It means the emissions-intensive status quo rules in Australia’s National Electricity Market (NEM).
The Abbott Government’s Energy White Paper released recently seeks to ‘ensure a technology-neutral policy and regulatory framework to support new energy sources and enable change, innovation and transformative technologies’. At the same time it notes that electricity generation produces more than one-third of Australia’s greenhouse gas emissions.
The claim that we need a ‘technology neutral’ domestic energy market has been around since the 1980s according to energy efficiency expert Alan Pears, energy and climate researcher at RMIT University. It is a rhetorical synonym of a ‘level playing field’ which ignores the historical legacy, incumbency and market power of fossil fuel-based (and government planned) energy generation; not to mention the subsidies and cultural bias embedded in the regulatory framework and institutional practices.
Fundamentally, the use of this seemingly benign phrase indicates a refusal to recognise the economy is dependent on the natural environment and as Lord Stern put it, ‘climate change is a result of the greatest market failure the world has seen’. Or as former British Prime Minister Margaret Thatcher put it, ‘We should always remember that free markets are a means to an end. They would defeat their objective if, by their output, they did more damage to the quality of life through pollution than the wellbeing they achieved by the production of goods and services’.
By contrast, energy policy elsewhere in the world is deeply intertwined with emissions reduction policy, as well as industry policy. This is clear, for example, in the announcement by the Chinese government of a commitment to twenty percent renewable energy by 2030 when it also plans to peak its carbon emissions. It is absolutely clear in President Obama’s executive order to the EPA to introduce emissions standards for existing and new electricity generation plants as part of his Climate Action Plan.
In the UK, the Energy Act 2013 enables the Government to dictate priorities to the electricity and gas regulator Ofgem via a Strategy and Policy Statement. The draft Strategy and Policy Statement issued in late 2014 by the conservative government states that ‘playing a leading role in efforts to secure international action to reduce greenhouse gas emissions and tackle climate change’ is one of the Governments three strategic priorities in delivering the UK’s energy policies.
A similar objective was included in the Australian Energy Market Agreement in 2004, to ‘address greenhouse emissions from the energy sector, in light of the concerns about climate change and the need for a stable long-term framework for investment in energy supplies’. However, since then the energy market institutions have argued vigorously for a narrow economic interpretation of the energy market objective. Consumer advocates have fought and so far failed for emissions reduction to be incorporated in the framework for Australia’s energy markets.
So what ‘technology neutral’ really means is that the consumer priority and international imperative of emissions reduction will continue to be ignored in Australian electricity and gas markets as long as energy policy remains a separate domain to climate change policy. The UK merged its energy and climate departments in 2008 and the European Commission finally merged its energy and climate portfolios late last year. Even the conservative OECD recently concluded that environmental regulation may not diminish and, in fact, can lead to permanent increases in productivity.
The energy market institutions have consistently argued that emissions reduction can be addressed by laws and policies outside the sector. However Australia no longer has a price on carbon and no means of reducing emissions from the electricity sector. Pitt&Sherry analysis shows emissions from the electricity sector have risen nearly 3 per cent since the carbon price was removed last June. Most state and territory governments (including the NSW Government) acknowledge climate change and actively support renewable energy and energy efficiency improvement. But while the Federal Government separates energy and climate policies, the incumbent coal-fired generators will continue to dominate Australia’s electricity market and policies.