Australia’s Renewable Energy Debacle: Government Mandates Economic Suicide

Bill Shorten: pledges total economic destruction with 50% RET.

 

Australia’s energy policy reads more like a Greek tragedy. An obsession with wind and solar has left Australians with rocketing power prices and an unstable grid.

Renewable energy rent seekers have profited (obscenely) from the greatest government mandated wealth transfer in history: $70,000,000,000 worth of subsidies and soft loans will be thrown at wind and large-scale solar over the life of the Federal government’s Large-Scale Renewable Energy Target.

Starting in 2002, South Australia led the charge with its very own 50% RET. Infamous for the only statewide blackout in Australian history, mass power cuts and the highest power prices in the world – perversely, SA is still held up as Australia’s renewable energy capital. High praise indeed!

With a Federal election set for May, all eyes are on what happens next in the energy domain.

The current Coalition (Liberal/National) government gave its support to the original LRET’s ultimate annual target of 41,000 GWh – ramped up during the Rudd Labor government in 2009.

Liberal PM, Tony Abbott wanted to slash it to nothing back in 2014.

Outraged, the wind and solar lobbies – backed by Labor – convinced then Environment and Energy Minister, young Gregory Hunt to settle on 33,000 GWh. The cost of the subsidies under that scheme will exceed $60,000,000,000.

Eager to emulate South Australian disaster and take it National, Bill Shorten and his deranged sidekick, Mark Butler (a South Australian) want to double up and impose a 50% Federal RET.

The economic cost attached to the current policy is disastrous. Whereas what is threatened by Labor is nothing short of catastrophic.

Last week, Dr Brian Fisher delivered a prognosis on Australia’s current renewable energy debacle. Brian Fisher is managing director of BAEconomics and has participated as a lead or convening lead author in three IPCC climate assessments.

On Brian’s numbers, the choice for voters is a bit like asking someone whether they would like to be run over by a steam roller, or eaten by lions? Although, at least under Bill Shorten the coup de grace will be as swift as it is brutal.

Carbon cut apocalypse: cost of ALP energy plan
The Australian
Simon Benson
21 February 2019

Labor’s 45 per cent emissions-­reduction target would push electricity prices 50 per cent higher, cost workers up to $9000 a year in lower wages and wipe $472 billion from the economy over the next decade, according to the first independent modelling of the energy policies of both the government and opposition.

The Coalition’s commitment to meeting a 26-28 per cent reduc­tion under the Paris Agreement would also come at a cost, with $70bn in cumulative economic losses by 2030 and a 2 per cent hit to real wage growth.

The research, which is currently under peer review in the US, has been authored by Brian Fisher, the former head of the Australian Bureau of Agriculture and Resource Economics, who served under the Hawke, Keating and Howard governments as a chief adviser on climate policy.

The comprehensive modelling of the economy-wide impacts of both parties’ climate change policies has exposed claims by Labor and the Coalition about the costs of their commitments. It suggests that Labor’s policy would result in 336,000 fewer jobs in 2030 than there otherwise would have been while the Coalition’s commitment would result in 78,000 fewer jobs as the economy adjusted to transitional shock.

Dr Fisher, who has also been a lead author on three reports of the UN’s Intergovernmental Panel on Climate Change, accuses both sides of politics of engaging in a dishonest debate.

“Having also been involved in climate policy research since 1992, I still get frustrated about how deficient and even outright dishonest the climate debate continues to be … regardless of the approach Australia adopts to reduce emissions, there is an inevitable cost to our economy as more emissions-­intensive activities make way for less intensive industries,” Dr Fisher told The Australian.

The findings of the ongoing ­independent study, conducted through modelling firm BAEconomics, show that Labor’s plans would result in cumulative economic losses of $472bn over the decade, with GDP $144bn a year lower by 2030. This also takes into account Labor’s 50 per cent renewable energy target.

The loss of economic activity associated with the transition from energy-intensive industries and their workforces to less energy-intensive ones under the Labor emissions-reduction policy was equivalent to an average annual growth rate of 2.3 per cent compared with 2.9 per cent. The forecast effect of this economic shock would be 336,000 fewer jobs by 2030. “The full-time wage would also be around $97,400 — a reduction of 8 per cent,” it said.

