Still cautious after the pink batts program, the government’s climate policies fail to properly engage with energy efficiency. By Karen Middleton.
Climate policies: Twelve dumped in half a decade
Over the past five years, the federal government has cancelled a dozen energy efficiency programs that were saving money and reducing Australia’s greenhouse gas emissions, and shelved possible replacements.
Among the reasons for both moves were that they irritated business, were Labor-initiated or a low Coalition priority and risked comparisons with the Rudd government’s home insulation scheme.
Some of the cancelled programs were linked to the Gillard government’s carbon price and abolished by Tony Abbott, but the largest program was a 2006 Howard government initiative that after five years of operation was saving business $800 million annually, despite some complaints about onerous requirements.
The program forced energy-intensive businesses to identify energy-saving opportunities and report them annually. While they were not compelled to implement the measures, if they didn’t they had to explain why.
An assessment found that by 2011, the Energy Efficiency Opportunities program had also cut Australia’s annual emissions by 1.5 per cent – equal to taking 2.3 million cars off the road – and could almost double that if all opportunities identified were taken up.
But some businesses didn’t like it. It apparently upset the internal balance of power between engineers and financiers.
As one energy expert puts it: “I heard more grumbling about that program than I did about the carbon price.”
As prime minister, Abbott cancelled the program, effective from June 29, 2014, in line with his business deregulation agenda.
The Saturday Paper has been told that under the Turnbull government, then environment and energy minister Josh Frydenberg proposed modest new energy efficiency projects several times but that cabinet’s expenditure review committee did not endorse them.
Frydenberg has declined to confirm or deny it.
But as the government seeks this week to defend its record on emissions reduction, the latest data has renewed debate on whether more could be done to reduce energy use as well as prices – and what hasn’t happened as well as what has.
It is unclear why Frydenberg’s proposals were not funded and it may be that there were simply other financial priorities. Energy sector sources say there was also a reluctance to pursue anything that might evoke memories of the Rudd government’s ill-fated home insulation scheme, which contributed to the deaths of four installers.
Last week, as part of its pre-election Climate Solutions package, the government pledged $67 million to new measures centred on grants of up to $25,000 to help businesses and community groups improve their energy management.
Energy Minister Angus Taylor highlighted an $11.6 million expansion of the National Australian Built Environment Rating System, funded in the mid-year budget update, to include more commercial buildings, schools, factories, workshops and retail stores.
Taylor also emphasised the Council of Australian Governments’ energy ministers’ endorsement last month of what it called the “Trajectory for Low Energy Buildings”.
“These measures have specifically been designed to provide support to Australian families and businesses without excessive regulation and burden,” he said.
The government insists there is an “established and successful” set of existing efficiency measures, including $14.3 million that the COAG energy council has collectively allocated.
“The Morrison government is committed to ensuring customers remain at the centre of its energy policy,” Taylor tells The Saturday Paper.
“Our policies are balanced and considered – unlike Labor’s pink batts disaster.”
But even in its own ranks, there is a view the government isn’t doing enough to lower customers’ costs.
Six Queensland Nationals MPs have written to their federal leader, Michael McCormack, demanding action on deferred “big stick” legislation that would force energy producers to lower their prices or divest. They also want a fast-tracked new high-efficiency, low-emissions coal plant in Queensland.
But Morrison dismissed the insurrection, saying he had other priorities when parliament resumed next month.
Others accuse the government of not doing enough to lower emissions, after its own regular greenhouse gas assessment showed a reduction of 1.4 per cent in last year’s September quarter but a 1 per cent rise over the full year and an upward trend over the past five.
Scott Morrison and Angus Taylor said the quarterly fall proved programs were working and Australia would meet the emissions reduction target set at the 2015 Paris global climate change conference – of 26-28 per cent on 2005 levels by 2030 – “in a canter”.
Taylor said critics were “cherry-picking” for a particular outcome – despite relying on a single quarter’s figures himself.
Ministers also defended using a loophole in the global agreement to carry over the extra emissions reductions Australia achieved beyond its lower 2020 target and credit them towards meeting its 2030 obligations, instead of starting from zero as other countries are doing.
The carryover equals about 15 per cent of the total cut needed.
On Sky News this week, Taylor insisted the government could not do much more to lower greenhouse gas emissions, including on energy efficiency, without seriously harming business.
He attacked Labor’s alternative proposal to reduce emissions by 45 per cent, insisting it would also have to carry over credits to meet it.
Labor won’t say yet if it will, though the Greens also argue Labor will struggle to meet its target without an “accounting trick” that may anger other countries.
Labor’s energy efficiency policies include allowing the Australian Renewable Energy Agency, which funds energy projects with a renewable component, to also support efficiency projects.
It is promising a $10 billion reinvestment in the Clean Energy Finance Corporation and to also expand it to efficiency measures and $20 million to help manufacturers improve their energy productivity.
Labor’s shadow environment and energy minister Mark Butler points to modelling by analysts Reputex that finds the 45 per cent reduction target would lower wholesale power prices by 25 per cent more than under the government’s target.
Angus Taylor cites rival modelling from BA Economics that says Labor’s target would cost 300,000 jobs and cut salaries $9000 on average.
“You get to a point where any more just becomes apocalyptic,” Taylor said. “It is too hard. You can drive emissions reductions through energy efficiency up to a point. Beyond that then, you just have to start slashing activity. You have to start slashing jobs and they’re mostly export-driven, energy intensive jobs... The aluminium sector has got to go. You’ve got to curb transport. You’ve got to curb cattle production. So you’ve got to hook into those industries which are the backbone of our export economy.”
