The dire state of Australia’s national electricity market, and our lack of investment in renewable energy, has been a mess of our own creation, said former Treasury Secretary Ken Henry.
Key points:
- An “extraordinary gas export tax” would reduce domestic gas prices in Australia
- The tax rate on extraordinary profits could be 100 percent
- It would also help the transition of the economy to renewable energy
Australia has also missed its opportunity to use its huge national gas reserves as a transition fuel to change our electricity system from a highly dependent coal to a renewable one, he says.
“It has been wasted through politics, partly ideological, partly I think driven by personal ambition, and it has put us in a very bad place,” he told ABC this week.
“It’s too late to have the kind of dependence on gas energy as a transition fuel that we were imagining in the last century.”
Dr Henry, who was Secretary of the Australian Treasury from 2001 to 2011, argued in 2004 that Australia should adopt a national emissions trading scheme.
In its 2010 fiscal review, it warned that energy markets could become unstable if investors were not secure enough to make long-term investment plans for renewable energy.
Now, looking back, he says no one involved in energy policy-making in the late 1990s and early 2000s could say he did not see the current energy crisis in Australia.
But an extraordinary gas export tax could help fix things, he said.
Space to play or pause, M to mute, left and right arrows to search, up and down arrows for volume. Clock time: 21 minutes 12 seconds 21 m Would a gas export tax fix Australia’s energy crisis? (Rachel Pupazzoni)
Australian policymakers collapsed
Dr Henry spoke to the ABC after one of the most tumultuous weeks of Australia’s energy policy experience.
Last week, Australia’s east coast electricity system plunged into chaos as power supplies plummeted as demand rose as people increased their demand. energy use during a strong cold season.
Some fossil fuel generators had withdrawn a large amount of capacity from the National Electricity Market, which worsened the expected electricity shortage and led to unprecedented regulatory intervention.
There were terrible warnings about possible blackouts, which prompted politicians to ask voters to turn off the devices to avoid catastrophic tensions in the system.
And the gas price crisis continued as multinationals made huge profits exporting Australian gas abroad.
Dr. Henry said it was a situation we should not be in.
“It’s weird, isn’t it?” He said.
“We have a global energy price shock, energy prices around the world are going through the roof. Australia is an energy superpower; we have almost every energy source imaginable in abundance.
“And yet we have multinational companies making huge profits while Australian households and energy-dependent Australian manufacturers have it on their necks.
“How did we end up in this place?”
A gas-driven recovery?
Dr. Henry said that Australia’s political leaders took the opportunity to have more control over Australia’s gas fields to help us make the transition from our energy system to renewable energy.
He said the current crisis was predictable and has been a disaster for a long time.
“Many people will remember that the Kyoto Protocol was signed 25 years ago in 1997. It came into force in 2005,” he said.
“This gave Australia eight years to design an optimal policy approach to climate change.
“Canberra’s senior civil servants easily came to the conclusion that an optimal policy response would be a carbon price for the whole economy,” he said.
A coalition government, led by Prime Minister John Howard, was in power from 1996 to 2007.
Dr. Henry said a carbon price could have been introduced in different ways, either with an emissions trading scheme or with some kind of carbon tax.
But it was “very important” that the price of carbon be introduced as soon as possible, before Kyoto came into force, to help the business community make long-term investment decisions as Australia prepares for a move. great dependence on renewables.
“And the reason was that back then, in the last century, people had in mind that the Australian electricity system would go through phases,” he said.
“From a large dependence on coal, to a transition phase that would depend heavily on gas power generators, to the third phase, and the final phase, highly dependent on renewable energy.
“But the risk was that if we did not get the right policy set, then we would lose the opportunity to rely on our large gas reserves as a transitional energy fuel.
“And guess what? That’s what we did.”
A Labor government, in federal power between 2007 and 2013, finally introduced a carbon pricing scheme in late 2012, but the next coalition government repealed it in 2014.
Meanwhile, gas prices on the east coast of Australia have been deliberately linked to global gas prices, with no reserve policy for Australian households, and multinationals are making extraordinary profits by exporting our gas abroad. .
Dr. Henry said it was a situation we shouldn’t be in, but we couldn’t turn back the clock.
However, he said that if we still wanted to have a “gas-driven recovery”, we would have to do something about the internal price of gas.
And the easiest way to do that would be with taxes, he said.
We could start lowering national gas prices for Australian consumers and manufacturers by taxing the extraordinary profits of multinational gas companies.
“Given where we are now, I think a gas export tax would be the most effective way to reduce the domestic price below the world price,” he said.
“[It would] to ensure a sufficient supply of gas for domestic users, both households and businesses, and of course would have the added benefit of generating very significant revenue for the budget. “
He said there was “no economic case” why such extraordinary profits could not be taxed at a rate of 100 percent.
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Posted 22 hours, 22 hours ago, Monday, June 20, 2022 at 10:14 PM, updated 21 hours, 21 hours ago, Monday, June 20, 2022 at 11:58 PM