This would amount to a fall in real annual wages of about $9000 per year by 2030.

Electricity prices would also balloon under what the report claimed would be a significant economic adjustment. “In meeting the combined 50 per cent renewables target and the emissions target, the wholesale electricity price would be around $128/MWh,” the report said.

This would be more than 50 per cent higher than the base case of ­$81/MWh. The Coalition’s commitment to a Paris target of ­reducing emissions by 26-28 per cent by 2030 was also not without a price tag.

“Meeting a 26-28 per cent reduction target is projected to mean that by 2030 the Australian economy would be around $19bn smaller in terms of GDP than it otherwise would have been,” the summary report said.

“In 2030, the first scenario (26-28 per cent) would also see around 78,000 less full-time equivalent jobs in the economy and a full-time wage of around $104,600 per year compared to $106,400 in the base case, a reduction of 2 per cent in real wages.

“Under this option, Australia’s share of renewables would reach around 36 per cent and the wholesale electricity price would be $93/MWh compared to $81/MWh in 2030.”

Dr Fisher said he expected to get “kicked” by both sides of politics but claimed it was time the public knew the true costs associated with abatement.

Writing in The Australian today, Dr Fisher says: “Inescapable, is that both policy scenarios will result in economic cost in terms of reduced GDP growth as the economy is forced away from its current trajectory.

“This will in turn affect employment and real wages, with regional economies dependent on the production and export of fossil fuels exposed to more severe adjustment pressure compared to more diversified urban economies.

“As you might expect, achieving the lesser target is not as disruptive but it still comes at a price.”

A recent ANU report said Australia could meet its Paris commitment by as early as 2025 without cost and using reductions in the electricity sector alone.

Dr Fisher described this as “appallingly” inaccurate.

His summary research paper to be released today is based on an advanced model of the world economy called BAEGEM, built on climate policy models used by government for almost 30 years.

“Australian climate policy is at a crossroads,” the summary report said. “With a federal election expected in May 2019, it is timely to assess the economic impacts of the ­alternative domestic policy approaches proposed by the two major political parties.

“Under either policy scenario, the Australian economy must adjust as more emissions-intensive activities make way for industries that are less greenhouse-gas-emissions intensive.

“In some cases such adjustments are technically difficult and therefore expensive.”
The Australian

Brian Fisher: counts colossal cost of renewable energy fiasco.

 

STT followers might well ask why Australia is still bound up in the global war on carbon dioxide gas? With the USA ditching its commitment to the Paris agreement and the world’s biggest emitter, China practically ignoring any impost on its effort to industrialise by way of cheap and reliable energy, principally delivered by coal-fired power plants, why is it that Australia obsesses about its trivial contribution to carbon dioxide emissions? All good questions.

Brian Fisher, like all good economists undertaking any kind of analysis, operates on disclosed assumptions. One of which is that Australia will stick to the Paris agreement and continue to throttle its economy by way of meaningless virtue signalling. Tragically for Australia’s economic prospects, Brian Fisher is justified in assuming that at least the status quo will continue, in future.

The Green/Labor Alliance is utterly obsessed with carbon dioxide gas, mounting a war against coal-mining (Australia’s biggest export earner) and coal-fired power; and the Liberal/National Coalition terrified of the political consequences of backing away from current policy.

Brian Fisher’s paper is available here: Economic consequences of some alternative Australian climate policies

Here is Brian’s op-ed on the paper as it appeared in The Australian.

Come clean on climate targets
The Australian
Brian Fisher
21 February 2019

As both a farmer and an economist, I pay close attention to the weather and how much things cost.

Like thousands of other farmers in Australia’s southeast, I’m having to handfeed livestock because of the continuing drought, and to this day I still wonder about what is happening with our climate.

I perhaps give it more thought than many, having also been involved in climate policy research since 1992, and I still get frustrated about how deficient and even outright dishonest the climate debate continues to be.

For example, at the headline level, there are two common propositions — the first being that Australia alone can positively influence the climate and, second, there is little to no economic cost for us in achieving significant greenhouse gas emissions reductions.

Both are simply untrue.

In 2012, the most recent year for which a full inventory of all greenhouse gases is available, Australia’s share of global emissions was just 1.15 per cent, so there is nothing we can do alone that will have a material impact on the global climate, let alone save icons such as the Great Barrier Reef from climate change.

