Emergency Measures in Need of an Exit Strategy
Quadrant, 25 March 2020
It started with Mirko Bagaric in The Australian — “Release super to boost economy” — who, while justifiably railing against the superannuation funds’ fees, argued that allowing people to access 10 per cent of their super could inject up to $300 million into the economy. Mirko has separately suggested that the actual amount might be $150 billion.
Treasurer Josh Frydenberg has accepted a watered-down version of this, which he thinks might inject $27 billion into the economy by allowing people to access $20,000 of their superannuation savings, interestingly, over two years, an indication that the malaise won’t be over soon. This is part of the fiscal package which is now at $189 billion. That’s 9.7 per cent of today’s GDP but considerably more down the road, with GDP contracting by maybe 20 per cent.
Much of the expenditure, that which seeks to cushion the costs to those worst affected, is sensible. But, even so, there has to be be an exit strategy. We have doubled the dole, for example, but when do we return it to previous levels?
Some of the money is conjured up by the Reserve Bank, which is buying shares and bonds to depress interest rates. This “quantitative easing” ..... Read more
Revealed: the Deep Green State
The Spectator, 24 March 2020
A story in the Guardian demonstrates the impotence of government against the Deep State machinery that it nominally controls.
This involved an attempt, in line with government policy, to divert money from the Emissions Reduction Fund to less harmful activities than efficiency-undermining promotion of green energy that it normally funds. The case under review was an attempt by Delta Energy to get some $14 million support for refurbishing its Vales Point plant, an outcome that would extend the plant’s life (and incidentally reduce its greenhouse gas emissions). The Guardian notes that “energy baron” Trevor St Baker is a part owner of the plant.
The Emissions Reduction Fund was set up by the Abbott Government following its election in 2013. Its Environment Minister, Greg Hunt, was an avid promoter of “direct action” which involves buying out firms’ greenhouse gas emissions rather than reducing emissions by taxing coal. In fact, buying out emissions simply funds canny firms who can offer a good story, while providing negligible effects on total emissions, since the cashiered production ..... Read more pdf version
two steps forwards, one step back as energy security matters more than ever
The Spectator, 18 March 2020
The latest energy policy from the Victorian government is to place a constitutional ban on fracking and coal seam gas exploration but once again permit the search for conventional gas in the state.
The proposed policy was developed in consultation with an industry/activist Independent Stakeholder Advisory Panel. The panel was chaired by the Lead Scientist, Amanda Caples, a pharmacologist, who was previously responsible for developing the state’s “strategic industry growth plans”. In announcing the policy, the Premier said it was “a science-based approach”. Presumably, he had in mind political science.
The exploration bans were first implemented in 2012 by the Coalition government under the then minister for energy — and now opposition leader — Michael O’Brien. For the Coalition back in 2012 seeking to blunt opposition from green radicals, a ban on new gas supplies seemed like good cynical policy.
How to Make Things a Whole Lot Worse
Quadrant Online, 17 March 2020
Deaths from coronavirus were up yesterday (March 16) on the previous day. Although death rates lower than one per cent are being quoted, the macro data (deaths/deaths-plus-recoveries) is 8 per cent, and 15 per cent in Australia (see the chart below). Hopefully that will improve. Otherwise, if Angela Merkel is correct in estimating that 60 per cent of humankind will eventually contract the disease, we can expect over 300 million deaths. Tomas Pueyo’s brilliant analysis suggests a death rate levelling off at 3-5 per cent for countries or areas that are unprepared, but one-tenth of this for those quickly identifying and isolating those affected, and intensely treating the 20 per cent who develop the most serious symptoms. Among the latter are South Korea and China outside of Wuhan, the coronavirus’ origin and epicentre.
Despite an inevitably horrendous death toll the world will recover, leaving the virus as just another background killer, like its garden-variety cousin influenza.
For the present, the world is now in a very deep economic depression. There is no shortage of consumer demand but the basis of that demand, income from the supply of goods and services, has been or soon will be sharply curtailed. ..... Read more
Coronavirus: Pump-priming is economic folly
The Australian, 17 March 2020
In normal times we have a healthy disdain for the insights and capabilities of our political leaders. In Australia, the commentariat has just emerged from agendas that blamed them for not acting fast enough to combat the bushfire crisis — even having contributed to it — and from looting taxpayer funds to curry favour with voters in the sports rorts saga. In the US, half the population thinks their President is so corrupt that he should be placed on trial.
Yet suddenly, with the coronavirus crisis, politicians and their advisers are thought to have powers and the wisdom to turn back tides and lead us out of the wilderness.
The US is focused on stopping the spread of the disease, finding a cure and easing the discomfort of those afflicted. Britain, like Australia, has added measures to assist business with investment support. .....Read more pdf version
The Coronavirus stimulus package: not just another trip down the Swanee?
The Spectator, 12 March 2020
We have mixed messages on coronavirus: Angela Merkel has said 60-70 per cent of Germans will contract the disease, while the latest data from China and South Korea shows new cases having peaked and, in the case of China, recoveries closing in on new cases.
Aside from spending on health precautions and seeking to staunch the spread, what do governments do?
The Trump Administration is talking about ensuring those thrown out of work are looked after financially – the equivalent of community action in medieval plagues when stricken villages were isolated but fed by those nearby. In a rare flash of economic lucidity, Senate Democratic leader Chuck Schumer said the government should focus on guaranteeing paid sick leave for infected workers and extending unemployment insurance for people put out of work. But Trump is also urging the Federal Reserve to embark on a financial stimulus.
Australian politicians look likely to avoid panicky measures involving economic stimulus. Hopefully this means they have learned from past ..... Read more
The last thing we need now is more costly climate virtue signalling
The Spectator 10 March 2020
Desperate to attend the September 2020 Glasgow climate change summit with a positive program, the Coalition government continues to promote, at the expense of national living standards, elitist-appealing measures that force lower greenhouse gas emissions.
The new elixir is to boost investment in CO2-free hydrogen technologies which, if not mystical, hardly require funding from Australian taxpayers. New support measures add to the $1.5 billion annual funding of a bewildering acronymic gaggle of institutions (including CEFC, ARENA, CER and CSIRO) and at least $2 billion in subsidies to wind and solar.
The Glasgow meeting is the third phase of climate change programs.
The first phase was established by the Kyoto Agreement in 1997, in which rich nations pledged to stabilise their emissions. Although only ..... Read more
Toilet paper shortages – why is Australia not a net exporter?
Catallaxy Files, 7 March 2020
It was a relief to learn that Australia is 80 per cent self-sufficient in toilet paper and there is, therefore, no need for panic buying.
But hang on a minute. First, that 80 per cent is for a market that has suddenly grown – perhaps doubled. So, there may indeed be a shortage.
What should be more worrisome is that Australia is only 80 per cent self-sufficient in an industry sector which we should be a massive net exporter. We actually import 50 per cent more wood and paper products than we export.
In days of yore, governments were always looking for value-added industries that could leverage off our natural advantages. Because we had cheap energy and bauxite, we were world leaders in aluminium production and this led to fantasies that we’d become a key part of the global supply chains for industries like automobiles (engines) and – I kid you not – for windmills (blades). Governments sank considerable funding into these ventures.
They were doomed by the labour market arrangements that, with the connivance of governments and the legal system, have priced Australia .....Read more
Revealed: the sickly state of the National Electricity Market
The Spectator, 26 February 2020
This year’s annual report from the regulatory collective that is the Energy Security Board awards itself gongs for overseeing a (temporary) spot price decline and assembling an armoury if new tools to prevent catastrophe from a system poisoned by renewable energy subsidies. Unfortunately, it declines to illuminate the additional costs this has entailed, preferring instead to give cover to the politics behind the demise of the industry’s efficiency.
The report is a consensus by the peak energy body itself and its three sister regulators, the Australian Energy Market Commission, which has custody over the market rules; the Australian Energy Regulator responsible for setting network prices; and the Australian Energy Market Operator (AEMO), responsible for scheduling supplies and ensuring supply/demand balance. It addresses the “challenge” to:
George Calombaris gets done like a dinner
The Australian, 14 February 2020
George Calombaris is a victim of the Australian regulatory state. The failure of his restaurant businesses has been greeted by a mixture of schadenfreude that a tall poppy has been exposed for having cheated his employees, and tut-tutting for not being sufficiently alive to the regimen under which his industry’s labour hire regulations operate.
In between, there have been pointed remarks about how other miscreants — for example, the ABC — have not been subject to the indignation that a commercial operator has faced for not having paid his staff in accordance with the labyrinthine government-specified rates.
There are three points that better describe what has taken place.
First, other than in the context of the highly regulated labour arrangements that cover the Australian hospitality industry, there was no fraud involved. The employees agreed on a package of wages, hours and other responsibilities; they were for the most part seasoned workers ..... Read more .....pdf version
One Word: ‘Klobuchar’
Quadrant, 14 February 2020
When the US Presidential polls had the triumvirate of Biden, Saunders and Warren (above) vying for the November 2020 date with destiny, President Trump was sitting pretty. As the poll leader, Biden was a known quantity. He was showing his age in mangling words, he had a legacy as an Obama failure, was an insider in an era when this is poison, and had a son who had benefitted immensely from his patronage and protection in getting paid handsomely for a job in Ukraine for which, aside from his father’s political clout, he was utterly unqualified. He would have been crushed by Trump’s relentless pressure as the campaign progressed.
Elizabeth Warren adoption of far-left socialist ideas combined with a fraudulent invention of indigeneity would have likewise been a victim of Trump’s acidic bluntness. Trawling the depths of wokeness (“reparations for gay couples”) she would have ended the campaign humiliated.
Bernie Sanders has never pretended to be anything other than a Communist sympathiser. He encapsulates the anti-Americanism that is ..... Read more
How the rise of environmental politics is threatening traditional allegiances – and world trade
The Spectator, 10 February 2020
Some 172 years ago Karl Marx opened the modern era of politics in proclaiming that a spectre was haunting Europe. The spectre he referred to was in the title of his “Communist Manifesto”.
Marx was talking in the context of the series of political disturbances in major European capital cities in 1848. He interpreted these as bookending the ancien regime, the evolution from which had been brutally signalled in 1789 with the French Revolution and perhaps even back in 1649 when Charles I paid the price for his “high crimes and misdemeanours”. Marx saw the events of 1848 as presaging revolution and a new era of peace and prosperity where private property would be abolished and income would be earned “by each according to his abilities” and apportioned “to each according to his needs”.
Democracy becoming dominated by the politics of envy?
Catallaxy Files, 24 January 2020
Among the attendees of the recent Mont Pelerin Society were Steve K, Sinclair and me. A great many issues were discussed in the debate on liberty, efficiency, their friends and enemies.
I have a piece in today’s The Australian, which summarised my view of the more important take-aways. They include
No attendees doubted market capitalism’s higher efficiency and ability to deliver growth, including for the benefit of poorer members of society. But recent developments have undermined confidence that the model will continue to prevail.
These include the resumption of growth in the size of government and a weakening of property rights by, for example, the seizure of land usages rights. In Australia, government actions to reduce greenhouse gas emissions through planning laws and measures that restrain commercial activity include the increase in regulatory intrusions and permissions, like those that resulted in the Adani coalmine taking nine years to be ..... Read more
Wealth will weaken if we ever yield to populism
The Australian, 24 January 2020
This week’s Davos meeting of virtue-signallers and plutocrats was preceded last week by a meeting at Stanford University of the Mont Pelerin Society. Long dominated by Milton Friedman, among the society’s luminaries today are two former US secretaries of state, George Shultz and Condoleezza Rice.
Founded in the aftermath of World War II, the Mont Pelerin Society set out arguments that free markets based on property rights and the rule of law were the keys to delivering prosperity and freedom. Its meetings provided an intellectual bulwark to the then prevailing attractions of communism or at least to socialism.
As the 20th century progressed, the sclerotic state of the socialist world was increasingly evident. By contrast, adopting the Mont Pelerin principles saw a revived Germany and Japan, followed in the 1970s by the creation of prosperity in Hong Kong, Taiwan, Singapore and Korea. .....Read more
Renewables rent-seekers aren’t interested in bushfire prevention – or cheap efficient energy
Spectator Australia, 20 January 2020
No amount of mouth-frothing by Piers Morgan or artful deception bythe legions of renewable energy warriors published by the Australian Financial Review and the Guardian will change the facts about this summer. The severe fire season is due to dry weather (not itself conceivably a result of climate change – rainfall trends have been flat for the past century) and the accumulation of combustible material on the forests’ floors. The build-up of combustible material is a result of the criminal neglect of the authorities to undertake or, in the case of private land, to prevent cool burn-offs. Less than one-third of the recommended hectares have been burned-off.
