The Greenhouse Mafia strikes again

Originally published in Arena Magazine.

During the prime ministership of John Howard, the term ‘greenhouse mafia’ was coined to describe the fossil fuel industry representatives who were so influential they were literally writing the Federal Government’s climate and energy policies. With Martin Ferguson as Labor’s Minister for Resources and Energy, it seems very little has changed. The draft Energy White Paper (EWP), released in December 2011, provides as clear an indication as ever of the access and esteem granted to the organisations and individuals whose profits depend on Australia maintaining its fossil fuel-dependent status quo.

The EWP addresses questions central to the supply and use of energy in Australia and points to strategic priorities for the government in the face of expected challenges over the period to 2030. The answers it comes up with are as strikingly beneficial to fossil fuel industry interests as they are disdainful of the growing importance of renewable energy and the reality of responding to global warming.

The vision put forward in Ferguson’s EWP is one of a nation continuing to expand its fossil fuel use and exports, albeit under the Orwellian banner of a ‘clean energy transformation’. As the EWP proudly notes, ‘Australia is currently the world’s largest coal exporter, third-largest uranium producer and in future years will be the second-largest liquefied natural gas (LNG) exporter’. Ensuring major, ongoing growth trends in fossil fuel exports, particularly to Asia, is a significant theme of the paper. Domestic energy supply will continue to be met by coal, made less emissions-intensive by the assumed commercialisation of carbon capture and storage (CCS) technology, and will see an increasing reliance on gas, which is expected to account for 44 per cent of Australian energy supply in 2050. Some diversification into renewable energy sources is envisioned, with qualified support for the potential of large-scale solar, geothermal and wind power. At the same time, the paper suggests the introduction of nuclear power should be considered. The EWP’s vision is also one of a fully privatised, deregulated energy sector, in which protecting the sanctity of the market is prioritised over the promotion of zero emissions technologies.

To begin to understand the EWP’s outcomes, it is worth noting the reference group that Minister Ferguson put together to help write it. The group does not include one person with any expertise or exclusive interest in renewable energy. There is also not a single representative from community or environment groups. Instead, the list of those invited to the table reads like a roll call of the usual suspects: BHP Billiton; Rio Tinto; Xstrata Coal; Woodside Energy; Caltex Australia and so on.

In many ways, the EWP is a typical neoliberal document in the tradition of the last few decades of Labor and Liberal party policymaking. It calls for the privatisation of all remaining government-owned energy assets and full deregulation of retail energy pricing. The EWP also sets the scene for the scrapping of policies designed to support the deployment of renewable energy, lending weight to the view that carbon pricing is considered a sufficient, catch-all response to emissions reduction by the Gillard Government. During his launch of the draft EWP, Minister Ferguson underscored this point by announcing the scrapping of the Government’s promised emissions standards for new coal-fired power stations, no longer seen to be necessary given the passage of the carbon price legislation.

Also in Ferguson’s sights are the various feed-in tariff schemes introduced by state and territory governments to support the uptake of solar panels. According to research presented in September 2011 at a renewable energy symposium in Taiwan, feed-in tariffs have been responsible for 64 per cent of wind energy and 87 per cent of solar energy installed worldwide. Rather than giving due credit to this effective policy instrument, the EWP dismisses it as a ‘market distortion’. In the meantime, the distortionary implications of support for the development of controversial carbon capture and storage (CCS) technology, assumed in the EWP to allow coal to continue to play a major role in Australia’s energy future, is not brought into question. Nor is the over $10 billion in fossil fuel subsidies already supplied by taxpayers annually.

