by Richard Denniss
[Originally published in the Australian Finacial Review, 24 Feb 2020]
If you think Ministers handing out sports grants to marginal electorates is a waste of taxpayer money, you need to take a look at the Coalition’s plans to hand out coal fired power stations as well.
The former free marketeers in the Coalition literally went to the last election promising to subsidise the business case for a new coal fired power station in Collinsville, Queensland, which—as luck would have it—was in one of the most marginal Federal electorates.
There are 151 lower house seats in Australia, which means if we gave each of them the same $4 million grant given to the proponents of the Collinsville coal fired power station it would cost the budget more than $600 million. But of course, the Coalition aren’t interested in every electorate.
Fairness and accountability aside, the problem with Ministers handing out cash for power stations in marginal electorates is that there is absolutely no evidence Suggesting marginal electorates are the cheapest or best places to build new power stations. And of course, there’s also no evidence that, of all the ways to supply more power, coal would be the cheapest. The whole idea of subsidising a power station in Collinsville makes Bridget McKenzie’s gift of $500,000 to the Mosman Rowing Club look like one of the Coalition’s better ideas.
The last coal fired power station connected to the National Electricity Market was Kogan Creek, back in 2007. Since then, our population has grown by 4.5 million and our GDP by $483 billion. The market’s subsequent lack of enthusiasm for investing in new coal fired power stations shouldn’t really come as a surprise. Only one coal fired power station is currently being built anywhere in Western Europe, North America or Australia; a German plant that is currently nine years overdue. Even in Trump’s America, no coal fired power stations are under construction.
But who cares what investors think! This is modern Australia run by modern Liberals and—with enough taxpayer’s money—anything is possible. The former Resources Minister, Matt Canavan, even pulled out the schoolyard defence of ‘they started it’, arguing on Twitter that: “I see some are saying that we should not help coal fired power stations provide jobs because we should leave it to the market. Well if that’s the view be consistent and argue against the billions we give to renewables every year!”
Where to start?
First, no Federal Government has spent billions per year on subsidies for renewables. None. While it’s true that the government mandates minimum amounts of renewable energy are supplied to the grid, such obligations don’t cost the budget a cent. The same approach drives demand for seatbelts, baby capsules and one of the National Party’s biggest donor’s favourite product: ethanol. While rules differ by state, Queensland petrol stations are forced to ensure 4 per cent of all the unleaded petrol they sell is ethanol.
Second, the biggest subsidy that coal receives is free waste disposal of carbon dioxide into our atmosphere. While virtually every economist (other than Senator Canavan) agrees the best way to deal with such a ‘negative externality’ is to tax CO2 emissions, the Coalition make a virtue out of ignoring the overwhelming economic advice. The second-best solution is to subsidise alternatives to coal, like renewables—but for Senator Canavan to argue that we should subsidise polluting coal because we support its clean substitutes is simply absurd.
Third and finally, what’s it got to do with the Federal Government? Just as there is no obvious constitutional or policy justification for the Federal Ministers choosing which councils should build swimming pools, there’s no reason why Federal Ministers or backbenchers should have any say in where we build power stations, or what kind.
Every state in Australia is committed to having net zero emissions by 2050. The cost of renewables and storage are falling rapidly. When SunMetals built a new zinc smelter in North Queensland they built a solar farm to supply the power—because it was the cheapest solution. But hey, the Coalition went to the 2019 election holding the seat of Capricornia by just 0.63 percent, and now they hold it comfortably. Who cares whether we put the cheapest power sources in the places they are needed most? How would that help win an election?
Richard Denniss is chief economist at independent think tank The Australia Institute @RDNS_TAI