Subsidy seekers in the renewable sector and among its media clients are hinting, sometimes even claiming, that the fires are caused by Australian delinquency in inadequately forcing the replacement of coal by wind and solar. Such policies could never have any effect on the climate. Moreover, Australia has harmed itself far more than any other nation in substituting renewables for low cost, reliable coal. This is demonstrated by these two ...... Read more ......pdf file
Time to Bight the bullet over gas scare campaign
The Australian, 8 January 2020
The NSW government is considering approving the establishment of a liquefied natural gas import facility moored off Port Kembla. This same government has erected formidable barriers to domestic gas production.
Gas imports to Australia were last considered 20 years ago. The source was to be Papua New Guinean gas, to be sent here via sub-sea pipeline, then distributed — again by pipeline — to Queensland and NSW. The then federal government liked the idea as a way of providing aid to PNG.
At the time, Santos and Origin Energy were in the early stages of developing coal-seam gasfields in southern Queensland but were struggling to secure domestic markets for their gas.
Gas prices were less than $3 a gigajoule, a similar price to that which prevailed then and now in the US but less than half today’s Australian price.
However, gas drilling methods were about to be revolutionised. In a world first, the small, privately owned company CH4 Gas drilled three ..... Read more
Soleimani’s assassination and its aftermath
Catallaxy Files, 8 January 2020
A mass murderer calling himself a general is killed on Donald Trump’s orders either and/or because he escalated terror by killing yet another American or to take him out before he escalated even further.
George W. Bush did not target him during the height of the Iraq War, when Iranian-supplied roadside bombs and Iran-backed militias were killing hundreds of American troops. By 2011, that toll had reached more than 600 and Barack Obama was the president; he too declined to hit the general. Indeed in his $150 billion Danegeld to Iran he financed that nation’s Middle East reign of terror. But Trump, who came into office vowing to pull the United States out from Middle Eastern wars, decided to cross a line two war-president predecessors feared breaching.
Joe Biden, said Trump had “tossed a stick of dynamite into a tinderbox”.
Massachusetts Sen. Elizabeth Warren said the move “‘increased the likelihood of more deaths and new Middle East conflict.”..... Read more
Madrid: the climate catastrophe juggernaut trundles on
Spectator Australia, 20 December 2019
As well as nation-states, an astonishing well-funded 2,330 NGOs, many with multiple delegates, fronted up to this month’s Madrid climate conference. The macabre festival was re-located from Santiago because the Chilean populace had risen in revolt about the higher prices foisted upon them by its government following the green gods just as faithfully as the virtue signalling textbook says they must.
The objective of the successive biennial UN climate change Conference of Parties is to replace the messy cacophony of market capitalism by one that operates under the guidance of the intellectual aristocracy. The all-pervasive carbon dioxide and other gases that have been increased with the march of higher global living standards offer the catalyst for this power transfer. For, even though the evidence continues to elude us that higher emissions of these harmless gases is bringing significant, let alone catastrophic, global temperature increases/climate change, those favouring the transfer of power include alarmists, lobbyist and bien pensants guilt-ridden at the success of the West. They have marched through the institutions and assembled signatures of people, real and imagined, in support of zero emissions. They have persuaded mainstream media and politics that ..... Read more ..... pdf
Electricity supply continues is dismal march
Catallaxy Files, 11 December 2019
I have a piece in the Spectator today that draws together some recent developments in energy policy being developed in the half dozen or so agencies that control what is ostensibly, and was in earlier days, a market with supply largely from private enterprise. I also did a session on the issue with Chris Kenny.
The destruction of the once highly efficient electricity supply industry by government and bureaucratic oversight is, of course, well known. This, the most vital Australian industry, continues to hurtle towards Armageddon, courtesy of government subsidies to the intrinsically uncompetitive renewables. And the besieged Energy and Environment Minister, Angus Taylor, is in Paris defending the semi EU-type policy Australia has adopted while trying to avoid going the full Greta.
This week we had three publications from agencies that are piloting us towards the economic oblivion politicians have determined upon.
The Australian Energy Market Commission (AEMC) has released its price forecast for the next few years. Halleluiah! Prices to households are falling 10 per cent the year after next after ramping up 30 per cent (250 per cent for wholesale prices) since the 2017 forced closure of Hazelwood. The ..... Read more
Cheaper power coming? Blink and you’ll miss it if our Paris goals remain
The Spectator Australia, 11 December 2019
There is a panoply of agencies regulating energy at the Commonwealth level and not all of these seem to be rowing in the same direction. The main agencies are
The Energy and Environment Department with 490 staff in energy and greenhouse — plus another 454 in its dependent agencies: Clean Energy Finance Corporation, the Clean Energy Regulator and the Climate Change Authority;
The Australian Energy Regulator (AER) with 283 staff;
The Australian Energy Market Commission (AEMC) with 95 staff;
The Energy Security Board (ESB) with perhaps 10 staff; and
The Australian Energy Market Operator (AEMO) with 670 staff.
Good Sense Sold Up the River
Quadrant Online, 6 December 2019
Earlier this week some 3,000 irrigators and their supporters rallied in Canberra against government policy on Murray-Darling irrigation and management. With the cacophony of dozens of semi-trailers’ blaring horns, it was certainly noisy. Ominously for the National Party, their representatives were treated with considerable hostility, particular anger being directed at water Minister David Littleproud. Enduring the jeers, the Nationals would have been especially dismayed at the warm welcome for Pauline Hanson and Malcolm Roberts.
The current drought has exacerbated a contrived water shortage that government policy has engineered in the Murray. Having set a cap on water extractions in 1999 — roughly a third of the average flow — the productive uses of this “working river” have been gradually reduced. As a supplier of a vital agricultural input to a formerly barren area that grew to supply 40 per cent of the nation’s farm produce, the river has been de-rated. At a cost of $13 billion, some 20 per cent of the flow has been diverted to “environmental” use. This has caused a five- to ten-fold increase in the price and forced thousands of far ..... Read more
Sacrificed on Victoria’s Green Altar
Quadrant Online, 27th November 2019
Victoria is the vanguard of states in major struggles over the control and use of public lands. These comprise around 35 per cent of the state, the majority of which is in parks and reserves that aim to minimise human impact. Such areas have long been seen as under-managed and infested with exotic flora and fauna. They are increasingly recognised as perilous host to ferocious and destructive fires.
The rest of the public land is state forest, traditionally available for forestry, grazing, mining and a whole range of leisure activities such car rallies, hunting, horse riding, camping and dog walking, none of which are generally permitted in National Parks.
Two developments are changing the nature of Victoria’s public lands. The first is increasing restrictions on the activities allowed in the state forests. Over the past 30 years governments have progressively constrained the use of the forests for timber harvesting and grazing. Grazing has been all but eliminated and only 6 per cent of Victoria’s public forests are available for timber production, the annual harvesting area having been reduced from 25,000 hectares 40 years ago to just 3,000 hectares today. Last week, the Andrews government announced a 2030 phase-out of all timber-getting in the state forests.
The second change is the conversion of state forest to national park and other conservation reserve categories. This not only imposes restrictions on use but is also an essential step to converting the land to Aboriginal title, which unlike Native title, grants beneficial-use and veto rights over the activities and intentions of others. Even within the remaining state forest, the government is moving to enhance designated Aboriginal groups’ influence by granting them controls over exploration licences .....Read more
The flagging economy, its causes and remedies
Catallaxy Files, 22 November 2019
Keynesian policy lever pullers at the RBA and Treasury, as well as the Opposition, have been urging the government to inflate the economy. Some are calling for deficit spending, others are urging the authoities to force interest rates even lower than the current barely positive levels. Even if ignorant of the impossibility of pump priming economies, it’s almost as if they have never seen the evidence of failures of such moves that are observable from current economic outcomes in Europe and Japan.
Australia’s economy is now stagnating – in per capita terms there is no growth. The key to this is flagging levels of private investment, the key to increased real income levels. Private investment has fallen from 18 per cent of GDP to 11 per cent over the past 7 years. In addition, its potency has been weakened. Policies that have directed funds into counter-productive or low return investment, notably in electricity and the NBN, and other measures that have undermined long standing productive capital in irrigated farming by redirecting water to environmental goals.
At his address last night to the Business Council (sans a couple of otherwise occupied bankers) the Prime Minister partly moved towards the stimulators’ position by announcing a bringing forward of $4 billion of infrastructure spending. With private non-housing investment running at $220 billion a year, even in current recession-like levels such a spending increase is unlikely to be material even if it were to be a positive stimulous.
The PM also said he was taking steps to reduce the paperburden entailed in elongated approval processes created by the relentless rise of regulation.
The Regulatory Enemies of Promise
Quandrant Online, 22 November 2019
One disturbing factor regarding the Australian economy is its sluggish growth. Per capita growth was negative in 2018/9 and has not had a sustained run above 2 per cent since the pre-2007 Howard/Costello years.
The key drivers of growth are capital investment (with its associated technological gains) and freedom from regulatory provisions that distort the direction of capital spending away from the most promising venues. The slowdown in (non-dwelling, private) capital investment in Australia over recent years is clear and as a share of GDP is illustrated below.
The share of GDP comprising investment reached a recent peak of almost 18 per cent during 2012 and has steadily fallen to under 11 per cent in the June 2019 quarter. This is the sort of level we saw post 1975, when recession and inflation brought economic recession and, in the early 1990s, presaging Paul Keating’s “recession we had to have” ..... Read more
The return of Ross Garnaut and climate nirvana?
The Spectator, 7 November 2019
This week, the Financial Review has featured a return of Ross Garnaut to the climate policy advisory role. Soothingly, he said that with the upcoming technological changes, Australia in a post-carbon world could become the locus of energy-intensive processing of minerals”. This, he said, was because of our superior “renewable energy endowment”. The renewables he refers to are wind and solar. They remain two to three times the cost of coal, gas or nuclear in electricity generation and will never be cheaper than them nor as reliable. Australia is not even particularly well-endowed in wind and solar, except in the more inhospitable and remote parts of the continent.
Exploring the perimeter of credulity, Garnaut also saw renewable energy as bringing a burgeoning hydrogen export industry for Japan and Korea. And he saw Australia as an exporter of its wind and solar as electricity via high voltage direct current transmission.
It was Garnaut’s eponymous 2008 report that armed the Rudd government’s agenda for overturning the conventional energy market.
The Garnaut report welcomed “Australia’s return to the international fold following the election of the Rudd Labor Government.” It paved the way for a massive expansion of the renewables subsidies and the Gillard carbon tax. It was largely written by the present Commonwealth Treasury Secretary, Stephen Kennedy, something that’s especially worrisome given the prominent role Treasurer Josh Frydenberg played in marketing Turnbull’s version of a carbon tax.
A Billion Reasons to Despair
Quadrant Online, 30 October 2019
The support that certain people offer for a policy is Quite often a clear indication that it is hopelessly wrong. So it is when Malcolm Turnbull registered support for the government’s intention to fling an extra billion dollars at the Clean Energy Finance Corporation to “future proof the electricity grid”.
Turnbull’s favoured green energy policies involve subsidies to renewables, both directly and by hidden taxes on consumers and in the form of the Renewable Energy Target. The policies were initiated by Howard, in a pale form, and accelerated by Rudd/Gillard. Abbott tried with only modest success to roll them back. Then Turnbull as prime minister, with then-energy minister Josh Frydenberg, attempted to intensify the policies by introducing a carbon tax, deceptively called the National Energy Guarantee. Turnbull’s attachment to this duplicity cost him his prime ministership, just as it cost him his party’s leadership back in 2009.
Australia’s green energy subsidies have transformed the nation from having the cheapest electricity among major global entities to one of the dearest. For households, the average Australian price at 25 (US) cents per kwh, is three times that in India and China, which do not have our cheap coal, and almost twice that of the US (the average of which is boosted by green fruitloop West Coast policies). We do, however, remain better placed than Germany, where the “Energiewende transition” has brought prices to 36 cents per kwh.
Australia’s deindustrialisation is certain under the policies being adopted by both the Coalition and the ALP; the next major manufacturing plant departures will be at least two of the three east coast aluminium smelters. ..... Read more
Australia’s Wealth of Complacency
Quadrant Online, 18 October 2019
NickCater in The Australian rightly lampoons a Harvard study that, by polacing its focus on manufacturing, manages to rank Australia ninety-third in the world economic complexity league table. By contrast, another study, Credit Suisse’s Global Wealth Report, puts Australians second in the world in terms of average wealth and the wealthiest for median wealth. These assessments inevitably involve some exercising of problematical judgements by their authors, but that aside, wealth is not as easy to measure as it might appear.
The Credit Suisse study would be heavily coloured by the fact that most of Australians’ household wealth is locked up in the homes they own. And the value of those houses is inflated threefold more than that of comparable houses in the US or France, where planning regulations are more liberal. Take away the illusory wealth represented by regulatory-driven land scarcity (in the nation with the world’s highest per-capita land availability!) and Australian’s household wealth falls to average OECD levels .....Read more
Governments created this Murray-Darling crisis
The Australian, 8 October 2019
The Murray-Darling is the only major region where irrigation plays a prominent role. Water availability there has the urgent attention of politicians because locals, unhappy at measures that have deprived farmers of water, have helped displace Nationals representatives in favour of those from the Shooters, Fishers and Farmers Party.
