In this article, I review the newly formed Coalition’s agenda to repeal the carbon pricing scheme implemented by the Clean Energy Bill 2011, and the policy program of the Clean Energy Plan. These actions are subsidiary to a broader political attack upon the doctrine of State-based initiatives to regulate climate change. It is perhaps most clearly manifested in their initial actions to repeal the Clean Energy Bill, as well as abolishing three agencies incentivising renewable electricity production in Australia: the Clean Energy Finance Corporation (CEFC), the Climate Change Authority (CCA), and the Climate Commission (CC).
That the political debate has moved on from the question of climate change to its solution is worth interrogation, but not within the scope of this article. Instead, by focusing specifically on the interactions of these agencies with potential energy markets a single thread of the debate is analysed debate while contextualising the relevant political components.
…should the policy platform produce the results anticipated by the Coalition, it would be remiss to suggest that it was due entirely due to market forces
Broadly speaking, the political division over climate change falls upon the Clean Energy Plan. The polarisation centres not upon climate change and denial, but the application of political ideology as to the best means to address it. The Coalition’s policy reflects a neoliberal scepticism towards government regulation, deferring instead to market-mechanisms. In counterpoint, the Clean Energy Plan exemplifies a rejection of the market alone as the means for resolution, and places incumbency upon the State to induce sufficient change.
The Clean Energy Plan is and its attendant carbon pricing is a policy program responding to anthropogenic climate change, synthesising the disciplines of environmental sciences and political economy. It emerged after a failed attempt by the Rudd government to secure an Emissions Trading Scheme, and a subsequent compromise through the hung parliament under Gillard. It implicitly entails a classical economic approach that reconciles government agenda with environment concerns, and attempts to model its program on economic rationality. This necessarily filters the debate of climate change through economic discourse, by emphasising the nature of emissions as externalities. Implicit in this position is a contention that the market cannot respond rationally to climate change, and requires government intervention (see such claims as made in this book). Typically such critiques claim that market mechanisms cannot internalise emissions because individual choices within the context of market forces are subject to profit seeking over public interest.
The counter-argument lauds the capacity of market forces in selecting for environmentally sound practices: as the externalities of the environment increase social costs, and as these demands become increasingly urgent, industry and technology are able to respond with a solution by sheer dint of the demand. In this light, the Clean Energy Plan has been criticised on a number of fronts, including an inability to realise its ideals due to economic sleight-of-hand, which prevented incentivisation; another being a failure to engage with the populace on the significance of the carbon price, beyond how it impacts on the daily cost of living. These two arguments are exemplar of climate change denialism that rejects the potential thread of a Malthusian catastrophe, as exemplified in the works of Lomborg. These critiques effectively accuse the Clean Energy Plan of environmental authoritarianism (for example).
Having laid the groundwork of these political divisions, the contentions between market-mechanisms and State-based mechanisms become much more apparent. The ‘Carbon Tax’ is easily the most visible component of State-based instruments, and the principle focus of the Coalition’s actions. However, where we see additional complications and nuances on these issues is the Coalition’s focus on the abolishment of the climate change agencies.
Firstly, the CEFC’s principle mandate was the subsidisation of renewable electricity innovation: in the last year the CEFC managed to invest $560 million in projects, including the Moree solar farm and the Taralga wind farm. Moreover, the CEFC has laid claim to having encouraged an additional $1.6 billion worth of private investment towards clean energy projects. Incoming Climate Action Minister, Greg Hunt, has critiqued the CEFC of being a green hedge fund, “borrowed in taxpayers’ name for investing in speculative ventures” . It is worthwhile noting that such actions and positions are perfectly in line with the neoliberal sentiment of deregulating interference with the market.
The predominant form of electricity production in Australia is coal, comprising 77.2% of the country’s total electricity production
However, the issue is not as reductive as there are other political and commercial interests relevant to these changes; not the least of which is the significance of Australian coal. The predominant form of electricity production in Australia is coal, comprising 77.2% of the country’s total electricity production in 2003. Though different States and Territories have specific energy policies, the aggregate cost of most electricity production is based on the price of coal at the power station: coal also constitutes one of Australia’s principle energy exports to China. So the question remains that if State-based mechanisms are removed to incentivise change and Australia is economically dependent on the coal industry, will market-mechanisms alone be sufficient to achieve the government’s mandated renewable energy targets for 2020. If critiques hold true, then deregulation will simply expose a vulnerable environmental system to greater intrusion by market mechanisms, which cannot redress the issue. If the neoliberal vision holds true, then the market should reach a point of equilibrium as the burden of environmental degradation affects consumer choices.
There are two principle issues that will significantly play into this: the first is the cost of peak coal production, and the latter is the tipping point of solar power energy production. Currently there are a series of predictions suggesting that the production of solar powered electricity may become equivalent to conventional fossil fuel production. That Germany has taken a significant lead in adopting solar powered energy production, and thus growing the global solar market. There is also predictions of the decline of the global coal market, with Citi analysis predicting coal consumption in China could peak as early as 2014. Equally compelling, there is some evidence that renewable energies are gaining confidence in the US market, to the point of being considered reliable. This competition of solar and coal energy markets is made even more pertinent in Australia, as the Climate Commission revealed a significant uptake of solar panels.
To suggest these changes signal the success of the neoliberal vision is flawed, particularly in context of these competing energy markets.
To suggest these changes signal the success of the neoliberal vision is flawed, particularly in context of these competing energy markets. Neither of these energy markets has changed significantly without some form of government intervention. In 2012, the Chinese government invested $68 billion into renewable energy, making it a leader of that investment. In comparison, Germany and its production of solar power is more difficult to determine. At first glance, Germany seems to depict a narrative of a staunchly pro-nuclear power leading changes to become the world’s top photovoltaic installer. However, some later commentary predicts the burst of the solar bubble, and Lomberg specifically critiquing the policy project as being economically unsustainable. While a genuine economic critique is far beyond the scope of this essay, it is reasonable to say that neither the reduced cost of solar power in Germany nor the peak consumption of coal in China are purely the consequence of market mechanisms.
Due to the vagaries of both China and Germany, it is far too early to predict the success or failure of the Coalition’s policy platform to respond to the issue of climate change through a high dependency on market mechanisms. Moreover, should the policy platform produce the results anticipated by the Coalition, it would be remiss to suggest that it was due entirely due to market forces, which are merely capitalising on opportunities produced through contrary political economic agendas.