Martin Ferguson will come in for criticism for his decision to shut down the “contract for closure” negotiations that form part of the government’s carbon pricing package; indeed, he has already done so from the Greens. But if there is a significant gap between what power generator owners were prepared to accept and what the government was prepared to offer, it is the correct decision.
Contract for closure was always one of the most poorly thought-through aspects of the carbon pricing package. The government has already shelled out $1 billion to power stations, primarily in Victoria’s Latrobe Valley, to help them cope with the carbon tax. Paying them to shut up shop — when the economy globally is shifting to cleaner technology — was always galling, and designed to obscure the fact the government’s carbon price wasn’t really going to do the heavy lifting required to start decarbonising one of the world’s most carbon-addicted economies.
A persistent problem with Australia’s inept approach to curbing greenhouse emissions over the last decade — and yes, there has been an approach, one that would be generously described as “half-baked”, revolving around grants programs — has been the absurdly high prices, often several hundred dollars, per tonne of abated carbon dioxide obtained. Contracts for closure risked exactly this sort of outcome without strong and disciplined negotiation on the part of the Commonwealth.
Martin Ferguson is no particular friend of the renewables sector or of the need to decarbonise our economy. He is a relentless advocate of the extractive and fossil fuel industries and nuclear power. But on this issue, his call has been the correct one. There are less expensive ways to reduce our emissions than bribing coal-fired power generators to shut down.
Totally agree.
It also presumably helps the Government keep its budget in surplus, altho I haven’t been able to find the size of the savings quickly.
Crikey says: power stations can do without cash but ignores half of the argument and is therefore only half right. The government against the advice of Ross Garnaut and others promised the generators $5.5 billion over four years in cash and free permits as compensation for asset loss of value and has already shelled out $1 billion. Little wonder that with a change of government in prospect they are not playing long with the ‘contracts for closure’ process. However as Mark Wakeham from Environment Victoria says:
“…the failure to deliver on Contracts for Closure should lead to a review of proposed compensation over the first 5 years of the carbon price. ‘It’s essential that the government now withdraws the $5.5 billion in compensation that power station owners are receiving from taxpayers. If polluting power stations are saying in negotiations that they remain profitable and their assets are still valuable then there is no justification for giving them compensation for introducing a price on carbon.’
‘We don’t buy the Government’s line that the amount sought by power station owners for Contracts for Closure doesn’t represent value for taxpayers when $5.5 billion is being gifted to these same companies to keep polluting with no public benefit.’”
Neither do I. Neither should Crikey. It is outrageous that further huge sums of taxpayer money should be allocated to prop up these industries whose social license has well and truly expired and Crikey should condemn this in the strongest possible terms. If the $2 billion allocated to ‘contracts for closures’ is welcome as an aid to balancing the books the outstanding $4 billion in compensation for generators should be even more so. Gillard et al ignored Garnaut the first time now they have a chance to redeem themselves.
For the dangerous conservative Ferguson this is a win win. He claws back some money for the budget bottom line and strikes a blow against Combet at the same time – what a happy day!
The $5.5 billion is already being implemented and is the basis on which power companies have written contracts and set their prices. Removing that now, or even phasing it out over 12 months, would disrupt the industry too much since it is so capital intensive. The deal has been done and should be maintained, however irksome it was then and remains now.
The article is right. We shouldn’t pay too much for carbon reduction by the coal (black or brown) fired generators.
The Environment Victoria position doesn’t understand the effect of ‘free permit’ arrangements. Such arrangements don’t give dirty power stations money. Instead the station operators get free permits. But those permits are tradeable: and so the station operators have a strong inducement to pollute less and to sell excess permits. In other words, free permits don’t take polluters out of the system and its inducement to reduce pollution.
I don’t think we should be handing out free permits, and I think we should have gone straight to a cap without an introductory period of unlimited permits available at a price (the ‘carbon tax’ phase in period). But it’s wrong to treat free permits as if they took dirty industries out of the pollution reduction system.
And it’s just as wrong to say that, having been too generous in one area, we can afford to be too generous in another as well.