Drought Minister David Littleproud is to meet farming representatives on Tuesday to discuss a fivefold increase in prices of Murray-Darling water. The minister attributes this to speculator hoarding together with another villain, climate change, which he says “is leading to hotter days, meaning droughts”.
Neither of these factors are the cause of the farmers’ discontent.
Although the Murray-Darling, like much of Australia, is in serious drought, this is not unusual. Other areas are seeing record rainfall; for Australia as a whole, rainfall has increased during the past century.
As for the minister’s attack on speculators, he targets an ever-convenient and populist scapegoat.
Independent ownership of water was facilitated when the rivers’ water was formally made tradeable in 2014 (before which trades were informal and ostensibly water could be owned only by the landowner). ..... Read more
We should be afraid of rising fuel costs, not climate claims
The Spectator, 27 September 2019
With the children’s week-long climate crusade now approaching its end, the United Nations meeting on climate change, accompanied by the normal release of alarmist “findings”, is well underway in New York. The New York meeting has been weaponised by the millions of children incited to take time off from school. President Trump sat through the “we’ll be watching you” rant from the unhappy teenager Greta Thunberg. The UN Secretary-General is requiring countries like Australia, judged to be too heavily fossil fuel focussed, to listen rather than talk.
Bill Gates is struck by the volume and intensity of interest among the public, which he says is “quite a contrast versus five years ago, where it was hardly discussed at all.” Starting as a scientific backwater, climate change has come to dominate the scientific community and politics in general. Within the former “think tank”, the Tasman Institute, in the early 1990s my colleagues and I wrote a string of books and papers that examined the economics of the issue recognising then the crippling costs that would result from forcing a reduction of emissions. We were joined by scientists, including Arizona State’s Professor of Climatology, Robert Balling and later by Brian Tucker who, having retired as Chief of CSIRO’s Division of Atmospheric Physics, committed the ultimate apostasy of decrying the climate alarmism in which he had participated in the pursuit of grants. ..... Read more
Standby for next week’s UN doomfest for climate crazies
Spectator, 18 September 2019
The push is on ahead of the upcoming UN Climate Summit to be held next week in New York. Although the most senior world leaders, Donald Trump and Xi Jinping, will not attend, the UN claims that 100 heads of state will.
The official Climate Summit is proceeded by the Youth Summit to be attended by autistic rock star Greta Thunberg, yachted in from Europe at great expense to avoid burning fossil fuels in aeroplanes. Unlike the leader of the Medieval Children’s Crusade, who was not taken seriously by world leaders, then the Pope and king of France, Thunberg has met the pontiff and is feted by government and social media leaders.
The New York Youth Summit takes place alongside a weeklong global climate strike, ostensibly led by children, planned for the week Friday.
The on-going push for climate change action is centred on reductions in carbon dioxide emissions from fossil fuels, though there are other featured issues. One of these involves chastising right-wing Brazil, often with phoney photos, for converting Amazon forests to farmland (left-wing Peru, which makes the right climate concern noises, gets a free pass). In addition, there are the kooky issues involving conversions to vegetarianism.
The agenda for dramatic and urgent action on climate change – the so-called “climate emergency” – is totally divorced from the evidence. .....Read more
Irrigation water restraints about to become more harmful
Catallaxy Files, 10 September 2019
There is a considerable interest in water in the Murray Darling, an issue that I have written about over the two decades during which concerted attacks on irrigation took place.
Most of my articles and reports, including my latest piece in The Spectator, drew attention to the effect of taking water for environmental and other reasons from irrigators. Recent activity by farmers has given the matter some considerable profile and Alan Jones addressed it as did Peta Credlin.
The truth of the Murray Darling is that the highly irregular river flow became a working river during the twentieth century and the previously low productivity region was transformed into producing 40 per cent of the nation’s agricultural produce.
Then came claims by a group of environmental activists, the Wentworth Group including David Karoly, Tim Flannery, Anna Skarbek, who said that salt infusion caused by irrigation was crippling the region. Naturally the ABC uncritically adopted and magnified this absurdity, which nobody now takes seriously. An outcome was John Howard establishing federal intervention, taking some 450 gigalitres off irrigators, designed to placate the activists’ demands for 1,500 gigalitres. Irrigators’ water comprised 11,500 of the average flow of 34,000 gigalitres.
The bureaucratic infrastructure was in place to expand this. Then came the global warming scare, with the 2008 Garnuat report claiming that the area was certain to run out of rain and water generally so we’d better get used to it and stop all irrigation. The Garnaut report was in fact written by a Treasury officer, David Kennedy, who Josh Frydenberg has recently appointed as Treasury Secretary. ..... Read more
Regulatory attacks bringing a sad demise of the Australian economy
Catallaxy Files, 4 September 2019
The Australian economy has been flagging for many years now. Over the past year we actually saw a decline in GDP per capita and per hour worked.
There are many reasons for this but all come back to government intervention – excess spending on unproductive welfare measures, over-taxation of business income and the general regulatory morass that has come to characterise economic management.
An outcome of this intervention and major cause of the economy’s malaise can be traced back to private investment, the prime driver of higher income levels. In real terms investment has declined by 20 per cent over the past half dozen years. As a share of Gross National Expenditure, it has fallen from over 16 per cent five years ago to under 12 per cent now.
Subsidies, bureaucrats, blackouts and bills: inside our electricity disaster
Spectator Australia, 26 August 2019
The Australian Energy Market Operator is one of the half dozen different government institutions responsible for planning and managing the electricity industry. Like its sister agencies, AEMO accepts no responsibility for the transformation of an industry that over the past five years has gone from supplying the world’s cheapest, most reliable power to one of the dearest and least reliable.
There is daily evidence of the damage from climate change inspired, renewable energy-induced high electricity prices. The latest confirmation comes from Bluescope, which is opting for a $1 billion investment in the US, rather than Australia. The cause of this disaster has been the regulations subsidising high cost intermittent renewable energy.
In planning for the future AEMO claims to have abandoned a “price-based mechanism to achieve decarbonsation”. But this is pure dissimulation. AEMO is now promoting a volume-based carbon budget – instead of setting the tax and allowing this to bring about its carbon target, AEMO is setting the target directly, which will see a de facto tax emerge.
Another regulatory agency, the Energy Security Board in its 2025 plan, has the same approach, which it calls the Renewable Integration Study.
Yet another government agency, Infrastructure Australia, earlier this month published its own catechism for the future. This was also founded on policies to combat and adapt to climate change. IA costs taxpayers $12 million a year to provide a voluminous, gushing fantasy report every few years that tells us we need to decarbonise. And when it states “Policy uncertainty and poor coordination has affected investment in the energy sector” this is not an apology for regulatory ..... Read more pdf file
Another rope-seller to the hangman
Catallaxy Files, 13 August 2019
An article in the Fairfax papers today asks how we proceed to make sure that regions don’t suffer too much as a result of the inevitable triumph of renewables and the consequent demise of coal. The article represents the views of the Global Compact Network Australia (GCNA), which is funded a hundred or so firms including the usual virtue signallers: BHP, Rio, Qantas, AGL, IKEA, Shell and so on as well as charity agitators like World Vision and Care.
For Australia the article sees closures in the coal areas as inevitable as a result of technology and low carbon policies’ “disruption” (see how the social engineers hijack the contemporary version of Schumpeterian language to describe a process that has nothing to do with entrepreneurial developments).
GCNA’s answer is to follow the German blueprint and not the American one. The latter in the Appalachians, we are told, subsidised coal but its inevitable closure left an economic wilderness as its legacy. Germany in the Ruhr
‘ramped up its community and social infrastructure efforts. It built modern infrastructure, tertiary institutes, cultural and leisure industries. It played to the region’s logistical strengths, building up packaging and transport industries’ and, of course, ‘developed environmental jobs and eco-tourism’.
The article claims the $266 million package given for the Hazelwood closure is not nearly enough and wants to see coordination and far more spending.
Anyone following trade policy over the past 30 years will be aware, unlike the article’s author, of the colossal subsidies that Germany gave to shore up its increasingly uncompetitive coal mines. And the history of government promotion of particular areas is decidedly mixed – especially in Australia where the millions of dollars pumped into the Multifunctionpolis all got buried in a swamp near Adelaide. ..... Read more
The hazards of synthetic valuations of environmental services
Catallaxy Files, 7 August 2019
I have a Spectator article ($) addressing new bans on rural, mining and recreational activities proposed in 77,000 hectares of the Victorian Goldfields region north of Melbourne. The agenda involves converting the targeted area, which has no remarkable features, from State Forest to National Park.
This would prevent activities include grazing, logging, horse riding, hunting, 4-wheel driving, prospecting and mining. The more intrusive activities – logging and grazing – have already been progressively reduced as forest management has been refocussed onto environmental conservation rather than production.
The review is being undertaken by the Victorian Environmental Assessment Council (VEAC), an agency stacked with environmental activists. VEAC has courted the local aboriginal representatives, who are understandably solidly behind a change that grants them advisory rights and may vest them with paid duties lead to some form of native title.
VEAC also has to prove the change is worthwhile in benefits to the community as a whole.
Some 18 per cent of Victoria is National Park (plus about 13 per cent State Forest). As environmental services are public goods, that cannot easily be charged for, policy changes need to be informed about what the public would pay for redefining land from State Forest and increasing National Park land – in this case by two per cent.
To do this VEAC hire some reliable economists, well versed in the black art of “contingent valuation” that asks people what they would be prepared to pay for some environmental goods; the consultants are also practiced in the magic of estimating what recreational and productive value might be lost from the reclassification. ..... Read more
Nobbling the new gold rush
The Spectator, 7 August 2019
The rising price of gold is stimulating a boom in new activity. However, Victoria is one state government standing firm against this and other productive developments.
Victoria has a little over four million hectares, 18 per cent of the state, in areas classified as National Parks. Already, only about a quarter of this is adequately managed for feral plant and animal invasions. Public ownership also includes about 3 million hectares as state forest. A great deal of this is in the aptly named Goldfields, in the state’s Central West.
In state forest, unlike National Park, permitted activities include grazing, logging, horse riding, hunting, 4-wheel driving, prospecting and mining. The more intrusive activities – logging and grazing – have been progressively reduced as their management has been refocussed on environmental conservation rather than production.
The Victorian government has outsourced reviews of public land use to the Victorian Environmental Assessment Council (VEAC) to which it has appointed people with strong conservation convictions. VEAC is progressively conducting examinations with a view to reducing the extent of permitted activities that they consider intrude upon conservation. The latest targeted area is the 400,000 hectares comprising the Central West.
VEAC’s modus operendi is to have the government set it terms of reference for a report to address all the values of the area: natural, cultural, social and economic, and call for submissions from interested parties on how usages should be modified. An important step in this is to identify some “traditional owners”, vest them with authority to offer advice and duchess them around the area, inviting them to rediscover their historic attachment to the land.
Carbon reduction policies just shovelling money into a black hole
The Australian, 23 July 2019
Australian taxpayers are funding pointless and costly efforts to change the climate
The global warming scare has fathered many government policies that have penalised taxpayers and consumers. The energy and climate space is dominated by regulatory-oriented entrepreneurs seeking government funding or measures to distort markets in their favour. The Copenhagen Consensus Centre’s Bjorn Lomborg puts the global cost at $230 billion a year.
For Australia, Energy and Emissions Reduction Minister Angus Taylor is trying to bring an erosion of these costs through “masterful inactivity” — letting the programs expire. But it will take at least a decade to eliminate the $5bn a year impost paid by Australians through the subsidies and regulatory-induced costs that are undermining low-cost energy supply.
Meanwhile, extra spending is being proposed, the latest being an additional subsidy for poles and wires to allow the already subsidised rooftop solar panels to work more effectively. New fads keep emerging — the latest extracting hydrogen from fossil fuels which, in a familiar refrain, will be a future bonanza if only governments come to the party with funding.
One longstanding solution that refuses to die is carbon capture and storage. It involves stripping out the carbon dioxide from coal (and gas) generation and burying it where, it is hoped, it will stay.
In Australia, finance for this was a part of the suite of measures introduced by Kevin Rudd as prime minister. That was in 2009 when he was planning to take the world by storm as the lead player in the extravaganza of that year’s Copenhagen climate change conference. He created six quangos to foster CCS with the Global Carbon Capture and Storage Institute, funded by an initial grant of .....Read more
When Even Bob Brown Gets It …
Quadrant Online, 19 July 2019
Some people think wind turbines are structures of beauty. Bob Brown is no longer among them and we’ve all had fun pointing out his apostasy. The half-million birds which turbines are estimated to kill every year in the US and the 200,000 German bats minced annually by the same machines might also take heart at his belated conversion, although the louder and less intelligent members of another species lately gluing themselves to Brisbane’s roads and elsewhere will probably take longer to absorb the truth about these taxpayer-supported environmental destroyers.