The introduction of a low carbon price and the absence of policies to support renewable energy deployment will ensure the increasing exploitation of fossil gas, including gas from non-conventional sources such as coal seams. Widespread community opposition to the emerging coal seam gas (CSG) industry is treated in the EWP as a minor hurdle. Rather than legitimise concerns about what the destructive impacts of this industry and what its planned expansion will mean for farming, water supplies and greenhouse gas emissions, the document merely notes that effort will need to be applied to build community support. More fundamentally, the assumption that gas is a ‘clean energy’, creating lower emissions than coal may not even be true, particularly when it comes to non-conventional sources with high uncertainty around fugitive emissions. Very little research has been done on the life-cycle emissions of gas, with at least one recent report suppressed by the gas industry.

The EWP displays a rose-coloured glasses approach when it comes to the future price of fossil fuels. Dismissing outright the potential for peak oil to occur between now and 2035, the EWP predicts an oil price of US$120 a barrel (in real terms) in 2035. That amounts to an approximate increase of 54 per cent on 2010 prices over twenty-five years, which seems especially naive considering the 300 percent oil price increase over the last seven years acknowledged by Minister Ferguson in his speech to launch the EWP.  Ferguson also admitted that the eastern states of Australia will be exposed to global gas prices once the export terminal in Gladstone is complete around 2015, which is likely to see gas prices triple and become as volatile as oil prices are currently.

Modelling included in the EWP also exposes Minister Ferguson’s questionable grasp on the price of renewable energy. Research by the University of Melbourne’s Energy Research Institute, commissioned by Ross Garnaut in May 2011, showed that the Department of Resources, Energy and Tourism was consistently overestimating prices for renewable energy. In the case of rooftop solar panels, the study showed that they are already cheaper than the prices Ferguson’s department predicted they would fall to in the year 2030! Despite publicly acknowledging this data and promising to note changes to the cost of renewable energy, the EWP reflects continued use of outdated figures. One week after the EWP was launched, finance analysts at Bloomberg revealed that the cost of wind power had been exaggerated by 50 per cent, and the price of solar power by 300 per cent in EWP modelling.

Leaving aside these flaws in the EWP it is worth asking, more fundamentally, what a strategic, long-term energy policy for a wealthy, emissions-intensive country like Australia should look like, given what we know about global climate change and energy trends.

A forward-looking energy policy not tainted by vested interests would recognise the twin realities of the urgent need for emissions reductions and the favourable economics of a switch to renewable energy. It would recognise that these transitions require strong government leadership and support.

Policies built on this analysis do exist. One example is the Danish Government’s recently released package of initiatives, Our Future Energy which clearly emphasises the need to ‘avoid becoming trapped with inefficient and non-renewable technologies… [and] caught with an expensive and outdated energy sector in 30-40 years’. The investment required to meet its target of 100 per cent renewable energy in national energy supply by 2050, expected to amount to a net cost of less than 0.25 percent of that country’s GDP in 2020, is considered a necessary insurance policy to avoid higher costs in the longer term due to increasing prices of non-renewable energy.

The EWP contains no such vision. Instead, it shows that there is a contradiction at the heart of the Gillard Government’s climate and energy policies. On the one hand it fought to get the carbon price through parliament in 2011, while on the other Australia’s planned fossil fuel export projects will generate at least eleven times as many annual emissions as will be saved by the Clean Energy Future package. As Guy Pearse recently calculated, these projects will also contribute a staggering one eighth of the global carbon budget to avoid 2 degrees C global temperature rises (which, as many have explained, may not avoid disastrous impacts) between now and 2050.

The EWP claims to be working towards a ‘secure, resilient and efficient energy system’ and one which provides ‘accessible, reliable and competitively priced energy for all Australians’. Looking beyond motherhood statements, it contains policies which, if implemented, appear more likely to entrench energy insecurity, expose Australian energy consumers to ever-increasing fossil fuel prices, and completely contradict national efforts to abandon our greenhouse gas emitting path towards catastrophic climate change.

Taegen Edwards is a Research Fellow at the Melbourne Sustainable Society Institute. Pablo Brait is General Manager at Beyond Zero Emissions and Convenor of Yarra Climate Action Now. The opinions expressed in this article do not necessarily reflect the views of the organisations the authors work for.