What, of course, is required is meaningful global co-operation under the Paris Agreement, but even then we are reliant on all countries doing their bit and to date, as with many other UN treaties, there is a wide gulf between laudable aims and what is delivered.

As for the second proposition, regardless of the approach Australia adopts to reduce emissions, there is an inevitable cost to our economy as more emissions-intensive activities make way for less-intensive industries. In many cases, adjustments are technically difficult and therefore expensive.

For example, at present it is simply not practical to control methane emissions from livestock grazed on native pasture, the source of a significant share of agricultural emissions. As a result, the marginal cost of abatement is very high, with the implied impost on industry significant.

In other cases, making emissions reductions is cheaper. Incentivised activities such as those supported under the government’s $2.5 billion Emissions Reduction Fund show that up to a limited point, emissions reductions can be achieved for about $13-$14 per tonne of carbon dioxide abated in the example of returning carbon to the soil.

However, to reduce our emissions by, say, 35 per cent by 2030 — compared with benchmark 2005 levels — would far and away exceed anything achieved under the ERF to date, and we could expect the cost of abatement to climb steeply as the economy adjusts.

To provide an insight into the economic impact of emissions abatement out to 2030 in light of the Paris Agreement, BAEconomics has modelled two possible policy positions of the federal government and opposition respectively.

The first being the Paris target of a 26 to 28 per cent reduction and the second being a more ambitious reduction target of 45 per cent with a renewables target of 50 per cent.

The modelling chooses the least cost way of meeting the specified abatement targets.

Inescapable is that both policy scenarios will result in economic cost in terms of reduced GDP growth as the economy is forced away from its present trajectory. This will in turn affect employment and real wages, with regional economies that are dependent on the production and export of fossil fuels exposed to more severe adjustment pressure compared to more diversified urban economies.

As you might expect, achieving the lesser target is not as disruptive but it still comes at a price. For instance, in terms of GDP, the economy would be about $19 billion smaller in 2030, with cumulative losses over the decade of about $69bn. This is equivalent to a growth rate of 2.8 per cent a year, compared with 2.9 per cent under the base case.

In 2030 the first scenario would also see about 78,000 less full-time equivalent jobs in the economy and a full-time wage of about $104,600 a year, compared with $106,400 in the base case, a reduction of 2 per cent in real wages. Under this option, Australia’s share of renewables would reach about 36 per cent and the wholesale electricity price would be $93/MWh, compared with $81/MWh in 2030.

To achieve the more stringent 45 per cent target with 50 per cent renewables would see the Australian economy $144bn smaller in 2030, with cumulative losses over the decade of $472bn with an average annual growth rate of 2.3 per cent compared with 2.9 per cent.

Under the base case, the Australian economy would support about 14 million full-time equivalent jobs in 2030 but there would be about 336,000 fewer jobs by meeting the 45 per cent emissions reduction target. The full-time wage would also be about $97,400 — a reduction of 8 per cent. In meeting the combined 50 per cent renewables target and the emissions target, the wholesale electricity price would be about $128/MWh.

At the end of the day, the political process will determine the emissions reduction road that Australia takes, but in the meantime we need to inject some honesty into the debate about the true cost of achieving our targets.
The Australian

