Judith Sloan joins the queue to scrap the RET

Judith-Sloan

Professor Judith Sloan, slams the RET.

Senior and experienced economists are lining up to scrap the RET.  STT readers have heard the “word” from Burchell Wilson and Alan “The Terminator” Moran.

The number crunchers are on the warpath, for good reason.

The Renewable Energy Target is a ludicrously expensive and utterly ineffective means of reducing CO2 emissions, which is what is meant to justify the impact of spiralling power prices that are killing businesses and punishing households.

It’s also meant to justify the untold suffering caused to hardworking rural families, who have to put up with incessant low-frequency noise from fans as they try to snatch a little well-earned sleep.  It takes a special kind of person to justify harm to people’s health, for any reason – Senator “Die Nasty” can, but he is a very “special” person.

The Renewable (Electricity) Energy Act 2001 defines its objects in section 3 as:

(a) to encourage the additional generation of electricity from renewable sources; and

(b) to reduce emissions of greenhouse gases in the electricity sector; and

(c) to ensure that renewable energy sources are ecologically sustainable.

This is done through the issuing of certificates for the generation of electricity using eligible renewable energy sources and requiring certain purchasers (called liable entities) to surrender a specified number of certificates for the electricity that they acquire during a year.

Where a liable entity does not have enough certificates to surrender, the liable entity will have to pay renewable energy shortfall charge.

A partial exemption relating to one or more emissions-intensive trade-exposed activities may be taken into account in working out a liable entity’s renewable energy certificate shortfall for a year. If it is, it will reduce the renewable energy shortfall charge otherwise payable.

If you’re keen to learn how the scam prescribed above works in practice, check out our post: The RET & the REC: the anatomy of a National fraud.

STT doesn’t weigh into the debate about whether increased CO2 emissions are harmful to the environment.

We leave that to bloggers with more scientific knowledge than us – who have been attacking the climate change myth for years.

Our beef is not with the “global warming” yarn (apparently now called “climate change”, at least since the world stopped warming 18 years ago) but with the fallacy that giant fans have anything to do with saving the planet from imminent CO2 driven incineration.

For STT’s purposes, we’re happy to concede that increasing CO2 emissions may cause increases in atmospheric temperature.  Whether or not such increases would be adverse to humans or the planet is another matter, again.

Where we join issue is on the cost and effectiveness of measures taken to reduce man-made CO2 emissions.

STT readers know that generating electricity with giant fans has nothing to do with reducing CO2 emissions, and everything to do with increasing power prices.

STT readers are acutely aware that wind power is inherently unreliable and intermittent – see our posts here and here and here.

When the wind takes a complete holiday, every other day, the grid has to be supported by fossil fuel generation sources.

Ramping the output from thermal power plants up and down to accommodate intermittent wind power (thermal plants are the ones with boilers heated up by gas or coal) results in more CO2 being emitted than if these plants were left operate without interference from wind power being occasionally pumped into the grid.

Maintaining sufficient “spinning reserve” in thermal plants means more gas and coal is burnt for any given unit of power output from that plant.  Using fast start-up Open Cycle Gas Turbines (OCGTs) and, even worse, diesel generators to ensure the sparks keep flowing mean that CO2 emissions per unit of output are even higher still.

Paul Miskelly and Derek Partington have spelt it out in clear and simple terms – see our posts here and here and here.

So what was the object set out in the Renewable Energy legislation, again?

Wasn’t the object: “to reduce emissions of greenhouse gases in the electricity sector”?

Wind power cannot – and will never – jump the first hurdle.

chicken-little-poster

It’s CO2 what did it. OK, so it’s a beneficial trace gas
essential for life on earth, but it’s gotta be guilty of something?

So let’s assume (as STT does, for the sake of argument) that the climate change Chicken Littles are right: the sky really is falling and it’s all CO2’s fault.

So what the HELL are we doing pouring hundreds of billions of dollars into subsidies for wind power?

STT has always thought that if man-made CO2 emissions really were destroying the planet, then sensible governments would have moved to build nuclear power plants from the moment Chicken Little started wailing about the heavens collapsing.

The French generate around 80% of their sparks using nukes – and have used nuclear power – without any serious incident – for over 50 years: the first plant kicked off in 1962.

Nuclear power is the only thermal power source that is base-load and which does not emit CO2 emissions when generating power.

