Originally published in The Australian Financial Review on August 27, 2018

by Ben Oquist, Executive Director of The Australia Institute.

[This article originally appeared in the Australian Financial Review 28.08.18]

Scott Morrison is set to make the same mistake as the Business Council of Australia on energy and climate policy. Equating emission reductions with higher prices gets the politics and economics wrong.

Australia’s climate and energy debates will continue to see a range of legitimate differences of opinion. There are no definitive answers to what our emission reduction targets should be and how we should achieve them.

But as important as specific answers on exact targets and mechanisms, is the quality of the debate that produces them. Much of the blame for current policy failures lies at the feet of the baseless claims that policies such as carbon pricing would be a wrecking ball on the economy.

The latest of these claims come from the BCA. While lobbying to support the then government’s National Energy Guarantee, the BCA stated a reduction in electricity sector emissions of 45 per cent is an “economy wrecking target”.

Many of the BCA’s members supported the NEG, for reasons such as a desire for policy certainty and advantages to their long-term investments. Indeed, Australia Institute research shows a NEG – with an effective emissions target – could be the basis for sound integration of climate and energy policy.

The government’s original plans of 26 per cent emissions reductions equated to little more than business-as-usual projections. The BCA’s claims of major economic impact from a modest increase in emissions reduction targets (to 45 per cent) is not supported by research or data. Indeed many BCA members do not support the unsubstantiated claims.

Watershed moment

None of the official modelling conducted in recent years predicts major disruption to the Australian economy if the electricity sector reduces its emissions in line with credible Paris targets. On the contrary, strong economic growth is expected to continue. In fact all analyses find it would be cheaper for the electricity sector to reduce emissions further than the government proposed, if Australia is to meet a credible economy-wide target.

The abandonment of the company tax cuts was a watershed moment in modern Australian politics, but in reality a bigger battle looms. While the drums have been beating for some time, the next war over energy policy is yet to really begin. Most of the shots fired to date have been conservatives taking aim at each other. The government is yet to test its strategy of small or non-existent emission targets and big subsidies for the coal industry with the public.

The BCA made much of the fact that some carefully selected opinion polls showed apparent support for the company tax cuts. But countless other polls showed the overwhelming majority of voters preferred the government to increase spending on services than to cut the company tax rate again.

The BCA now risk making the same mistake when it comes to climate and energy policy. While it is true polls show electricity prices are hurting, it is also true the majority of Australians think climate change is real, that it makes droughts worse, that investment in renewable energy is a great idea, and that subsidies to coal mines are a terrible idea.

Early signs are that new prime minister Scott Morrison seems intent on making a virtue of having no emissions reduction policy at all, in an attempt to focus purely on energy prices. But this misreads the politics and economics of energy. Renewables are popular, renewables are cheaper. And anyway, does anyone really believe the calls from within his side of politics that subsidising new coal will trickle down and lower electricity bills for consumers?

The BCA has argued repeatedly that we need to have an evidence-based approach to policy development. But echoing Tony Abbot in claiming that Labor’s 45 per cent target is an “economy wrecker”, does not serve our public debate well. There is overwhelming evidence of the economic cost of climate change but there is no reliable evidence that hitting a 45 per cent target will harm the economy.

But it’s a free-ish country. If the Coalition and the BCA want to cherry-pick their economic and political evidence to justify negligible emissions targets, they can do so. But if the collapse of the company tax cuts teaches us anything it is that policy advocates can get the economics wrong, or they can get the politics wrong, but no matter how powerful you are, you cannot get them both wrong.

Ben Oquist is executive director of The Australia Institute @BenOquist

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