About stopthesethings

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

Comments

  1. Jackie Rovensky says:

    What is missing in the assessment of jobs in relation to either course being offered is – What are the predicted population figures?
    For Australia to keep meandering down the path towards disaster is something we need to present to the Politicians at the coming Federal Election. We need a new path to tread, one which doesn’t destroy our Nation and/or its environment but one which brings prosperity to the population now and into the future.
    Without the biggest countries and polluters in the world making an effort what is the point, we will still in 2030 be a nation without a Great Barrier Reef and one with constant catastrophic weather conditions no matter the month or Season.
    The signing and then ratifying of the Paris Agreement was a HUGE mistake which politician should acknowledge and step aside from. After all no-one anywhere looked into how such reductions could be achieved from the Essential Service of electricity supply, whether in respect to provision of reliable, affordable supply for our current and future needs.
    As we have seen the use of electricity has escalated, more cars running on battery’s, electric trains, buses, heating and cooling, running businesses and production of foods to name a few where electricity is a commodity in high demand – and growing. The use of the internet which uses either battery or mains power, mobile phones all now something most homes and all businesses need, it seems everything needs electricity.
    The cost is growing not coming down, it is now acknowledged that Wind Turbines need some sort of backup and batteries appear to be the ‘backup’ of choice, even though they cannot provide sufficient supply to meet needs for more than what amounts to a miniscule amount of time, and what recharges them?
    We need a new direction and unless the Federal Government and State Governments find that new direction and begin immediately to use it we will continue to fall into a pit we will find it VERY difficult to extract ourselves from.
    We may even have to be ‘taken over’ by one of those country’s that are not party to the Paris Agreement or who are manipulating things to appear to be meeting their commitments, because if we cannot provide for our own Nation that could be the outcome.
    Liberal, Nationals, Labor and if we have to the Greens get off your backsides and do what is best for this country and not your personal ideological dreams.
    Turbines are not the answer, solar is not the answer to two combined is not the answer – a reliable source of energy when and where it is needed at a cost that people can afford IS the answer – source that does not have to be replaced every 5-10 years (at enormous cost) is the answer one that lasts with good maintenance for many years is the answer.

  2. Sarcastic Cynic says:

    This comes as no surprise and I think Brian Fisher understates the economic effects. The Australian property market is on a razor’s edge with huge mortgages and flat wage growth. The follow-on results of an economic hiccup could start an avalanche.
    Whenever I read various social media posts, it’s obvious that Australians remain heavily pro-climate change, anti-development and anti-business. It appears that they are infatuated with economic hari-kari. Energy intensive industries are seen as environmental vandals and coal miners are viewed on a level equivalent to rapists and paedophiles. The view that wind and solar are free and equal to fossil fuels is pervasive.
    Pray that fracking is slow to gain traction across the world outside the US. Cheap gas will heavily impact Australia’s coal market, particularly as Australia seems intent on rationing its supply.

  3. Where is the problem??? When Australia’s economy resembles the Fijian model I am sure there will be a large number of nations offering food aid and happy to come and take over the country and export Australia’s minerals and coal for their own gain. You couldn’t write a comedy to compare what Australia and the virtue signalers have become and what damage they are going to do. I think the only course of action is let the ALP ruin the economy and let the children demonstrating in the streets about coal and climate change find out what it’s like to starve and become the butt of the worlds jokes.

  4. Reblogged this on ajmarciniak.

  5. Son of a goat says:

    Tales from the Kooyong Chronicle

    Update 2: Yoda 4 Kooyong # peanut for PM

    Spare a thought for Yoda Yates in his bid to arrest the Federal seat of Kooyong away from the incumbent Josh Frydenberg at the forthcoming election.
    Politics is a brutal sport at the best of times, certainly removed from the rarefied atmosphere of the board room in the banking world. Blood letting, bullying, intimidation, a constant barrage of media interviews the ever present social media and always being in the public eye.
    Its no world for the faint hearted , you wont see a Messiah or Charismatic Kane leave the bubble of like minded zealots to enter the cut and thrust of everyday politics.

    I’ll give Yoda his dues,the big fella is in there swinging away. Putting his views forward strongly on energy policy, stating that with half of Australia on fire and the top end of Queensland under water we are seeing the effects of climate change.

    Unfortunately we all have our own kryptonite. For Yoda it came this week when we suspect a mischievous liberal party stooge stuck a lump of coal in his letter box.
    When Yoda checked his letter box and found his unwanted present early one morning, he went ape shit, it was as if I was watching a live version of the “Incredible hulk”.

    Lets just say when Yoda returned inside his prized pooch “Peanut” was sent tumbling through the air in a kick that was reminiscent of his beloved Jack Gunston kicking on goal from 60.

    I am happy to report both Yoda and Peanut have calmed down and are unhurt.
    Peanut may be a pedigree pooch, but believe me there’s a degree of mongrel in him. Later that night he sought his revenge by creeping up the stairs whilst the Yoda’s slept and cocked his leg on Yoda’s Italian leather shoes.

    Peanut gave us all a valuable lesson in political life.
    Its a dog eat dog world out there Yoda.

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