Energy experts say that while there are measures at the state level involving New South Wales, Victoria, South Australia and – most comprehensively – the Australian Capital Territory, there is plenty more that could be done on energy efficiency. They say the government’s own National Energy Productivity Plan, which has existed since 2015, has been basically dormant.
The Australian Alliance for Energy Productivity – a coalition of energy-saving specialists, producers and users, government bodies and research organisations, also known as A2EP – rejects the minister’s assertion.
Chief executive Jonathan Jutsen says Australia has the poorest energy productivity in the developed world and the slowest rate of improvement.
Jutsen points to an assessment by globally respected non-profit energy thinktank, the American Council for an Energy-Efficient Economy.
“Our energy productivity has almost flatlined,” Jutsen tells The Saturday Paper. “We also have been rated by the ACEEE international survey to have the worst government policies in place for energy efficiency, particularly for manufacturing and transport… The challenge to jobs here and now is due to poor energy competitiveness – resulting from high energy prices combined with low energy productivity.”
Jutsen and A2EP want to double Australia’s 2010 energy productivity rate by 2030 and to halve energy consumption by 2050.
They are part of a push to have Australians use less energy overall and waste less of what is used.
The energy market manager is also considering rule changes so consumers and businesses can be paid for peak-period energy they don’t use, with a third-party aggregator controlling how much energy is saved, when, and where it goes – effectively a new competitor for existing retailers.
The “demand response” proposal from the Australian Public Interest Advocacy Centre, the Total Environment Centre and The Australia Institute was one of three subject to consultations this week.
The Australia Institute’s Richie Merzian says the technology exists to let customers “play the market” – it just needs regulatory support.
Jonathan Jutsen, whose members include AGL and solar producer Engie, says the sector is pleading for better, more consistent policies.
In December, an Ipsos survey of the Australian Institute of Company Directors’ 1252 members showed increasing support for addressing both energy policy and climate change.
Of their five top-rated issues – which also included tax reform, infrastructure and productivity growth – only these two recorded an increase in support for action over the year.
Similarly, a 2019 business prospects survey of members of the peak manufacturing body, the Australian Industry Group, found one caveat on a generally benign outlook: the rising cost of energy, which 68 per cent believed would increase further this year.
In a separate report published in July last year, called “From Worse to Bad”, Ai Group warned energy costs were making Australian businesses uncompetitive internationally and “hard decisions” were required.
In his foreword, Ai Group’s chief executive, Innes Willox, despaired at the politicisation of the energy debate and warned something had to be done to begin the transition away from gas.
“Energy should be boring,” Willox wrote, just as the Coalition’s internal brawling over the proposed national energy guarantee reached crescendo.
“Like many technically complex goods and services that underpin our lives and work, we only pay attention when something has gone wrong. The prominence of energy in political debate is a very bad sign.”
It certainly was for Malcolm Turnbull, who lost his prime ministership a month later.
A2EP’s Jonathan Jutsen says Australia should look to the US.
“In California, with a similar climate, aggressive efficiency programs involving incentives, minimum energy performance standards and education, have driven down consumption,” Jutsen says, adding that California’s residential energy use per person is half of Australia’s.
“Our… government remains totally focused on the unit price of energy – but if you are very efficient like California you can have relatively high prices but still low bills.”
He criticises what he says has been a failure to properly fund the 2015 National Energy Productivity Plan.
Jutsen calls last week’s energy efficiency announcements “welcome and long overdue” but also “trivial compared to what is needed”.
A2EP has produced its own detailed plan, dubbed “NEPP 2.0”.
He says energy consultants Energetics have calculated that doubling energy productivity by 2030 through upgrading equipment and adopting innovative technologies could deliver half to two-thirds of the total emissions reduction required to meet the Paris targets. “And boost GDP.”
Transport is a big contributor to emissions but Australia currently has no national vehicle emissions standards, nor any quality standards relating to fuel. A Turnbull government proposal to introduce them was scrapped after News Corp newspapers described it as a “carbon tax on cars”.
Reliant on imports since the demise of the nation’s car industry, Australia can’t access the most fuel-efficient vehicles because without quality standards its fuel is too low-grade.
Increasing numbers of Australian drivers have been switching to diesel-fuelled vehicles because diesel is cheaper than petrol – sending transport emissions up.
Progress on the alternative – electric vehicles – has also been glacial.
Last week the government announced measures to encourage the take-up of electric cars in Australia. But a recent senate inquiry found much more was required to make electric cars a genuinely viable alternative.
Committee chair, independent senator Tim Storer, says a national strategy is required.
The poor energy rating of many old houses is also an issue.
Separately, Storer has produced a private member’s bill aimed at introducing incentives for owners of rental houses to retrofit them so tenants save money on energy bills. To overcome concerns about the home insulation history, he built in a special requirement that installers had to be properly accredited.
“It’s unfortunate that that’s what hangs over the idea of upgrading existing housing stock in Australia,” Storer says. “Meanwhile, many people suffer.”
But the government opposes his bill and it has been sidelined.
With this week’s national accounts showing Australia technically in a per capita recession and teetering on the full-blown version, the government is being urged to consider its own stimulus measures – the same situation the Rudd government faced 11 years ago.
But if history and politics are any guide, a rapid-rollout energy efficiency scheme probably won’t be among them.
This article was first published in the print edition of The Saturday Paper on March 9, 2019 as "Climate policies: Twelve dumped in half a decade".
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