Clean Energy Target: Labor should let them eat coal

Australia isn’t the only country where coal-fired power stations are shutting down, investors are reluctant to build new ones and there are concerns about the stability of the power grid as renewables dramatically expand. The United States has a similar problem. Only, for the Americans, the shutdown of coal-fired power has been driven not by regulatory uncertainty about climate action but by the surge in shale gas production, the availability of gas-fired power plants and the failure of energy demand to resume its healthy pre-financial crisis growth.

But the current presence of a self-proclaimed saviour of coal in the Oval Office has done nothing to change the investment environment for coal-fired power. Total new projects for coal-fired power are a fraction of the capacity that’s been shut down in the last five years, and some of those projects are on hold. As one investment analyst told Scientific American, “environmental risk might not be a risk for four years, obviously referring to the presidential administration, or eight years. But when you’re building 30- to 50-year-type assets they’re certainly a high risk for carbon.”

Investors in Australian infrastructure plainly share that reservation about coal. Denialism and obstruction of climate action won’t hold sway forever. They might not even hold sway beyond late next year.

Perversely, however, that opens a window for a resolution of the climate wars. Following Labor’s shift to accept the second-rate solution of a Clean Energy Target (a carbon pricing scheme will deliver the most efficient carbon abatement, with least cost to consumers and taxpayers, but Malcolm Turnbull is too weak to deliver it), the main difference between the major parties now is whether a Clean Energy Target threshold is set at a level that excludes any coal-fired power, even much-hyped ultra-supercritical generators — say at 700 tonnes of carbon per megawatt hour — or higher, enough to allow new generation coal-fired power, say 800 tonnes.

The Finkel Review argued that the threshold be driven by Australia’s emissions abatement target — which currently is an unambitious 26-28% of 2005 levels by 2030. The political reality is that it will be driven by what Malcolm Turnbull can get through his restive partyroom. And a CET with a threshold at 800 or 830 tonnes, that notionally gave the hilariously misnamed “clean coal” technology a chance, would be much more likely to get through the partyroom even with denialists and Luddites like Abbott and Abetz raising hell.

Problem is, would Labor support it? Here’s a suggestion: Labor should back a higher target. Yes, the opposition has already compromised. No, it doesn’t owe Malcolm Turnbull anything. Yes, further compromise isn’t consistent with the bleak reality that we need to do a whole lot more than we’re doing to prevent catastrophic climate change.

But the trade-off would be no public funding for new coal-fired power. Coal would have to stand or fall on its merits. Coal spruikers insist that coal has a big role to play in our energy future. Well, let’s see if investors agree. Let the market decide if coal can play any role other than as a burdensome and toxic legacy.

It’s highly unlikely any investor will put their hand up. The maths simply won’t add up — partly because even under a high-threshold CET, coal-fired power isn’t very attractive, partly because it will take so long to build a new plant, which is likely to be beset by delays, cost blowouts and regulatory problems, and partly because investors know that a new plant may well be a stranded asset as soon as 2030, let alone by 2050.

It would be a win for Turnbull, which the opposition might want to resist, but Labor should reflect on the last time they played hardball with Turnbull on climate action, in 2009: it resulted in the removal of Turnbull, whose measure Kevin Rudd easily had, and his replacement by Tony Abbott, who proved anything but the easybeat Labor assumed he was. Labor thinks it has Turnbull’s measure again. Does it want to see him replaced by another figure — not Abbott, maybe not even Peter Dutton, but who might prove the kind of surprise Tony Abbott did?

Turnbull can tell the denialists and coal obsessives in his ranks that he’s paved the way for coal to play a role in our energy future. And he can do so knowing that few investors are likely to want to facilitate that role, but that they have a clear understanding of the rules of the energy game going forward, enabling them to invest with certainty — in renewables, in batteries, perhaps in gas if we can sort out that debacle.

It’s a compromise, but a rhetorical one only. Coal is dying.