The sad truth is that many still see wind and solar power as the future, displacing those old-fashioned coal and nuclear plants. But even though wind and solar are said to be competitive, their supporters continue to demand increased subsidies, often dressed up as National Energy Guarantees or soft loans from the taxpayers’ greenbank, the Clean Energy Finance Corporation. Those subsidies have caused commercial coal generators to collapse, doubling the cost electricity and savaging its reliability.
In other words, and even allowing for Brown’s Damascene conversion, idiocy continues to prevail. .....Read more
Farming, fibs and Four Corners
The Spectator, 11 July 2019
From little things, big things grow. And so, for the 60 odd years until the nineteen-nineties, we saw the land in the Murray Darling basin being developed from what was mainly arid low-yield farmland into a province producing over 40 per cent of the nation’s agricultural output.
Dams transformed the highly irregular flows of the system (the annual variation being between 7,000 and 118,000 gigalitres) into a placid river. This not only allowed some 12,000 gigalitres of water out of the average 34,000 gigalitres to be allocated to irrigation use, but also gave us a river far more suitable for recreation as well as for fish and birdlife. The Murray Darling became a working river like the Nile, the Mississippi, the Indus, and the Po.
Climatic factors mean the irrigated area of Australia is low by world standards, less than one per cent compared to 20 per cent in many well-watered poorer countries as well as in Italy, Japan and Korea. The Murray Darling is nation’s the only extensive irrigation system.
Having created a valuable agricultural resource, Australia’s predilection for (normally destructive) policy meddling has, since the nineteen hundreds, worked on tearing it down.
Activists formed the Wentworth Group (named after the five star Sydney hotel where they met) to wind back and eventually eliminate irrigated agriculture in the river system. The Group’s members, mainly taxpayer funded, have included David Karoly, Tim Flannery, Anna Skarbek, and Quenton Grafton. Lusty and utterly unfounded claims were made about the river drying up as a result of global warming, irrigation causing salt infestations, driving animal species to extinction and causing forests to die. The media, especially the ABC, took up the cause publicised these jeremiads and magnified the activists’ support.
Is the AFR rejoining economic rationality?
Catallaxy Files, 4 July 2019
The AFR has spent a decade of extolling the merits of renewable energy. It has waxed lyrical on the beneficial effects of taxes on fossil fuels (aka renewable subsidies, the NEG). But, following a passage rightly pointing out the cost imposed on the nation by a gas reserve policy, comes this from the editorial in today’s AFR
The loss of baseload power from sudden shutdown of Victoria’s Hazelwood coal-fired power plant in early 2017 .… was precipitated by the force-feeding of unreliable renewable energy into the power grid. Rather than penalise the source of Australia’s prosperity, governments need to fix the policy failures that have caused the problem.
In promoting the opposite position, for years the AFR has given regular columns to the green left writers at the Grattan Institute, the Australia Institute and elsewhere. It has hosted a coterie of in-house journalists ceaselessly opining on the merits of “modern” sources of electricity – the sun and wind – marching daily to replace all their antediluvian fossil and nuclear rivals. It has approvingly cited the renewable energy scam’s boosters, including green interventionists like Garnaut and Yates as well as self-serving business leaders like EnergyAustralia’s Tanna, the appalling ex-AGL chief Andy Vesey, the cashed-up wind and solar farming subsidy-seekers, and political appointees heading regulatory agencies.
Here is just a small sample of headlines
August 20 2018: Thank God for renewable energy targets, state and federal
The Clover Moore catastrophe
The Spectator, 28 June 2019
Clover Moore’s Sydney, with its Climate Emergency clarion call, is far from the first city to adopt the zero-emissions-by-2050 mantra. In fact, the Carbon Disclosure Project with a blue-ribbon board of trustees claiming to represent $100 trillion of funds has 43 such cities on its A-List. These include Melbourne, which demolishes Sydney’s virtue signalling credentials by having pledged zero net emissions by 2030 as far back as 2017. Previously Melbourne had even greater ambition with Lord Mayor Doyle planning in 2014 to be carbon neutral by 2020; the date of the city’s first zero emission target, set in 2003, has already passed.
In part, such actions constitute attention-seeking by local government politicians keen to extend their influence beyond bus shelters and garbage disposal. But they are also responsive. Human-induced climate change fears have come to dominate the political agenda over the past 30 years. All Australian state governments have goals to be carbon neutral by 2050 and deliver cost punishments to their citizens in order to progress to this goal. This is despite the satellite data available since 1979 having failed to substantiate claims of dangerous global warming.
In recent years, governments around the world have been drawing back from tangible actions, at least those posing threats to extinguish the cheap energy that is the touchstone of the modern economy.
Perhaps the most significant of these come from the Trump Administration taking the US out of the Paris climate agreement and winding back the emission restraints enacted by President Obama. In addition, we have:
The May 2019 Australian Coalition victory, in what was depicted as a climate change election,
appearing to have halted further expansions in renewable subsidies and carbon emission suppressing measures that attack farming.
Green subsidies have sapped nation’s energy for too long
The Australian, 20 June 2019
This month Energy and Emissions Reduction Minister Angus Taylor fleshed out the federal government’s energy policy in ways that brought howls of outrage from the subsidy-seeking renewable energy lobby. Stripping aside the rhetoric, his address had three main themes.
First, the government has subsidies in place for low-emission energy and does not intend to expand these with additional renewable energy subsidies. There will be no expansion of the existing commitments to subsidising large-scale solar and wind facilities — commitments likely to be fully acquitted by 2021 (though the existing subsidies will continue for another decade).
This has followed relentless pressure to expand the subsidies, but it is only a start. Unfortunately, no commitment was made to terminate the subsidies for small-scale rooftop facilities, even though the Australian Competition & Consumer Commission had recommended this course.
Nor was there any commitment to wind back the cripplingly expensive direct subsidies from the budget, including those through the Clean Energy Finance Corporation “green bank”.
Indeed, this week Victorian Energy, Environment and Climate Change Minister Lily D’Ambrosio triumphantly opened Australia’s “largest integrated battery and solar generator” at Kerang, a facility financed by direct government subsidies and soft loans from the CEFC.
The second strand was to reaffirm the government’s recognition that subsidies to high-cost, low-reliability wind and solar energy had undermined Australia’s energy affordability and the economy at large. .....Read more .....Pdf file
A cancerous fantasy: Australian Outlook 2019
Catallaxy Files, 18 June 2019
Two years in the making and with a release planned for shortly after a triumphant Shorten Government occupied the Treasury Benches, we now have the Australian Outlook 2019.
A team led by Dr Ken Henry, the man who developed Australia’s disastrous response to the 2007 world economic crisis, has produced a glossy with some smashing pics and charts with wonderful curly lines. The report tells us we have to confront challenges: the Rise of Asia, Technological change, Climate change and environment, Demographics, Trust, Social cohesion.
The Guardian and the AFR waxed lyrical about the blueprint, which is to shape the economy for the Brave New World. We were breathlessly told the nation is once again ‘at the crossroads’, that the report is a “call to arms” and we would, “Drift towards a future of slow decline economically and socially” unless we act now to ‘create a future of greater prosperity for all, globally competitive industries and a sustainable environment’. Ah, the sustainable rub!
The AFR approvingly quoted the report as saying, ‘The world is changing, and Australia will need to adapt much more rapidly than in the past if it is to keep up.’ The report pointed to a need to focus on:
Technology, (without which the CSIRO as prime financier would not have a guernsey), and better education, quality jobs, and better cities
Following these bromides, there is the real agenda: ‘reliable, affordable low emissions’ (near zero within 40 years). This is amplified by a call for a land shift for sustainable food fibre and fuel production with, of course, carbon sequestration ..... Read more
The Rx for Vigorous Economic Growth
Quadrant Online, 7 June 2019
he Productivity Commission’s latest bulletin shows labour productivity annual growth has fallen over recent years, from an average of around 2.5 per cent since 1975/6 down to a negligible increase in 2017/8. Capital growth was also lower and the contribution to output from capital deepening was actually negative.
This has ignited a debate on the health of the economy, especially as Greg Jericho in the Guardian points out, “Government spending accounted of 79 per cent of GDP growth in the past year – a level only marginally below what happened during the massive stimulus years of the GFC.”
But the debate about what needs to be done seems to be between the Keynesians, who want to see government stimulation through lowering taxes and increasing spending, and those who want an alternative means of government stimulation through increasing the supply of money via lower interest rates. Central planners and most of the media never seem to learn that government intervention will only exacerbate any underlying imbalance. We can only increase productivity and growth through deregulating supply and no longer discouraging savings and investment.
At least Treasurer Josh Frydenberg proclaims himself open to other options. He says, “I’ll be having discussions with my international counterparts about productivity-enhancing reforms in their own economies.” It is, however, unlikely he’ll find too many good ideas beyond those of the Trump administration at the forthcoming meeting in Japan of the G20 finance ministers. Other leaders will be promoting the stimulatory lines favoured by the RBA and Commonwealth Treasury. ..... Read more
Angus Taylor: fighting for coal and cheap power, but is it too late?
In contrast to his predecessor, the eminently likeable Josh Frydenberg, Angus Taylor can be abrasive and has managed to antagonise many within the industry:
State ministers for launching the proposal for government supported new firm capacity and avoiding them monkey wrenching it by not first consulting them;
The rationalists by not abandoning renewable subsidies, including those to small scale rooftop facilities, which even the ACCC said were a costly waste;
The Greens, the ALP and “Modern Liberals” for not adopting green energy policies and including in the seemingly sacrosanct 2015 Paris targets “carryover” credits from exceeding the 1997 Kyoto agreement targets. That exceeding was due to Australia preventing land clearance – without compensating the farmers who paid for this;
Subsidy seekers and much of the regulatory establishment for not embracing the “National Energy Guarantee” version of a new, increased carbon tax;
The supply industry for threats to force divestments and establish price controls;
Smaller consumers for the Minister failing to live-up to the billing given him by Scott Morrison as the Minister for lowering electricity prices;
Larger customers epitomised by Brickworks chief executive Lindsay Partridge saying, “When manufacturers start closing and companies like me start saying I can bring bricks from Pennsylvania 16,000 kilometres away and land them in Sydney cheaper than I can make them, they’ve got big problems”. ..... Read more Pdf version
Australia’s election result: a reprieve not a recovery
Catallaxy Files, 23 May 2019
Reprieve was possible but feared the worst. Steve Kates offers a comprehensive 10-point summary of why the ALP lost. I have a more succinct version in Canada’s Financial Post which highlights the key reasons being cost-pregnant green policies and the tax hikes on superannuation.
Everybody concerned about Australia’s future prosperity would be relieved at Saturday’s result. The Coalition would be entitled to believe it guarantees them six more years of government, especially as the ALP is signalling a maintenance of its current spending and climate policies.
The ALP went to the election with the most radical manifesto that we have ever seen – more so than that of Whitlam in its call upon national income. Even in their detail its policies made no sense, for example with selective increases in spending on wages, health and education that defied the institutional arrangements in place to ensure rational decisions on these matters.
And yet 48 per cent of the electorate voted for Labor or its allies. Indeed, perhaps the one reason their manifesto failed is, as Alan Kohler had said, because it attempted some integrity with tax proposals designed to cover the spending baubles that were offered. While Chris Bowen’s tax hikes were totally inadequate, even the fig leaf they provided was sufficient to shift votes, amounting to a decisive two or three percentage points, to the coalition. One would expect even less integrity in future Labor campaigns with a pretence that proposed ..... Read more
Australians voted against more climate-regulation mania, but their job's not done yet
Financial Post, 22 May 2019
The Labour/Green alliance lost promising a raft of more spending and regulations
The conservative Liberal National Coalition (LNC) went into the Australian election on May 18th as a minority government. All opinion polls predicted the Labor Party would come out of the election with a majority with a margin of 8-20 seats in the 151-seat lower house. In the event, the LNC was returned with a firm majority under Prime Minister Scott Morrison, who had been leader for less than nine months, following a bitter leadership battle in his party. With some results still unconfirmed, Morrison’s party is shaping up to control 78 seats to Labor’s 67, with six going to others.
The Labor Party had run in a de facto alliance with the Green Party (they previously had a formal alliance agreement, that lapsed, but they remain allied). Their Labour/Green alliance had lost on a platform promising a raft of more spending and more regulations including:
— New privileges to trade unions (which cover fewer than 12 per cent of workers) and pay increases for certain low-wage workers;
— Tax cuts focused on the less well off;
— Aggressive climate policies including (but not limited to) restraining coal ..... Read more
Our hard-won prosperity – and how to keep it
The Spectator Australia, 14 May 2019
The different rates of change in world income levels have provided Australia with a magnificent base on which to build our own prosperity. But, though our standard of living is testament to some success, political measures have blunted the potential level of achievement. A less regulated business regime and lower taxes especially on savings are vital to enhancing our income levels. Yet the ALP and to a lesser degree the Coalition are putting taxes on savings and have no stomach for deregulation.
