The nation appears headed for an election over emissions reductions and power prices after a majority of Coalition MPs endorsed the National Energy Guarantee and set the scene for a showdown with Labor.
By Phil Coorey
Despite a rearguard effort led by Tony Abbott to kill the NEG stone dead, Coalition MPs backed it by a ratio of about three to one at Tuesday’s party room meeting, clearing a major hurdle for the policy and handing an internal victory to Malcolm Turnbull and Energy Minister Josh Frydenberg.
Last night, the states, which must pass separate legislation to establish the mechanism for the NEG but were awaiting the outcome of the party room, held a telephone hook-up and allowed the process to continue. However, the Labor states still have key reservations and are yet to pledge their final approval.
Victorian Energy Minister Lily D’Ambrosio said she wanted to study the federal legislation approved by the party room “to see what concessions Malcolm Turnbull has given the climate sceptics in his party room”. The ACT is also holding back pending the final shape of the federal legislation and whether it can even get through Parliament.
There is potential for a stalemate, with federal Labor saying it wanted the states to establish the mechanism before it dealt with the federal legislation.
To begin in 2020, the NEG will require power retailers to source electricity that meets reliability and emissions reduction targets. The states will legislate for the mechanism of the NEG and federal Parliament will set the targets.
The legislation approved by the party room on Tuesday sets an emissions reduction target for the electricity sector of 26 per cent on 2005 levels by 2030.
Federal Labor supports the NEG mechanism but believes 26 per cent is too low and the target should be 45 per cent.
Without Labor’s support, the federal legislation could fail to pass the House of Representatives because up to half of the estimated 10 MPs who spoke against the NEG also reserved their right to cross the floor and the government only has a one-seat majority.
Labor is yet to make a decision but is likely to pass the legislation through the House of Representatives and then fight it out in the Senate over the size of the emissions reduction target.
Labor claims 45 per cent will lead to more renewable energy and cheaper power. The government claims the opposite.
Mr Turnbull said he would relish an election fought over the issue.
“We should legislate the 26 per cent target and then if Labor wants to go to the next election and argue for a higher target, they should do so,” Mr Turnbull said.
“And we’ll gladly have that debate with them because if you were to have a higher target than 26 per cent, it would increase costs on consumers.
“We welcome a clear-cut political debate on the cost of power.”
“We’re very happy to have a strong debate within the community, in the context of an election, about the need for real ambition on energy investment,” he said.
“The government’s emissions reduction target of 26 per cent is effectively a reduction of 2 per cent over the course of the decade and will pull through absolutely no new [renewable energy] investment. That will be felt with higher power prices.”
Victoria says it will not back the NEG unless the federal legislation is amended so the target is set by regulation, which is a ministerial decision, not legislation. Mr Frydenberg is refusing to move on those demands and Mr Butler said federal Labor was yet to take a position.
An estimated 26 Coalition MPs spoke in support of the policy while around 10 either spoke against it or cited reservations.
Of these, several MPs opposed it outright and reserved their right to cross the floor. These included Mr Abbott, Andrew Hastie, Tony Pasin and George Christensen. Mr Abbott mocked Mr Turnbull’s claims that power prices would drop under the NEG as “merchant bankers’ gobbledegook”.
Others who expressed concerns and who could cross the floor included Barry O’Sullivan, Eric Abetz, Andrew Gee, Craig Kelly and Kevin Andrews.
Former Nationals leader Barnaby Joyce said he would support the policy but will move an amendment to force the divestment of AGL Energy’s generator assets in NSW. This is unlikely to succeed.
The meeting was marked by strong contributions from marginal seat holders who risk losing their jobs as the party devolves into another bout of infighting over energy policy. Of those, everyone who opposed the policy, except for Mr Christiansen, are in safe seats or the Senate.
MPs Anne Sudmalis, Sarah Henderson and Julia Banks as among those urging Mr Abbott, who has a safe seat, to pull his head in.
To assuage concerns among the Nationals and conservative Liberals, Mr Turnbull promised to adopt in parallel with the NEG an Australian Competition and Consumer Commission recommendation in which the government would underwrite a new dispatchable power station by agreeing to be a buyer of last resort of the energy it produces. This could be coal, gas or renewable energy but would most likely be so-called clean coal.
Businesses which are heavy users of power are pleading with the Parliament to land the NEG and end the policy uncertainty which has caused power prices to spike.
“We’ve seen our energy costs almost double in the last three years. That’s what a period of uncertainty does to energy costs,” BlueScope chief executive Mark Vasella said.
Australian Industry Group chief executive Innes Willox said the strong support in the party room was “a positive, and we are hopeful there will now be no barrier to getting on with the next stage of development”.
“All sides will need to be ready to work together in the national interest of delivering the durable policy framework that the electricity sector, and all who depend on it, so badly need,” he said.
First published by The Australian financial Review, Wednesday 15 August 2018.