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15
Jun
2017

Finkel & Turnbull Crisis Has Started

My last Commentary (on Tuesday 13 June) suggested that unless Turnbull recognises the many deficiencies in the Finkel report there is likely to be a political crisis within the Coalition. This morning I distributed several articles which indicate that this is now well under way. I list briefly below how this may have developed and what is wrong with Blueprint.

  • According to the Australian Government’s web, the “Chief Scientist provides high-level independent advice to the Prime Minister and other Ministers on matters relating to science, technology and innovation”  and  “reports to the Minister for Industry, Innovation and Science, Senator the Hon. Arthur Sinodinos AO, and also works closely with the Prime Minister both in his role as Executive Officer of the Commonwealth Science Council and in order to provide detailed scientific advice”. Turnbull appointed Finkel as Chief Scientist presumably in the knowledge that he had no background in examining influences on climate but that he is a warmist. Finkel’s letter of 9 June to the Prime Minister, Premiers and Chief Ministers accompanying the submission of his Blueprint at COAG on 9 June makes no mention of any terms of reference or decision by Cabinet asking for a report on clean energy (see Finkel Letter to Turnbull). Nor is there mention of the Party Room having considered the issue or the need for a report by Finkel. But Turnbull presumably either requested such a report or agreed with  a suggestion by Finkel that one was needed. He certainly has to accept responsibility for it having been undertaken;
  • Finkel’s letter of 9 June claims “the cries for reform are loud” because “the electricity system has struggled to cope with shifting policy imperatives and rapidly evolving technologies”. This of course is due to an inappropriate change in policy imperatives which needs reversing or changing and does not mean that “we need a plan”, which the letter claims. Finkel also claims that the COAG Energy Council “requested the Review Panel to recommend enhancements to the National Electricity Market to optimize security and reliability, and to do so at lowest cost”. In fact, the Communiqué of that Counicl’s meeting on 10 April refers to”the review by the Climate Change Authority (CCA), with advice from the Australian Energy Market Commission, to enhance power system security and to reduce energy prices, consistent with achieving our emissions reduction targets in the Paris Agreement(see COAG Energy Council Meeting 10 April). The CCA had already recommended an emissions reduction target similar to the 26-28% reduction adopted by the government;
  • Finkel’s letter claims further   “ We quickly discovered that beyond the cost of gas, uncertainty around emissions reduction policies was pushing up prices and undermining reliability. Our plan removes that uncertainty. Its key feature is an orderly transition to bring new generation into the market to improve reliability. Participation is based on low emissions, not technology type. There are no prohibitions, just incentives. It puts downward pressure on prices by bringing that new electricity generation into the market at lowest cost without prematurely displacing existing low-cost generators. It further ensures reliability by financially rewarding consumers for participating in demand response and distributed energy and storage”.
  • As indicated in articles by Sloan and Uren already circulated and by what I have already circulated, this is just nonsense. First, the only basis for claiming uncertainty about emissions reduction policies now is that the government has not set a time table for meeting the already set target at 26-28% by 2030 .The Blueprint does not remove that uncertainty because it doesn’t set a timetable either. The government could reduce the uncertainty by starting a time table now.  Second, the increase in electricity prices basically reflects the already started policy of substituting high-cost renewable for low-cost coal (including the closing down of some coal generators). That policy would continue under the Blueprint, which recommends a 42% use of renewable by 2030, about three times higher than now. A time table for renewable would also be needed. Third, the claim that Blueprint would put downwards pressure on prices is unbelievable because it would substitute high cost renewable (plus back-up) for low cost coal (no back-up) unless there was a sufficiently large increase in subsidies for the former at a cost to taxpayers. Fourth, the claim that participation is based on “low emissions”(and separately that this wouldn’t rule out coal!) is nonsensical because a coal-run operation would be unable to compete with a heavily subsidised renewable and nobody in the private sector  would start a new coal operation. Fifth, the notion that “there are no prohibitions, just incentives” is simply amazing. The “incentives” (read subsidies) for renewable are tantamount to a prohibition or tax because they tell coal operators that “OK you can continue to operate but you will have to do so at a loss”! Tony Abbott is technically incorrect in describing the incentives as a tax on coal but that is what it amounts to.
  • Just how this will play out politically seems clear, if uncertain unless somebody challenges Turnbull. But Turnbull’s responsibility for having Blueprint produced, and his initial quasi-approval of it, means that he has created a split within the Coalition by effectively imposing a tax on carbon. Although the Blueprint is not exactly the same as what Labor wants, their bipartisan offer to get together confirms that Turnbull is on the right track for them.  In his article today Andrew Bolt asks why is Turnbull “making the Liberals dance to the warmist tune of Labor and the Greens? Is this why Liberal supporters and donors back the party — to produce not just record debts and spending, but global warming schemes that will just make the poor too scared to turn on the heating this winter? While Turnbull is there, there’s no point to the Liberal Party. The Liberals must get rid of Turnbull or he’ll get rid of them”.

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