Accelerating rates of change in world prosperity levels
This animated twitter graphic presents a fascinating review of the rise and fall of nations in the GDP stakes. Over the past half century, the constancy of the US, rise of Japan and Germany and the more recent rise of China and India are the dominant features. As late as 1969, Australia even crept into the top 10.
Reviewing a lengthier period, by the seventeenth century, Europe had pulled markedly ahead of the rest of the world in terms of GDP per capita. ..... Read more
Election promises: eating the seed corn that generates sustained economic growth
Catallaxy Files, 14 May 2019
I have a piece in the Spectator that addresses the importance of savings to provide the capital that underpins wealth creation. Savings themselves will be severely constrained where the state or other looters can exproproate them or where the state imposes regulatory requirements that devalue the savings and the benefits from their investment.
The (IMF) data (shown right) are indicative of the benefits from small government and high savings. This pattern of high savings and small government is present in the earliest European economic take-offs and in those of Japan, the “Asian Tigers” and with Chindia.
Australian government spending tends to be ratchetted up by Labor administrations with the measures not being fully reversed by conservative administrations. The more recent of these have been new policy spending initiatives in education and for people with disabilities.
There is also a mounting hostility to growth by The Greens and to some degree the ALP in political decision-making and this has resulted in growth-inhibiting regulatory policies including: ..... Read more
Dog Dirt is No Substitute for Debate
Quadrant Online, 8th May 2019
There is now a narrow path to victory for the Coalition. It relies upon them winning a couple of seats in Queensland and Tasmania, regaining Indi and making a net loss of only two elsewhere (in addition to the likely loss of Farrer to the Shooters, Farmers and Fishers). But more than one loss is likely in Victoria, and there are vulnerable Liberal seats in Western Australia.
The possible near-term saviours for the Coalition are, first, the sandbagging of seats that contain large numbers of retirees set to be adversely affected by Labor’s intended raid on their savings –a grab even more grasping than that already introduced by the Coalition. But, secondly, there is the possible gain of seats where green policies have had tangible negative effects. We recently saw the Coalition fall victim to a backlash in the NSW state election as a consequence of green water policies, hence the possible loss of the Murray-Darling seat of Farrer. The Coalition is, however, seeing possible gains as a result of green anti-mining policies, most particularly in Queensland. ..... Read more
Forget the “watergate” conspiracies: here is the truth about the Murray
The Spectator Australia, 28 April 2019
The Murray Darling River is facing a plethora of publicity: fish deaths due to mismanagement of flows by the responsible body, farmer agitation as a result of loss of irrigation water, claims that the water buybacks behind the farmer concerns have been at excessive prices and possibly corruptly made, and a report by the “Wentworth Group of Concerned Scientists” with the usual claims of environmental distress.
The Basin has been a political football for the past two decades. The original initiative to insert heightened government control commenced with the ACF. Infiltrating themselves into farmer groups, always on the lookout for a hand out and ultrasensitive to criticism about their land stewardship, they formed a partnership with the NFF. A joint report in 2000 (the National Investment in Rural Landscapes) sought to extract $6.5 billion to combat environmental distress, which they said was costing $2 billion a year.
The Huge Cost of Climate Hysteria
Quadrant Online, 24 April 2019
Mark Lawson comes from a journalistic tradition which attempted to assess factual information without interpreting it within an ideological framework. His book, Climate Hysteria, draws on publicly available information, details that information, and analyses its interpretation and projections as offered by climate “experts”. It is highly readable, pulling together the both history of the climate debate and the present situation by comparing the careerists’ doom-laden forecasts against reality.
His book, as its title suggests, analyses the development of what he calls “climate hysteria” which, coupled with conferences of nations represented by their environmental agencies, has led to international agreements limiting emissions of carbon dioxide and other the greenhouse gases, the latest being the Paris Agreement of 2016. Trouble is, the climate is failing to behave the way scientific analysis, as reported at planetary conferences, indicates it should. Not only have the various milestones indicating apocalyptic tipping points on the road to irretrievable disaster failed to occur, but even the minor prophecies haven’t materialised.
# there has been no increase in wildfires, whereas more of these were claimed to be imminent in the IPCC papers
# there has been no change in global precipitation ..... Read more
Weaponising the ACCC to address cartels: more market controls planned
Catallaxy Files, 16 April 2019
Having seen the ACCC staffing levels increase 10 per cent since 2014 with a further increase of 14 per cent budgeted for next year, Chairman Rod Sims is out campaigning for additional resources to combat cartels. Sims’s views are in line with those of a predecessor, Graeme Samuel, who said ‘cartel behaviour is, in reality, a form of theft and little different from classes of corporate crime that already attract criminal sentences.’
Another predecessor of Sims at the ACCC, Allen Fels, like Sims was a long term ALP client/assister of the ALP and was rewarded with the ACCC job. Fels would mask his proclivity to intervene in markets (i.e. to “correct” them) by citing Adam Smith’s aphorism, ‘people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’
Neither Fels nor Sims would have agreed with Smith’s succeeding sentence, ‘It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice’. Still less would they recognise that the words were in the context of a chapter in The Wealth of Nations that addressed the perverse effects of government regulation in creating monopolies; indeed, government facilitation is only means by which such monopolies can persist.
More on the electric vehicles farce
Catallaxy Files, 8 April 2019
We can all have great sport on the back of Bill Shorten’s inability to differentiate between 8 minutes and 8 hours when it comes to the charge rate for electric batteries. But we should not delude ourselves that the Coalition is markedly different. The ALP policy has two strands – first the 50 per cent of new cars to be electric buy 2030 and secondly requiring vehicle emissions to be 105 grams of CO2 per kilometre by 2025.
The former recommendation also involved a roll-out of charging facilities across the nation. Angus Taylor for the government has, rightly, excoriated this proposal. But not so long ago he too was extolling a roll out by ARENA costed at $15 million for, “The ultra-rapid charge will provide a range of up to 400 kilometres in just fifteen minutes, compared to a current charging time of several hours”.
The 105 grams of CO2 per km recommendation was made by the government’s own hand-picked Climate Change Authority and was a policy approach Malcolm Turnbull almost got through the Liberal Party Room. Requiring all car sellers to average a level of emissions, which none of the March 2019 top 20 selling vehicles achieve, would require sharp price premiums on all other vehicles – and all vehicles outside of the electric models that start in price at $50k – in order to make the average. It is unlikely that this could be possible without upping prices of low cost models by 50 per cent and doubling the price of petrol. Norway, is the poster child of the electric car strategy ..... Read more
Electricity subsidies beget further interventions bringing additional inefficiences
Catallaxy Files, 31 March 2018
Unusually, Energy Minister Angus Taylor has some pre-politician expertise in the sector and is fully aware of the deficiencies of renewables (the exotic wind/ solar ones, not hydro) and the damage done to Australian prices and reliability by subsidised wind/solar.
Back in August of last year, as a newly minted minister, he basked in the PM’s invested title of Minister for electricity prices down. Conceptionally, the task this entails is not very difficult in the context of Australia having an abundance of cheap well-situated coal that has in the past allowed us to have the cheapest electricity in the world and could again do so. However, timing is of the essence and the program had to be achieved in the nine months gestation period ending in this year’s May election. This was a tall order, seeing as the collapse of the low prices occurred in 2016/17 (when Hazelwood closed) some 15 years after the renewable subsidy venom started to be introduced.
By November of last year Angus Taylor was trying to jaw-bone electricity retailers to reduce their prices. The pressure was intensified and by January this was converted into a rather more prescriptive form of price regulation followed by censorious comments about electricity company profits; these have grown tumescently not because of retail margins but as a result of the high wholesale prices caused by renewables (plus state government actions) knocking out Hazelwood and the SA Northern Power Station. ..... Read more
NSW Election: the Triumph of the Irrigators
Catallaxy Files, 24 March 2019
The Nationals are paraded as having had a poor election. This is not obvious – the Nationals got 9.7 per cent of the vote in the Legislative Assembly, a swing against them of 0.9 per cent, in the context of considerable opposition on their traditional turf with the Shooters, Fishers and Farmers (SFF) increasing their share by 3.2 per cent and One Nation up by 1.1 per cent. (One Nation will get over 6 per cent in the Upper House). However, this performance resulted in a loss of two seats (Murray and Barwon) to the SFF together with the confirmation of the gain of Orange that the SFF had previously made. And Dubbo and Wagga also saw major swings against the Nationals to right wing candidates.
The Nationals did well in other seats, notably that of the Deputy Leader John Barilaro. Barilaro, unlike the National’s leadership in Canberra where David Littleproud replaced Barnaby Joyce as Agriculture Minister, but in common with the ascendant SFF had called for action to restore water to irrigation.
This issue and mismanagement of the Murray Darling oin general has been crucial to the electoral losses of the Nationals and the Water Minister has stepped down.
As well as the loss of three Lower House seats, the erosion of support to pro-irrigation parties will also force those Nationals previously complacent about the issue to step up in support of their traditional constituents. In addition, SFF, One Nation and perhaps David Leyonhjelm will likely have 4 Upper House seats and the balance of power. Hence, even if Gladys Berejiklian wins an outright majority in the Lower House a review of Murray Darling irrigation policy in the Murray Darling is inevitable. ..... Read more
The scare is settled? Have the climate catastrophists won?
The Spectator Australia, 19 March 2019
Evidence does not seem to matter in the debate on human-induced climate change. Hardly anyone is listening to reason. Minds have been made up.
A substantial majority of people considers human-induced climate change is underway. They do so even though temperatures and ocean levels have not risen beyond their long-term trends, there is no increase in extreme events, no increase in flooding, droughts, or forest fires. And iconic features like the Great Barrier Reef are under no stress.
Countering every solid piece of evidence showing climate stability are unscientific claims that a particular occurrence of flooding, drought, hurricanes, and hot weather is proof of the opposite. Even Barnaby Joyce is on board when he says, “No one is seriously arguing the climate is not changing; I’m driving along the road now and the trees designed for our climate, eucalyptus, are dying. The creeks are dry and have been for years now; droughts are the rule and not the exception and their duration is brutal.”
A majority is equally unconvinced by the palpable evidence of higher electricity prices and a less reliable network due to a replacement of controllable fossil fuel generation by intermittently available renewables that require both expensive back-up and high-cost transmission. The simplistic cry that renewable energy is free and must be cheaper than those ancient coal generators is accepted by professionals outside the industry, and some within it. It is becoming a dominant perspective of bankers, doctors, lawyers as well as teachers. ..... Read more .....pdf file
Energy policy: the $72 billion fair dinkum disaster
The Spectator, 26 February 2018
Energy and climate change policy in Australia and other western democracies is now, along with immigration and its associated fear of imported third world violence, the cutting edge of the political divide.
But in Australia, the Liberal Party’s policy over the past 20 years has converged with that of the Labor Party and latterly the Greens to favour increased subsidies to electricity generated from wind and solar. This has knocked out lower cost, more reliable coal generators and doubled wholesale prices, with costs further enhanced by a consequent need for more spending to offset wind’s unreliability and on poles and wires.
The Liberals (supported by Labor) have responded to these regulatory induced cost increases by requiring retailers to reduce prices, a measure that is certain further to deter efficient investment, bringing still higher costs. ..... Read more .....pdf file
The myths of the Murray
The Spectator, 17 February 2019
Over the past century, the Murray Darling river’s naturally highly irregular flows have been transformed to convert it into the tranquil, ever-flowing waterway that has allowed the Basin it serves to become the source of 41 per cent of the nation’s agricultural output.
Green activists have, however, demonised irrigated farming by promoting myths about the river being under environmental stress. Such claims have been further amplified by fictitious and disproven claims that the precipitation into the catchment area will be much reduced due to supposed global warming.
As a result, one quarter of the water previously used for agricultural activities dependent on irrigation has been reallocated to environmental targets, including transforming the mouth of the Murray from its natural salt-infused state into freshwater lakes. Mismanagement of these environmental flows was critical in causing an unprecedented fish kill in 2019.
The cost of the Basin Plan in derating the region’s agricultural potential has been tragic, for the region. In aggregate terms this is likely to be in excess of $3 billion per annum at a time when agricultural export opportunities are promising. The measures adopted in the Basin plan were reactions to ill-founded and refuted concerns about human damage to the environment. The Commonwealth should cease incurring costs in preventing water use for irrigation and should re-sell the water it has banked to those willing to pay for it. ..... Read more ... pdf file
The Green Robe of Climate Justice
Quadrant online, 11 February 2019
Being open-minded and impartial, as his tenure as a judge requires, we can take for granted that Mr Justice Preston read more broadly than the warmist epistles of alarmists and climate careerists cited in his judgment against the Rocky Hill coal mine. Alas, the views of less excitable climate scientists failed to get a mention.