STT readers know that we are a big fan of hydro power, the development of which stalled after the Greens “No Dams” mantra shot them to political power.  The perversities of our renewable energy legislation mean that the cleanest and most reliable source of renewable energy – hydro – does not benefit from the incentives given to ludicrously expensive and completely unreliable wind power.  That’s right, the “Waterboys” don’t get RECs (only hydro generating capacity built after 1998 is eligible – the 99% of total hydro capacity that was built before then gets nothing).

The nuclear power debate has revved up in the last few weeks, with numerous leaders of green groups coming out in favour of nukes as the only sensible answer to generating CO2 free sparks.  These boys have been rounded on by their own kind as “heretics” in a style more befitting of the Spanish Inquisition.

The nuke debate is one that STT will leave to others.

As we’ve said before, our objective is to destroy the wind industry in Australia; and, from the way the mainstream media has turned against the great wind scam, we’re well on our way.

Here’s crack economist Professor Judith Sloan writing for The Australian last week.

Climate change dog’s breakfast
The Australian
Judith Sloan
Contributing Economics Editor
12 November 2013

DID you catch the latest survey result undertaken by Fairfax Media? Thirty-two out of 34 eminent Australian economists – OK, I wasn’t asked – favour an emissions trading scheme over direct action.

Since economists are in the same group as bankers, miners, bikers, real estate agents and nightclub owners when it comes to public esteem, I’m not surprised you missed it.

But what is really meant by the survey result? Are we talking about Labor’s climate change policy, including the linking with the European scheme? Are we comparing this with Tony Abbott’s direct action program, the details of which are unclear apart from its fixed budget?

It all strikes me as very Yes Minister – recall the episode when Sir Humphrey concocts two sets of survey questions on the same topic to generate completely opposite results.

The truth is that if you ask any economist, at a theoretical level, to rank price/tax, government spending and regulation as a way of discouraging an undesirable activity – in this case, carbon dioxide emissions – then that will be the order.

Use a price mechanism – a cap-and-trade emissions trading scheme is just a means of establishing the price – as the first pick. If you must, use government spending to bribe the parties undertaking the undesirable activity to desist or scale back. As a last resort, use the very blunt instrument of regulation. But, and this is the important point, do not use all of them.

There is nothing that economists abhor more than a dog’s breakfast of policy instruments, with its multiple distortions and high compliance costs.

But here’s the real rub: the Gillard government’s climate change policy – the so-called Clean Energy Future package – was the classic dog’s breakfast, with elements of tax/ETS, direct action and regulation.

Take a look at a few elements. Notwithstanding the very strong advice of the Productivity Commission to abolish the damaging renewable energy target (which specifies that 20 per cent of electricity must be generated from renewable energy sources by 2020) once carbon pricing was introduced, the government retained the RET.

In fact, it is even worse because the 20 per cent is specified as a given figure in terms of gigawatt hours (41,000) by 2020.

But because electricity consumption has fallen – the collapse of manufacturing has contributed to this outcome – this figure now represents closer to 25 per cent of the total.

Here was the chance of the newly created body, the Climate Change Authority, to shine. Tasked with reviewing the RET, rather than arguing strenuously for its abolition – there are some economists on the panel – the authority astonishingly argued for the retention of the 41,000 gigawatt hours.

Investment certainty for rent-seeking renewable energy industries was regarded as more important than offsetting the damage done to electricity users and the economy.

At that point, the authority lost all credibility.

And consider the Contract for Closure component of Labor’s CEF package, which is a clear example of direct action. The scheme was designed to use taxpayer funds to bribe owners to close the highest emitting power stations.

Hazelwood in Victoria and Playford in South Australia were slated for closure, but the owners got too greedy and so the government abandoned the attempt.

Then there is the carbon tax itself, set initially at $23 a tonne. One of the most peculiar features of its imposition was the offsetting spending on household and industry assistance. The spending was more than the revenue raised from the tax.

Households were compensated through higher welfare payments and adjustments to income taxes. And it was estimated that the vast majority of households were actually better off after the introduction of the carbon tax.

This was completely bizarre from the point of view of the policy objective of reducing emissions. Rather than have both the income and substitution effects (the latter associated with the higher price of electricity, in particular), the government opted to neuter the income effect by over-compensating households.

Similarly, the issuing of free permits to industries and the specific assistance to power producers and the steel industry counteracted the companies’ incentives to curtail emissions and introduce new technologies.

Now Labor could argue the incentives were designed to ramp up across time, but the decision to link our ETS with the European scheme (current carbon price around $7) and to scrap the floor price meant that forward carbon prices are, in fact, much lower than the current tax. So much for the incentives to invest in “clean” technologies.

