Grattan / Abbott's $60 billion cost for Labor's renewables goal came from 'back of envelope'

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Michelle Grattan, University of Canberra

TONY Abbott encountered some heavy weather on Monday as he sought to discredit Labor’s goal of having 50% of Australian’s electricity from renewables by 2030, and to conjure up the spectre of a Labor electricity tax.

As Abbott and his ministers attacked Labor on various fronts after its national conference, Abbott said the 50% goal “will mean a massive bill, perhaps A$60 billion or more, that will have to be carried by the consumers.

“So you’ve got two big hits on families, two big hits on consumers, coming out of the Labor conference” – the other being “their renewed commitment to an electricity tax.

“In fact, the ETS [emissions trading scheme] that Labor keeps talking about might as well be called an electricity tax scam” that would be scamming consumers for “decades and decades”, Abbott said.

When asked the basis for the $60 billion figure, the prime minister’s office referred to an article in the Australian last week, quoting ACIL Allen Consulting’s chief executive Paul Hyslop, who said that if the Labor goal were to be met by wind power it would require 10,000-11,000 extra turbines, with capital costs for these alone of $65 billion.

But on Monday, Owen Kelp, a principal with ACIL who specialises in the energy sector and leads projects analysing Australia’s electricity, natural gas and renewable energy markets, told Sky TV that the $60 billion was a “fairly simplistic, back-of-the-envelope calculation”, based on the capital cost of wind technology.

In other words, Abbott seems to be using the cost of apples (constructing turbines) to say what would be the cost of pears (the burden on consumers of Labor’s goal). And the firm that did the calculation says it was rough anyway.

But, right or wrong, Abbott achieved his aim of getting a big number out there.

Meanwhile, Malcolm Turnbull was fogging up Abbott’s description of Labor’s proposed ETS – of which we have no detail yet – as an “electricity tax scam”.

Asked whether an ETS was a tax, Turnbull chose to be precise rather than polemical. He said there were two answers to the question.

“There has been a distinction drawn in the debate about methods of mitigating greenhouse gas emissions between a fixed price cost on carbon which people have typically called a carbon tax and one that is floating because it is related to the purchase of permits”, with the price depending on supply and demand, “and that’s an ETS”, Turnbull said.

“And so in a lot of the literature and discussion you’re talking about the virtue of a tax versus the virtue of an ETS. But either way they are both a cost so yes, you can call them both generically a tax.”

Abbott prefers a blunter formulation – that Labor’s planned scheme is a tax, floating or not.

Turnbull also pointed to the home truth that “there is no such thing as a cost-free way of reducing carbon emissions … as long as emissions intensive forms of generating energy are cheaper than the low emissions forms”.

“As long as that’s the case, then whether it’s a regulation, whether it’s a renewable energy target, whether it’s an ETS or whether it’s a carbon tax – a fixed price – all of those can be seen to be a cost on the business of generating energy, therefore a cost on households purchasing energy and therefore in that sense a tax”.

So everything is a “tax” if you choose to look at things that way.

Labor was quick to recall that Turnbull and Abbott had history on the ETS – Turnbull was turfed out as opposition leader after a massive upheaval over his support for the Rudd government’s ETS, and Abbott replaced him.

Meanwhile, on another front, Victorian Liberal backbencher Sarah Henderson has urged that the government back off its direction to the Clean Energy Finance Corporation not to invest in wind farms and household and small-scale solar.

Henderson told the ABC she had written to Finance Minister Mathias Cormann asking him to consider that emerging technologies in wind and small-scale solar be included in the new investment mandate the government has given the corporation.

“It’s very important not to exclude small-scale solar and also wind, because there are new and emerging technologies in these sectors as well,” Henderson said.

Henderson has been a strong advocate for renewables. They are popular with her constituents in her marginal electorate – as they are in the seats of a number of Coalition colleagues.

Listen to the latest Politics with Michelle Grattan, with Labor’s Anthony Albanese and Richard Marles, here or on iTunes.

The Conversation

Michelle Grattan is Professorial Fellow at University of Canberra.

This article was originally published on The Conversation.
Read the original article.

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