Last week, the senior judge in the NSW Land and Environment Court, Mr Justice Brian Preston (left), rejected the Rocky Hill coal mine’s application to operate for a number of reasons, one of them being “to meet generally agreed climate targets” for a “rapid and deep decrease” in emissions. The case against the mine was run by the activist Environmental Defenders Office NSW, which is funded in part by the state government and at which Preston once served as the founding principal solicitor.
Mr Preston was appointed to the leading legal role in the Land and Environment Court by Labor attorney-general Bob Debus in 2005. Debus said he was impressed by his record as an environmental activist when appointing him to the job. ..... Read more
Days of power and fury: January 2019 electricity prices and outages
Catallaxy Files, 3 February 2019
Compared with a National Market that had a turnover of less than $7.5 billion a year four years ago, the turnover in just two days in January was over $1 billion.
It is impossible without all data on contracts to determine who the electricity industry’s winners and losers were from the January 2019 high priced events.
With the electricity there are multiple markets but it is best to think of them comprising just two markets. The first is the spot market which we see every five minutes; the price peaked in late January in some states at $14,500 dollars per megawatt hour (MWh). The price, prior to outcome from governmental destabilisation of the market, was $30-40 per MWh.
The second is the contract market whereby sellers and buyers agree beforehand on the prices at which they will supply and demand electricity for all the various periods of time. This contract market really comprises probably 95% of the aggregate market and the prices are fixed in advance. ..... Read more
The Liberals’ Downhill Racers
Quadrant Online, 27 January 2019
Last week, NSW’s Photios-aligned Arts Minister Don Harwin appointed Tim Flannery to the board of the Australian Museum. Days later, Olympics skier Zali Steggall announced the climate careerist would be aiding her independent bid to oust Tony Abbott from Warringah, a campaign that has already seen ex-Turnbull staffer Alice Thompson join the race. With friends like this, just what sort of a party have the Liberals become?
Could this be a coincidence? Zali Steggall, former Olympic skier and admirer of Malcolm Turnbull, is to contest Tony Abbott’s seat of Warringah. At her launch on January 27 she said her decision to declare as an independent was motivated by a desire to promote the “sensible centre”.
That term is code for climate change, the issue which is supported by agitprop from the massive funding that scurrilous and self-interested entities have at their fingertips, courtesy of funding for renewables, Great Barrier Reef and the associated green-ish endeavours governments of all stripes have provided. She made this clear.
“I have been consulting with Australia’s leading climate change and economics experts. I’m very lucky to have Professor Tim Flannery here today, and he and other experts have agreed to advise me on climate strategy and how we can best achieve the results we need to achieve for Warringah and Australia.”
Tim Flannery quote from 2007
Reality check from 2011:
Tim Flannery quote from 2007
Reaping the fruits of political sabotage of the electricity industry
Catallaxy Files, 25 January 2019
The third world nature of Australia’s electricity industry was revealed this week with wholesale prices in Victoria and South Australia at the maximum $14,500 for lengthy periods in spite of thousands of customers being cut-off, major users agreeing to shut down demand in return for compensation paid by consumers, and even some oil plants being called in.
The causes are clear. For twenty years, Australia has embarked upon a subsidy program for intermittent, unreliable and costly wind and solar. This is accompanied in Victoria and South Australia (and perhaps now in Queensland) by outright hostility to coal, the form of power that had given the nation the lowest cost and most reliable electricity in the world.
As I said in a previous post, there has been no shortage of spending on electricity generation
Over the past decade, we have spent $70 billion on wind and solar. That $70 billion is enough for 12 new coal generators that would give us electricity with a wholesale cost of one third that of the current level. Instead we have been closing down the more economical coal fired power stations because renewables, two thirds of the costs of which are covered by subsidies, are making them uneconomical.
Not one cent of the $70 billion spent on wind and solar would have occurred had it not been for the subsidies. Those subsidies – renewable energy schemes, the Green Energy Bank, direct support from the Commonwealth and state support measures – are running at $5 billion a year. ..... Read more
Banks pretend to be virtue signalling while plundering electricity consumers
Catallaxy Files, 21 January 2019
In the salad days prior to 2015, before governments’ destructive interventions undermined Australia’s stable low-cost electricity supply, electricity as a topic of general interest hardly figured. Any concerns about power blackouts just did not reach the front pages or the late-night news bulletins.
At that time the National Market had about 50,000 megawatts (MW) of capacity, about 80 per cent of which was coal with gas and hydro providing the balance; with the exception of wind/solar, which had already grown to around 1,000 MW, all the capacity was under human control or “despatchable”. The National Market now has about 45,000 MW of dispatchable capacity plus nearly 7,000 MW of wind and solar, with a further 45,000 MW wind and solar planned. No wind or solar facility would have been commercial without the subsidies they receive.
From the outset of the National Market, 20 years ago, there has always been a bit of a stand-off between generators and retailers over summer supplies and their prices. The most marginal generators (usually gas) sought better rewards for remaining on-line as a contingency supply source. The market manager, now called the Australian Energy Market Operator (AEMO), being more risk averse than the retailers, would usually step in acting as a reserve trader, to guarantee extra supplies. This Reliability and Emergency Reserve Trader (RERT) now contracts for about 1000 megawatts, on top of which are “demand response” contracts with major users. In addition, the market manager has powers, which it increasingly uses, to direct generators to stay on line or to make themselves available when such actions would be unprofitable. In the last quarter this included forcing South Australian gas plants to be available 40 per cent of the time (with consumers providing special payments) to compensate for wind supply inadequacies ..... Read more
The Australian Energy Regulator’s wholesale electricity market performance report
Catallaxy Files, 9 January 2019
The more desperate the situation of an industry, the more reports and regulatory overseers’ governments require, blind to any recognition of an industry’s malaise being created by their own actions. And so, with electricity we have an alphabet soup of regulatory agencies analysing, advising and fiddling. At the Commonwealth level we have the ESB, AEMO, AEMC, AER and ACCC all seeking a place in the sun. On top of this are state regulatory agencies and conventional line departments. Then we have government research agencies like CSIRO and the Cooperative Research Centres.
The Australian Energy Regulator has one necessary function, which it discharges effectively, namely setting the price the monopoly poles and wires businesses may charge for their services. It has other functions of less obvious worth. Among these is a requirement to report every two years on “the performance of the wholesale electricity market, including analysing and identifying whether there is effective competition in the market and whether there are market features that may be detrimental to effective competition or the efficient functioning of the market”.
Its first such report was issued shortly before Christmas. The report’s main themes are:
Prices have risen, largely due to the closure of Hazelwood and other coal power stations, but that increased coal prices may have contributed to this as might also, to a limited and declining extent, monopolistic behaviour on the part of Queensland government owned generators.
In spite of a diminished controllable supply, in the shorter term there is sufficient capacity to avoid blackouts. ..... Read more
Australia, the Plodding Underperformer
Quadrant Online, 8 January 2019
Australia sits on the world’s most valuable natural resources, yet those immense blessings aren’t matched by income levels — a failure which must be seen as an indictment of successive governments’ stewardship. More worrying, the pressures and follies that have inflicted below-par economic development are growing more pronounced
The different rates of change in world income levels have provided Australia with a magnificent base on which to build our own prosperity. Alas, though our standard of living testifies to some success, political measures have blunted the potential level of achievement. A less regulated, lower taxing political regime is important to enhancing our income levels. And as the 21st century progresses such a policy redirection will assume increased importance in ensuring our national security.
This graphic presents a fascinating review of the rise and fall of nations in the GDP stakes. Over the past half century, the constancy of the US, rise of Japan and Germany, and the more recent rise of China and India are the dominant features. As late as 1969, Australia even crept into the top 10. ..... Read more
Liberal luvvies for higher power prices
The Spectator, 20 December 2018
Politicians as targets of the French gilets jaunes are omnipresent in Australia and have, with their climate change-driven energy policies, created even greater economic damage than in France. Notwithstanding the disastrous effects from subsidising renewable energy, politicians’ hubris within the Coalition, ALP and Greens leaves most MPs convinced that renewable energy is the future. Debate is mainly centred on whether or not to double down on the harmful regulatory interventions that have undermined the coal generators that gave the nation its competitiveness and much of its prosperity.
The Gilets Jaune movement in France, rapidly spreading to other countries, stems from public revolts against the arrogance of the leaders that have been elected. The issue that has galvanised the French is government action to combat climate change, particularly its corollary of politically driven price increases for energy.
Many of these leaders who are the target of the demonstrations share similar career patterns. Starting with political activism at University they seamlessly move into working for a politician, thence into becoming themselves an elected politician, often parachuted into a safe seat, and from then on to ministerial office. All this is achieved without ever having had a real, productive job.
This describes NSW Energy Minister Don Harwin whose political agenda has been dominated by gay rights activism and who, as President of the NSW Upper House, supported a motion that described Mr Trump as ‘a revolting slug’ unfit for public office. ..... Read more
The mirage of lower renewable energy driven electricity prices
Catallaxy Files, 10 December 2018
Josh Frydenberg claimed the last week in Parliament was a poor one for the opposition and the triumph for the government. He made mention of the Opposition’s inability to get Peter Dutton and its failure to deliver its preferred outcomes regarding Manus Island detainees.
He also mentioned as a success the government’s energy policy proposals. One such proposal, the “Prohibiting Market Misconduct Bill 2018”, was clearly not a success for the government. The proposal was referred to the Senate for investigation and cannot emerge from that process until the least April of next year.
Wrapped in the normal cautious verbiage about “last resort” measures, the Bill is a desperate attempt to see electricity prices reduced before the next election. To do so it forces retailers to reduce their prices and generators to ensure they operate their businesses “fairly”. With thirty odd retailers around the nation and dozens of differently owned generators, the electricity market is just about the least susceptible to the monopoly activities against which these measures were targeted. The provisions would allow the government to have the ACCC examine suspect behaviour which could result in fines of $10 million or divestiture. Divestiture is clearly aimed at AGL’s Liddell Power Station.
Among the media outlets criticising the bill was the AFR. Ben Potter assailed it as ‘socialist’. The AFR had previously not opposed the carbon tax, renewable subsidies or the NEG all of which involved the expropriation of fossil fuel generator investments. It could be that such epithets are reserved for actions against industries that do not meet the PC test! ..... Read more
Ford’s Ontario has Nothing to Learn from Australia’s Climate Plan
The gilets jaunes (yellow vests) demonstrations across the Atlantic against climate change driven fuel taxes offer Premier Doug Ford yet another reason to congratulate himself on repealing Ontario’s carbon tax.
Less reassuring however is the speculation that he is to introduce a measure similar to the Australian ‘Emissions Reduction Fund’ (ERF). A sop to the leftists within the Australian coalition conservative parties, this provides funding for a reverse auction where, instead of taxing all emissions, (with the revenues theoretically being used to compensate those paying the taxes), the government invites bids from firms for the abatement measures they will undertake.
Australia’s ERF is part of a suite of measures in place, including
renewable energy subsidies that cost about $A3 billion a year,
direct federal investment through the budget of perhaps $500 million a year plus a similar amount for various state and territory programs,
regulations on light bulbs, buildings, white-goods etc. designed to reduce energy,
and a government $A10 billion Clean Energy Finance Corporation. ..... Read more
The ALP’s emission reduction dreams will strangle the economy
Catallaxy Files, 23 November 2018
Over the past decade, we have spent $70 billion on wind and solar. Here are some statistics from BNEF, not uncoincidentally, the venue where Bill Shorten and Mark Butler yesterday launched an outline of the ALP energy and climate policy.
That $70 billion is enough for 12 new coal generators that would give us electricity with a wholesale cost of one third that of the current level.
Instead we have been closing down the more economical coal fired power stations because renewables, two thirds of the costs of which are covered by subsidies, are making them uneconomical.
Not one cent of the $70 billion spent on wind and solar would have occurred had it not been for the subsidies. Those subsidies – renewable energy schemes, the Green Energy Bank, direct support from the Commonwealth and state support measures – are running at $5 billion a year.
The outcome of this experiment has been electricity costs which have skyrocketed to become among the highest in the world. A corollary, in addition to the obvious costs to households, is the loss of some of our most productive industries energy intensive including aluminium smelting.
Now, the ALP wants to double the share of subsidised renewables which, even at 20 per cent of supply, have poisoned our electricity sector.
To do this, they want to spend an additional $10 billion in funding the green energy bank. And they want to spend $5 billion on new interconnectors to allow unreliable and high cost wind to be transferred from state to state and to build new connections to windmills located in remote areas ..... Read more
Labor’s energy deal: Shorten facts, but you’ll pay more
The Spectator Australia, 21 November 2018
Sucked in by spurious claims of the loss of 99 per cent of all coral reefs, mounting natural disasters, a permanent drought in the Murray Darling, and illusions that fossil fuels are archaic, Labor is preparing to announce its energy policy.