The bottom line is that the Clean Energy Future package was a fiasco and the sooner we see the end of its component parts the better. The RET should be scrapped as quickly as possible, along with the carbon tax/ETS. All the other bits and pieces should similarly be turfed, although it is probably too late to take back the household compensation.

And for those who say that an ETS is a market mechanism, it needs to be stressed that the “market” is an artefact of government regulation, not a market between willing buyers and sellers. It’s not what economists have in mind when it comes to the beneficial effects of an efficient market.

For example, there are significant issues related to carbon accounting – evidently wood-fired electricity generation is not counted as emitting carbon dioxide in the European scheme – and the establishment of the cap is subject to political interference.

There will be no binding global agreement on carbon dioxide emissions reductions by 2015 – the incentives for countries not to co-operate are just too strong and there is no effective mechanism to ensure compliance.

The Abbott government therefore should take only baby steps, while scrapping the harmful set of policies they’ve inherited.

And beware “consensus” surveys of economists.
The Australian

STT notes Judith’s observation that:

Notwithstanding the very strong advice of the Productivity Commission to abolish the damaging renewable energy target (which specifies that 20 per cent of electricity must be generated from renewable energy sources by 2020) once carbon pricing was introduced, the government retained the RET.

STT hears that, despite Macca’s efforts, the Productivity Commission will be heavily involved in the RET review, if not in charge of it.

Greg Hunt is hardly renowned for his spine when it comes to facing up to the energy market debacle created by the RET.  But, low and behold, it’s young Greg who’s apparently pushing for the Productivity Commission to take control of the review.  No prizes for guessing what the Commission’s recommendation will be.

Angus “The Enforcer” Taylor will be in there baying for blood, too – along with a team of Australia’s leading energy market economists, who understand that the RET is nothing more than an ideologically driven, economic suicide pact.

Come on Greg, help kill the RET and save your Country from economic disaster.  There’s always room in the STT “Hall of Champions” for one more.

greg hunt

STT’s always got room for another Champion. How about it Greg?

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. James Lovelock, founder of The Greens, had this to say to 60 Minutes in 2004.
    http://sixtyminutes.ninemsn.com.au/stories/charleswooley/259238/wind-storm

    CHARLES WOOLEY: Professor James Lovelock is one of the world’s leading environmental scientists. This distinguished British researcher warns the climate clock is already at five minutes to midnight. Now, in Australia, we’re being told that wind power is one of the answers.

    DR JAMES LOVELOCK: I wish it were, but it’s not. At the best, wind power cannot provide more than a tiny fraction of the energy needs of civilisation. It’s a nice idea. It looks good. It’s showy. I think it’s one of those things politicians like because it can be seen that they’re doing something. But in practice, it’s not really a useful remedy.

    Mind you, that was before he Mr Lovelock said:
    ‘I am an environmentalist & founder member of the Greens but I bow my head in shame at the thought that our original good intentions should have been so misunderstood & misapplied.
    and:
    ‘We never intended a fundamentalist Green movement that rejected all energy sources other than renewable’

    Choke on that, Richard.

    James hit the wind industry nail on the head nearly a decade ago. Now it’s time for our pollies to listen to our economists. If our Pollies want to “look good” in 2014, and be seen to be “doing something,” they’ll start doing everything they can to stop these things and hammer in the nail to wind industry’s coffin.

    R.I.P RET.

Trackbacks

  1. […] 100% of its capacity to be backed up 100% of the time by fossil fuel sources (see our posts here and […]

  2. […] it cannot and will never reduce CO2 emissions in the electricity sector (see our posts here and […]

  3. […] 100% of its capacity to be backed up 100% of the time by fossil fuel sources (see our posts here and […]

  4. […] because it cannot and will never reduce CO2 emissions in the electricity sector (see our posts here and […]

  5. […] Judith Sloan has already entered the STT Pantheon with an earlier piece on the insanity that is the RET (see our post here). […]

  6. […] electricity sector – which is the whole point of the RET in the first place (see our posts here and […]

  7. […] Geothermal power generation produces no CO2 emissions and – unlike wind power – because it’s base-load – is capable of real CO2 abatement.  Remember, that’s the entire objective of Australia’s Renewable Energy legislation and the fat pile of subsidies paid for by power consumers (see our post here). […]

  8. […] STT is usually content to load-up on the economic and environmental fraud that is wind power (see our post here). […]

  9. […] hears that the review is odds-on to be headed up by the Productivity Commission, which has already signaled its readiness to drive a stake through the heart of this subsidy driven […]

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