forced to pay for them by 2030? Will that be passed on to consumers, or can it be plucked from the air?
A forecast of cheaper energy prices ignores the cost of capital and requires us to assume the cost of renewable energy is low. The question of who pays for the substantial upgrade of the grid required to support more wind and solar is left hanging, as is the cost of firming these inherently squelchy sources.
The bottom line is that Labor’s accelerated target will require hundreds of billions of dollars of investment in the next five years, some private, much of it public, and only vaguely hinted at in the policy document. It will impose higher costs on business, squeeze margins and kill jobs. All the costs will be sheeted home to the citizens in one form or another since government has no money of its own, only that which it extracts from individuals and businesses or borrows on their behalf. The cost of private investment and penalties to heavy emitters must be passed on to consumers or withheld from shareholders who can expect smaller dividends. That, in turn, will reduce capital investment and reduce the income of retirement savers, adding to the economic omnishambles this exercise in central planning will cause.
With holes as big as this in his modelling, Albanese can expect climate and energy policy to haunt him until election day as surely as it attached itself to Bill Shorten like some godforsaken seabird in a Samuel Taylor Coleridge poem. Economic modelling, no matter how fancy, is never going to pass the Caboolture pub test, which is where Albanese’s fate will be decided.
Nor does it help him wriggle out of the Goldilocks trap, the dilemma of delivering a climate policy warm enough to appeal in artisan bakery land and cool enough to avoid a blue-collar revolt. No amount of modelling can arrive at a trade-off that will satisfy both constituencies.
Friday’s announcement was accompanied by a warning of an imminent government scare campaign built on what Albanese bravely insisted was a lie. Labor’s proposal did not amount to a carbon tax, he said. Yet the detail of the policy shows a multiplicity of carbon taxes interacting with the economy in unpredictable ways that will act as a drag on growth for the next decade.
Missing from Friday’s announcement was the conspicuous display of moral virtue Labor once imagined was the key to winning the climate policy debate. The party’s losses in Queensland in particular in 2019 shook any illusion that a Labor leader could be swept to power in the cloak of a climate crusader.
The climate-change movement has developed radical cultish tendencies, giving rise to a new test for purity: the acceptance that climate change is not only real but an existential threat.
By falsely describing his own proposal as modest, Albanese will find it harder to prevent inner-city Labor voters defecting to the Greens in seats such as Macnamara and Cooper. If climate change is your thing, you’re inclined to go with the genuine article rather than half-measures.
Wise heads in federal Labor have been arguing the party’s only way through is to embrace a small-target strategy, adopting policies closely matching those of the Coalition. This was never going to work for Chris Bowen, Labor’s climate spokesman, who was hardly going to be prepared to fly under the radar.
To the extent that voters’ minds will be on the warming planet when they go to the polls next year, rather than, say, health services and the cost of living, Bowen and Albanese’s proposal may not yet prove modest enough.