Earlier this week, in a dummy run, Energy spokesman Mark Butler claimed, in the context of apparent public support for renewables, that we can up the government’s 23 per cent renewable energy share, which includes about eight per cent of (currently unsubsidised) hydro, to 50 per cent and also see electricity prices fall.
Bill Shorten is to formally launch the ALP “have our cake and eat it” policy on Thursday. This comes at a time when wholesale electricity prices for 2019 are around $95 per MWh, more than double prices just three years ago.
In claiming that its more intensive subsidy policies will lower overall electricity prices, the ALP platform is supported by the same confident predictions that have favoured existing renewable energy subsidies. Such predictions rest on modelling exercises by the main energy modellers, Jacobs, Deloittes, Frontier, Repu Tex, and ACiL. These presume that wind and solar generators, with a subsidy presently standing at $80 per MWh
The Diabolic Policy Dilemmas Created by Previous Energy Policies
Catallaxy Files, 14 November 2018
Regulatory measures – subsidies for wind/solar – have wrecked the Australian market, driving up prices and increasing supply costs. And the policies have created wind and solar capacities that have on-going effects, which cannot be unwound by simply allowing the subsidies to run their course, since this will exact an increasing toll on energy costs. Countervailing subsidies to coal generation cannot solve the problem since, with existing policies in place, a subsidy to one or more coal generators would impact on the economics of other coal generators rather than the subsidised wind/solar which create the problem.
The main energy subsidies are the RET for wind and large scale solar with a subsidy this year at around $80 per MWh and the SRES for roof top facilities where the subsidy is paid up-front for the presumed life of the facility at a rate of $40 per MWh. The RET this year costs electricity consumers $2.2 billion and the SRES over $1 billion.
Some people, especially those harvesting the subsidies, maintain the fiction that renewables are now cheaper than coal. Most politicians bow to the voter impact of the ideology of human induced climate catastrophe and the myth of cheap renewable power that the subsidy seekers have spun .....Read more
The red and blue of the US mid-terms
Catallaxy Files, 12 November 2018
The US mid-terms: a victory for Trump?
Many on the right felt relief at the outcome of the US mid-terms, where the message was that the incumbent President predictably loses support. The House loss was said to be modest and the Democrats actually lost ground in the Senate.
The inevitability of lost congressional mid-term support is overstated – one need go back only to 2002 to find the Republicans under President Bush gaining ground. Here are the mid-term results since 1950 ..... Read more
Renewable subsidies: destroyers of low cost electricity supplies
Paper presented to the September 2018 conference: The Basic Science of a Changing Climate held in Porto
Renewable energy and its replacement of conventional electricity supplies
In meeting targets agreed at the 2002 Kyoto Convention, the precursor to the Paris Agreement, Australia, by preventing land clearance, reduced emissions by 100 million tonnes a year of CO2 equivalent. Comprising almost 20 per cent of total emissions, this reduction allowed Australia to claim that there had been a negligible increase over the period 1990-2012, and Australian politicians were able to bask in diplomatic plaudits at farmers’ expense.
Australia also took measures to suppress greenhouse gas emissions from energy which, in its various forms, accounts for about 70 per cent of greenhouse gas emissions but as electricity brings only around 25 per cent.
Electricity however is the focus of attention on emission reductions.
Real people put living standards above virtue signalling on climate change
Catallaxy Files, 26 October 2018
Leftist Economist Joseph Stiglitz, coming to Australia to collect the human rights activist “Sydney Peace Prize”, is not the only dreamer urging a carbon tax for Australia and proclaiming that climate change was not a liberal conspiracy.
As Chris Kenny notes the Australian Institute of Company Directors (AICD) are also virtue signalling their support for such economy-crushing measures. Oblivious to the fact that the carbon suppression agenda is really only confined to the sclerotic EU, 50 per cent of them put it as the major issue confronting the economy. It’s as though they are cocooned in a world that has never heard of Donald Trump’s rejection of the Paris Agreement or the fact that China and India will at best look to join it a dozen years hence!
While many of the AICD respondents may have expertise in how to make businesses operate profitably, they clearly are bereft of political and general economic skills.
It may well be that the company directors’ stumping up for a carbon tax and other measures designed to subsidise renewables is based on their corporate interests, since so many firms have punted, willingly or unwillingly, for renewable “investments” along with the subsidies without which none of the investments would be profitable.
Any movement to withdraw these subsidies will likely be a precursor for the rescinding of the rorts already granted and this will not look good on balance sheets.
Although the electorate is often also over-obsessed with climate change and its corollary of poverty inducement and high household electricity costs, most people are better grounded on what affects their interests. The ACID virtue-signalling may well be self-interested but Essential has found that only 7 per cent of respondents among the general pubic put climate change and support for renewable subsidies as the key issue facing them ..... Read more
Socialism will impoverish you, but it won’t solve climate change
The Spectator, 25 October 2018
Writing in the Guardian, Geoff Sparrow is not the first person to call for a socialist “dictatorship of the proletariat” as the only means of markedly reducing emissions of carbon dioxide and other greenhouse gases. In a curious conflation of this with surveys that appear to show an attraction to socialism in the part of young people, he argues modern capitalism means ruination of the planet as well as Marxian impoverishment of the worker and “the steady destruction of social welfare, a preposterously unaffordable housing sector, an increasingly sinister security state and a political culture dominated by race-baiting charlatans”.
It is true that many people in each new generation need to be freshly disillusioned by the observed deficiencies of socialism wherever it is practiced. Seventy years after Marx and Engels published their Communist Manifesto we saw its principles being put into place in the Soviet Union followed, 30 years later, in Eastern Europe and China. The collapse of the Soviet bloc and the self-destruction of socialism by the Chinese Communist Party testified to its failure as an economic system on top of its abysmal record regarding civil liberties. Once the Communist countries returned to capitalism with private ownership their economies started to prosper – spectacularly so in the case of China.
The collapse of the Soviet bloc and the self-destruction of socialism by the Chinese Communist Party testified to its failure as an economic system on top of its abysmal record regarding civil liberties. Once the Communist countries returned to capitalism with private ownership their economies started to prosper – spectacularly so in the case of China. .... Read more
The ‘Broad Church’ and its Termites
Quadrant Online, 22 October 2018
No sooner did Wentworth fall than the green-left of the Liberal congregation demanded yet further sacrifices of other people's money and hardship be laid before the altar of global warming. If the party of Menzies has been white-anted to this extent, might it not be time to burn the whole thing down?
The Liberals are proving themselves unable to differentiate their product from that of the ALP and even veering close to the Greens. The rot started with John Howard and his “broad church” approach which welcomed soft socialism into the Liberal Party in an attempt to maroon the ALP with the hard left policies.
Howard was fortunate in this approach in having a strong-willed Treasurer who could make use of Treasury without being engulfed by the men and women led and nurtured by Ken Henry, the Keynesian global warmist. But other ministers and Howard’s own policy choices started processes that caused economic harm, moving the party closer to the ALP.
Most notorious among these was Howard’s 2001 decision on renewable energy subsidies, initially to bring these inherently high cost, low reliability wind/solar sources to comprise “two per cent additional energy”. As such interventions inevitably do, this started permanent pressure for additional renewable subsidies (which Howard, to his credit, resisted while in office). Subsidies to renewables will bring their share in electricity supply in 2020 to 24% (with commercial hydro another 8%). These policies have converted the nation with world’s cheapest electricity into one with the most expensive. ..... Read more
The Warmists Are Starting to Sweat
Quadrant Online, 7 October 2018
Here's a prediction you can take to the bank: the ABC and Fairfax will be running even more inane climate-scare stories than usual. Why might that be? Because the US has taken its money and departed Paris, threatening climate careerists with the unsettling prospect of finding honest work.
Over the next week the report being finalised at a United Nations Intergovernmental Panel on Climate Change (IPCC), meeting in Korea, will see an outpouring of alarmist material. Doom-laden factoids and forecasts will be released, all designed to head off an impending collapse in the “consensus” that reached its apogee in the Obama era. Culminating in the 2015 Paris Agreement, an EU-US axis led policy development on regulatory measures to suppress emissions of carbon dioxide and other greenhouse gases. Most fundamentally the strategy involved bearing down on the use of coal and other fossil fuels to the electricity supply industry and replacing these sources with wind and solar.
Developed countries agreed to reduce emissions by around 26%; successful developing countries, such as China and India, said they would fall into line 15 years hence. On the strength of this dubious promise no disciplines were placed on them, while they welcomed the self-mutilating actions of the developed world which enhanced their own competitiveness. The emission-supressing coalition was rounded out by a slew of failing developing nations brought into the tent by the promise of a $100 billion annual fund to fill their begging bowls and finance the lifestyles of their elites. Fat chance of that ever eventuating. ..... Read more
Carbon taxes: many losers, some winners
Catallaxy Files, 10 October 2018
In a Wall Street Journal opinion piece, Bjorn Lomborg drew attention to the inconsistency of the global warming costs and benefit estimates made by newly minted Nobel Prize recipient William Nordhaus, and the alarmist IPCC climate review issued out of Inchon. Lomborg, is a believer in the global warming myth but tends to think the money spent alleviating it is better spent elsewhere (his socialist background does not allow him to include an option of leaving the money with its owners!)
A New York Times article put the level of a carbon tax necessary to curtail emissions in line with an estimate of their social costs at somewhere between $135 and $5000 per tonne; the former would mean a twofold increase in Australian wholesale prices and the latter a thirteen fold increase.
Actually, though Nordhaus was a pioneer in marrying an emission reduction regime to economics, he uncritically accepted all the costs said to emanate from global warming – crop reductions, hurricanes, desertification of eastern Australia, increases in disease, lost infrastructure. Having done so, he set about estimating the level of global tax which would redirect spending and investment to take into account of these “externalities”. ..... Read more
Wasteful investment in wind/solar has a negative value
Catallaxy Files, 2 October 2018
A breathless piece by the Guardian’s Calla Wahlquist announced that Victoria’s renewable energy boom set to create six thousand new jobs. And yet the head of the renewable energy lobby group, Tristan Edis, was downbeat because the subsidies are being phased down. This is the group that claims subsidies are not really needed (or is it will soon not be needed?) because the wind and solar technology as made such colossal leaps that they are now (or will soon be) on parity with that archaic fossil fuel technology.
New “clean energy” investment in Australia was estimated in 2017 by the renewable punting Bloomberg New Energy Finance at over $10 billion. ..... Read more
Australia's faunal extinction crisis:
Submission to Senate Environment and Communications References Committee Inquiry into Faunal Extinction
1. Recognise that there is no species eradication crisis in Australia;
2. Protect existing property rights to the maximum extent possible and fully compensate landholders for regulatory imposts to promote biodiversity conservation;
3. Provide for equivalent biodiversity conservation offsets when regulating the clearing of land for economic development;
4. Remove any legal impediments to innovation in biodiversity conservation on privately owned land;
5. Minimise the use of 'command and control' regulation;
6. Cease incurring needless expenditure and limitations on private land-holders to address this matter. Where any limitations of land use are sought, owners should be fully compensated from the public purse;
7. Remove the impediments to markets for biodiversity conservation, including by paying landholders for specified conservation outcomes and allowing biodiversity conservation obligations to be traded;
8. Recognise that the cost effective means of addressing the residual species eradications that are deemed likely is to do so directly by devising measures to eradicate feral predators;
9. Consider measures that will encourage the development of “exclosures” that eliminate feral species and prevent their reinfestation;
10. Review blanket bans on exports of certain species and instead consider mechanisms including ownership vesting to allow their harvesting. Remove the legal impediments to the commercial exploitation of Australian wildlife, including its ownership, use, domestic exchange, and exportation Read here
Victorian Government contracts for renewable energy supplies
Catallaxy Files, 13 September 2018
Victoria has announced fifteen-year contract for wind and solar capacity amounting to 650 megawatts (the giant Loy Yang is 2,200 MW but renewables only provide about one third as much electricity per MW of capacity). The price is said to be under $60 per MWH, while the state government also garners the subsidies paid by consumers under the Commonwealth’s renewable scheme. The Commonwealth subsidies forward prices are running at about $20 per MWh.
In negotiating auctions, the Victorian government agreed to a poison pill clause that would prevent a Coalition successor unwinding the contracts without severe penalty. If the contracts were as good as the government and its gushing media supporters maintain this would not be necessary.
