Tough times for ag sector amid energy policy chaos

Tough times for ag amid energy policy chaos

Tough times: Malcolm Turnbull's change to the NEG was an appeal to his party's right wing who favour energy market intervention to reduce prices. Photo by Mick Tsika

Tough times: Malcolm Turnbull's change to the NEG was an appeal to his party's right wing who favour energy market intervention to reduce prices. Photo by Mick Tsika


Lib revolt leaves PM with NEG on his face


It’s a tough time to deliver energy market reform.

Drought grips the country, bushfires sweep the east coast in winter, climate change alarm is intensifying, power prices are soaring and the Liberal Party is eating itself alive.

Amid the tumult in Canberra this week, the Coalition's attempt at stable policy, the National Energy Guarantee was scrapped.

Down went the NEG, a signature Turnbull policy, and along with it went the hopes of agriculture for stable policy.

“I'm incredibly disappointed. We are back to square one,” National Farmers’ Federation president Fiona Simson said.


The sector which will struggle most to lower emissions, agriculture, had been pleading for two outcomes – lower power prices and for the energy sector to do the heavy lifting required to deliver on Australia’s international emissions reductions commitments.

New renewable technology means emissions reductions can be achieved far more efficiently by energy generation than agriculture, a sector battling energy costs that have as much as tripled in recent years.

Scrambling to save his political skin on Monday, Prime Minister Malcolm Turnbull announced a backdown on the NEG, a controversial policy that farm leaders had backed from the outset.

Mr Turnbull scrapped plans to legislate an emissions reduction target of 26 per cent on 2005 levels by 2030, replacing it with a goal defined in regulation and set by the responsible minister.

Default prices would limit the amount energy retailers can charge customers, set state-by-state by the Australian Energy Regulator, based on a reasonable margin and the local cost of operation. It is estimated to save households up to $415 a year.

And government would take over and operate power generation assets owned by companies if they use their power to manipulate the market.

Ms Simson lead a coalition of leading farm lobby groups that campaigned for the NEG.

She said the NEG criteria was reasonably affordable power and a trend towards lower emission in terms of international agreements, delivered by a technology-neutral approach.

“There are certainly many people in agriculture working towards lowering their emissions, but we’ve been left to the vagaries of government in terms of reductions targets,” she said.

“If future governments set higher targets, it will test ag’s ability to deliver.”

After Malcolm Tunbull’s NEG announcement on Monday, the Nationals called a snap press conference.

“For the Nationals, coal is certainly very much part of our thinking, part of our strategy, part of our support,” said Nationals leader Michael McCormack.

Deputy Nationals Leader Bridget McKenzie praised the Australian Competition and Consumer Commission energy market reforms, particularly government underwriting investment in ‘dispatchable’ power.

“I’m not afraid to say the C word. Coal, coal coal is going to be one of those areas we invest in,” Ms Mckenzie said.

Mr McCormack argued Australia was “doing more than enough” to meet its international commitments.

Australian National University Climate Change Institute director Professor Mark Howden established the inventories of agricultural greenhouse gas emissions from Australia and internationally.

He said the cheapest emission reductions options are in electricity sector.

“New wind and solar generation is on par or cheaper than new coal or gas, and renewables have zero operating costs when established.

He said agriculture had “relatively few” large scale, efficient, emissions reductions options.

“We can improve efficiencies in ag, but we have already gone down that pathway, plus we have to deal with drought. That means the dollars per unit of emissions reduction will be particularly high from here on.

“The most logical proposition is to go for cheapest option first, which is in the electricity sector. Even if you can’t attribute all of the drought and floods and heat waves to climate change, the analysis shows it has a fingerprint in those events.

“The risk of worse circumstances should make all of us with an interest in agriculture and rural Australia be careful about developments which increase greenhouse gas emissions.”

A spokesperson for Nationals Leader Michael McCormack said he supports “balanced policy outcomes whereby commitments such as reducing emissions are met while meeting the needs of important industries like mining and agriculture which are critical to the economies of regional communities”.

ANU Energy Change Institute director Professor Ken Baldwin said removing the emissions reduction target could be seen as a positive, as it could be adjusted depending “on our progress toward meeting the Paris obligations”.

“Given the electricity sector represents the lowest hanging fruit, this raises the prospect of increasing the target for the electricity sector in order for it to do the heavy lifting for other sectors like agriculture where emissions reductions are more difficult.”

Mr Baldwin said there would be no new coal plants built under solely private investment because wind and solar are the cheapest form of new build electricity generation.

“Wind in particular is now running close to the marginal cost of coal generation and soon the rapidly decreasing cost of solar will compete with it.”

“The caveat is that the rapid deployment of renewable energy across the country would only continue if the industry is given the investment certainty it requires from government policy that ensures alignment of climate and energy requirements in order to meet our Paris targets.”


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