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Alan Kohler is one of Australia’s most experienced commentators and journalists. Alan is the founder of Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour free business news and commentary website. He also hosts Inside Business, a half-hour Sunday programme on the ABC, is the finance presenter on the ABC News - and producer of the nightly graph (or two).
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CLIMATE SPECTATOR: Abbott's ignorant power punt

Tristan Edis6 Dec 2012, 11:12 AM

The Coalition is counting on public ignorance to get its message across that the carbon tax is to blame for high power prices. But as the media starts to dig deeper, it's a dangerous gamble.

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Climate Spectator

The Coalition was at it again this week, desperate to drag the media’s attention away from electricity network regulation and onto the carbon tax.

You see them now talking about not just a carbon tax but an "electricity tax”. The hope of course is that the major electricity price rises Joe Average has noticed since 2008 and ongoing until the next election will all be attributed to the carbon price. This is even though most of the rises have taken place before the carbon price even came into effect.

This strategy has been clearly in evidence in Abbott public statements, such as this:

"I think if you are a fair minded observer you would say there has been a very consistent level of opposition to the carbon tax because the public understand that this is a tax which will hurt them without helping the environment. It won’t clean up the environment but it will clean out people’s wallets and that’s what it’s doing. Every time your power bill goes up, that’s the carbon tax doing its job. Every time your power bill goes up, government ministers are saying, well, that’s why we put a price on carbon, to make your power more expensive.”

In response to Gillard’s announcement on the weekend to stop network gold plating, Shadow Climate Change Minister Greg Hunt again tried to get the focus onto the carbon tax as the driver of price rises stating, "The carbon tax was designed to increase power prices."

Actually, I thought the carbon tax was "designed” to increase the cost of emitting CO2. As a by product it increases electricity prices because we currently get most of our electricity from high emitting coal, but that’s not its specific design. If we got more electricity from gas or renewables then the price rise would be negligible. And that’s really the point – it’s not to make householders switch off the lights and turn down the heater, it’s really about encouraging the use of different technology by major emitters.

If the carbon tax was specifically designed to increase power prices then one could also say establishing gas liquefaction plants were also "designed” to increase power prices. Rail lines from coal mines to ports that increase the price of coal for domestic power stations – again these are "designed” to increase power prices. The propping up of Alcoa’s Point Henry smelter and also Port Pirie? Yep, that’s Labor at it again deliberately trying to increase electricity prices.

In fact to take it one step further you could even argue that Tony Abbott’s own Direct Action policy is "designed” to increase power prices.

What else does Tony Abbott and Greg Hunt think would happen if they paid Hazelwood to close (as Hunt has been promising)? Does he think that all the other generators in the NEM sitting above Hazelwood in the merit order would just generously adjust their market bids downwards to keep prices the same?

I suppose he thinks that gas producers will kindly hand out a long-term contract to a new gas power plant at $2 a gigajoule when they’re asking northwards of $7 from everyone else because they can export it to Asia as LNG. If a gas powerplant were to replace one for one the output of Hazelwood paying the LNG netback gas prices implied from current contracts – have a guess what wholesale power price you’d require to just cover its operating costs (ignoring the cost to construct the plant)? Based on ACIL Tasman costings it would be the same or even substantially greater than the wholesale electricity price we’re paying with the $23 carbon price.

All of this is a continuation of their effort to have people think that that the only way you might reduce emissions is to give things up, rather than doing things differently or, heaven forbid, actually innovating.

As Tony Abbott put it: "The tax doesn't work if it doesn't hurt. It has to make turning on your heater more expensive and make using transport more expensive to work.”

No doubt this came out of a bit of focus group testing where a few participants would have thought the only way we could reduce emissions was to go without.

Now it might be conceivable that Abbott could believe this tripe, but Hunt? He did a master’s thesis on how environmental regulation via markets can harness innovation.

But it’s getting worse because now Hunt looks like he’ll extend this rank populism to a scare campaign on the roll-out of time of use pricing.

"If the Prime Minister's solution is 'we'll give you a carbon tax to increase your power prices and then we'll increase power prices at dinner time', then I think we ought to know that today," he said.

All of this is essentially a gamble on people’s stupidity and ignorance.

But there’s some evidence emerging that while you might be able to fool some of the people some of the time, you can’t fool all of the people all of the time.

Gillard has remarkably managed to get the media to look a little deeper into what might be the underlying causes of power price rises. We now even have breakfast television host, Karl Stefanovic, putting the heat on Abbott and even mocking him to his face:

Karl Stefanovic: You must acknowledge and concede that there these are factors creeping into all these bills. So, how can you be certain that the bills will continue to go down, even if you get rid of the carbon tax?

Tony Abbott: Well, if you take off 10 per cent of the cost, the price should go down 10 per cent...

KS: I understand that. But if a bill, say, for example, a bill of $500, compared to $400 or $300, which is what people are telling us compared to last year. Even if that component is taken out, that $30, yes, it is a saving of $30 but no one is getting control of the power companies here. No one is getting control of the assets. It’s a short-term fix.

Abbott then replies by bringing the discussion back to the carbon tax

KS: It is a big issue. I think Nick Xenophon is on to something here, in terms of taking control of the electricity rules. I have noticed you have had a particular penchant for animal references in the last couple of days. I will play a couple of these references now. Let’s have a look:

Television footage of Tony Abbott talking: It’s going to be a python squeeze rather than a cobra strike… This is an octopus embracing the whole of our economy.

KS: Have you been watching too much ‘When Animals Attack’?

TA: No, look, I’m not going to make light of this Karl. I mean, seriously, on your program, Karl...

KS: But the animals are getting smaller!

The Spectators

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