If some of the forecasts paid for by the different proponents of renewable energy subsidies were to be realised the contracts have some superficial attraction. Two sets of future scenarios (by Jacobs) saw prices in the $70-90 per MWh range over the next decade (last year’s Victorian prices averaged $90 per MWH). Less beneficial as regards the contracts themselves would the fantasy land forecasts of ACiL (under $50 per MWh for most of the 2020s) or Frontier (which saw prices dipping below $50 per MWh before rising to $70 plus later in the decade). ..... Read more
The Bitter Fruit of a Bad Green Marriage
Quadrant Online, 10 September 2018
The service was conducted by the high priests of alarmism, with politicians pledging their love for rent-seeking renewables promoters as a media choir sang of the wonders to come. Yes, we've seen wonders aplenty -- obscene power prices, economic hobbles and the further corruption of science.
Comments from Josh Frydenberg and Mark Butler show that neither the Liberals nor ALP understand – or, perhaps more accurately, admit to understanding how carbon policies are destroying the economy. Both promote variations on a theme: subsidies to renewables and penalties on coal, which together have brought uncompetitive prices. Mr Butler even repeats the shibboleth that without the National Energy Guarantee and its thinly disguised carbon tax, electricity prices, as per the latest model’s fabrication, will cost consumers $550 per year.
Mainstream Australian politicians are responding to a dominant scientific paradigm that says reductions in carbon dioxide emissions will save the world. The science is settled and all that. Only a quarter of these emissions result from electricity production, so it’s not as if the sector’s transformation to renewables could ever be a solution in itself to the planet’s alleged peril. Yet these measures are widely represented by politicians and lobbyists alike as key. Abatement policies remain in place notwithstanding the trivial effect that Australian reductions might have, especially when the developing world is taking no action and the US has withdrawn from Paris. ..... Read more
Will abandoning energy subsidies allow the electricity market to self-correct?
Catallaxy Files, 29 August 2108
Coordination of supply in network industries
Network industries involve firms cooperating in order to meet customer demands. Their success depends upon parties mutually agreeing on certain interconnection standards in order to combine components together. This need for coordination was often ensured by keeping the major supply components in-house.
Thus, railways were vertically integrated to ensure that the package comprising train types, tracks, junctions, signalling, workshops, stations and other facets could be coordinated without negotiated compromises with independent businesses. Difficulties arose in the UK system when track and trains were placed with different businesses and each attempted to foist joint costs on to the other. Some privately owned freight lines continue to operate like this – notably with Brazilian and Australian iron ore supply routes. In the case of Australia, BHP and Rio spend hundreds of thousands of dollars a year on legal advisors to maintain control of their rail lines and what they carry; they do so to combat constant attempts by regulatory authorities seeking to force them to open their facilities to other users. Their imperative is to avoid any interruption to their shipments, since even short delays mean huge costs.
This vertical integration was also standard for electricity supply. Not only were generation and transmission under common ownership but so also, in most cases, was local distribution. Integration ensured that the lines and the different sources of supply optimised the needs of the market. In most of Australia that meant maximising the use of the cheapest source of supply, coal, while using more flexible, higher cost gas or supply constrained hydro to fill in peaks and ensure reliability. The coal generators remain lowest cost but, since most of their costs are in fixed plant and incurred whether or not they are generating, only when they can continue running continuously for prolonged periods. Coal generators are also not easily adaptable to stop-start operations.
A Simple Rx for the Energy Mess
Quadrant Online, 23 August 2018
Power prices have ignited the current leadership crisis and there are few signs of sufficient understanding of what caused this in the political firmament or, for that matter, in the mainstream media.
Malcolm Turnbull engineered the now comatose National Energy Guarantee to disguise his ideological imperative of a planned energy system that is fundamentally based on those wind/solar/battery technologies he regards as the shape of things to come. He says:
Our primary focus is to bring power prices down.
No single measure can achieve this …. there’s no single reason why power prices have been so high and there’s no single solution. So that’s why we’re taking action right across the board, with retailers, distributors, generators. And together, our measures will deliver cheaper electricity.
Turnbull is thrashing around, looking to place the blame for the energy mess on market manipulation by retailers and deceitful price offerings. His key solutions are
price fixing disguised as some form of regulation of “standing offers”
new powers for the ACCC to order separation of vertically integrated firms; and
underwriting support for some form of new dispatchable energy.
The energy crisis was created by the subsidies to renewable energy, feted at every turn by green activists and supported by all the major research consultancies whose models saw this as a key to lowering prices, on the basis that the subsidised renewables, having their costs covered by subsidies, would bid in the market at very low prices forcing the established players to follow suit. Such regulatory initiatives neatly expropriated the established businesses, especially the coal-fired generators which, like wind generators, have low variable costs but, unlike wind, have long asset lives and do not, of course, get the subsidies.
All the major modelling firms — Frontier, ACiL, Jacobs — forecast that energy prices today would be of the order of $40 per MWh or less, compared to their actual levels of $80. All of them expect the same policies to bring overbuilding of wind with negligible marginal costs again resulting in prices of $40 per MWh two years from now. ...... Read more
Turnbull’s new approach to electricity: smoke and mirrors
Catallaxy Files, 18 August 2018
The idiocy of Turnbull’s handling of electricity policy now, once again, looks likely to cost him the leadership of his party. Faced with termination, he is seeking to extricate himself while pretending to reform the policy that has revealed his incompetence. His new proposals at modifying the National Energy Guarantee (NEG) are bromides that leave intact his destructive objectives for the electricity supply industry.
Turnbull’s automatic default position is to override the market and substitute his own perceived wisdom. Ten years ago, on a joint ticket with the ALP to close down fossil fuel electricity production and replace it with wind, he lost the leadership to Tony Abbott.
He has long considered “modern” wind and solar to be superior to the geriatric coal power stations that gave Australia the cheapest electricity in the world. Among his missions is to effect the replacement of those dinosaurs. He will not be swayed by arguments that the alternatives are dearer and less reliable and will remain so. And no amount of evidence will dissuade him that global emission reductions are either unnecessary or unachievable.
His ratification of Australia’s emission reduction commitments in the Paris Agreement the day after Trump’s election victory torpedoed that agreement was the act of a man determined to cement in a favoured cause irrespective of its impossibility. This was a gesture similar to that of another ego-maniac, Kevin Rudd, in pursuing the Copenhagen conference’s express-train to decarbonisation even after fellow believer, Barrack Obama, had accepted that the policy had to be shelved for the time being. ..... Read more
Regulatory restraints on land use: harmful to affluence and to recreation
Catallaxy Files, 6 August 2018
A couple of weeks ago I launched an excellent book, GOING ‘GREEN’ Forests, fire and a flawed conservation culture by Mark Poynter.
I recalled that in earlier years there was a body that grandly called itself the Competent Authority. It was in fact just a bunch of bureaucrats who acted as a retarder to the vehement calls of the green left for preservation of forest on one justification after another – protecting some rare critters, protecting any critters, promoting tourism, stopping erosion of river banks and so on.
So, as Mark Pointer notes, in Victoria we have gone from a situation where some 80 per cent of the forest was open to wood harvesting to now where it is 10 per cent and the industry is destroyed. Other nations have managed to keep highly productive industries – Finland has over 90 per cent of its natural forests open for harvesting.
At least in the 1980s Australia had a forestry departments that understood the dangers as well as the benefits of forestry. Burn-offs were recognised as vital to stop the very hot fires that are the result of non-management in Victoria as is also the case in California and other places where the forestry department is fused and taken over by the environmental activists.
Global myths are all part of the agitprop – the Amazon will be totally cleared in 48 days if one of the factoid’s that WWF devised were to be true. These agitators are reinforced and amplified by taxpayer funded activists within the Universities –and Mark makes special mention of those at the ANU including David Lindenmeyer, graced, as are so many radicals, with an AO. Another one, also within the Australian peerage, is travel entrepreneur Graeme Wood who funded much of the anti-logging activity ..... Read more
Australian energy policy driving us on the road to Venezuela?
Catallaxy Files, 31 July 2018
The absurdity of the oxymoronic “National Energy Guarantee” continues.
Minister Frydenberg is urging all the states to sign onto his carbon tax with its fairyland projections of declining electricity prices on the back of higher roof-top investments. (The Government and its advisers did not get the ACCC’s memo that this subsidy should, in line with developments in the UK and China, be eliminated). But the renewablesphile, fossil fuel-phobic state and territory ministers are dithering because they want to replace coal with renewables even faster than Turnbull thinks he can get away with. Such policies would, of course, only hasten us over the economic cliff.
And they are joined by others, including wind farmer Goldwind whose CEO says, “We are at a pivotal point and the structure without the substance of an emissions target which is going to really be meaningful is something I’m not sure will really move us forward.” This is the firm that claims it has sold its wind energy including the renewable entitlements for $60 per MWh (the market price without the subsidies is far in excess of that)! So much for the plinth on which the NEG stands that renewables are now or will soon be so cheap that no subsidy will emerge from the new regulatory regime!
The hypocrisy and self-serving goes well beyond this. Today we saw the release of wind farmer Infogen’s annual report. Reported revenue is $200 million this year. $120 million of this is subsidies and much of the rest boosted by subsidy-forced plant closures. Directors paid themselves $11.2 million in 2017.
And the Clean Energy Finance Corporation annual report out today illustrates the degree of wasteful malinvestments the taxpayer is shouldering in this nefarious body’s activities. In the 12 months to June 2018, new commitments were $2.3 billion ..... Read more
Modelling, Schmodelling! How to rationalise policies that would destroy the economy
Catallaxy Files, 25 July 2018
In a reprise of the feeding of the 5000 with five loaves and two fish, the Energy Security Board has offered salvation for the Australian economy with the National Energy Guarantee (NEG).
A cunning scheme has been developed by the alphabet soup of acronymic agencies charged by the government to prepare a plan to regulate the electricity market. The objectives are to gradually remove the lowest cost (coal) generators, thereby reducing emissions, while lowering prices and raising reliability. All at the same time!
The NEG proposal remains confidential, (as does Minister Frydenberg’s subsequent offer to the state energy ministers) in spite of it being leaked to all major news outlets. Under the scheme, the existing generators are predicated to stay on line as long as needed – even though their economics is undermined by rival wind/solar generators. These are currently favoured by the $80 per MWh subsidy under the Renewable Energy Target (RET) ($40 for rooftop solar). To place this in perspective, the total price before the policy madness started to bite was $40 per MWh. Under the NEG, renewables – apparently, in a tax boost to government, including hydro – will benefit from an energy intensity scheme (aka a carbon tax).
The level of the carbon tax under the NEG is carefully disguised and is likely to fall both on generators and retailers, the former because the coal generators will have to accept a price discount on their contracts as a result of the increasing level of low emission electricity the retailers must source. Of course, like any other cost the new carbon tax will be passed on to customers. The fossil fuel generators also face a forced reduction in output as the “must run” renewable generators get priority. ..... Read more
Energy: Addicted to Waffle and Disaster
Quadrant Online, 18 July 2018
Like dogs with a taste for worrying sheep, politicians' destructive meddling with our energy regime appears to be a compulsion. As Australia's debacle grows ever more ruinously absurd and an election approaches, has it not occurred to them that betraying the flock invites summary justice?
Over the past year, we have seen the misnamed report into “energy security” by Chief Scientist Finkel, the ACCC’s report (“restoring electricity affordability”) — and now a new annual report by market operator AEMO. These are in addition to a couple of dozen reviews into specific market-machinery matters and the regular reports from Code administrator AEMC, price and informational regulator AER, and AEMO.
All these outputs derive from resources poured into government management of a sector to provide reports produced by people who are not participants in the actual supply and use of electricity. Ostensibly, the reports are trying to undo the mistakes made by the predecessors of those currently in the regulatory chairs and their political masters, mistakes that have needlessly doubled the cost and reduced the reliability of electricity. The market meddling, mainly the subsidising of renewables, has robbed Australia of its natural position as the home of the world’s cheapest power into the most expensive.
The latest AEMO report follows the now well-trodden path to disaster. It ostensibly offers a blueprint for what it regards as “the least-cost option for an orderly transition to renewables”. As AEMO chief Audrey Zibelman says, “We are witnessing disruption across almost every element of the value chain … Care must be taken now more than ever to manage this transformation in order to minimise costs and risks and maximise value to consumers”. But there is no discussion of this transformation being caused by subsidies, the latest encapsulated in the 26% emission reductions said to be required by the Paris Agreement.
Is there logic in Bjorn Lomborg’s climate change proposals?
Catallaxy Files, 15 July 2018
The Australian’s opinion piece writers on the energy and climate change issue include Judith and Henry as well as Maurice Newman, Chris Kenny and Graham Lloyd. They are all doing terrific work in addressing the myths and self-serving agitprop that has the main political parties in thrall.
But where does Danish statistician Bjorn Lomborg fit in with this? Articulate and courageous, he converted himself from being a member of Greenpeace and a climate change believer into a skeptic of sorts. He did so 20 years ago, after critically analysing but failing to repudiate Julian Simon’s assessments that environmentalists’ alarmism is unfounded.
His position became that any environmental damage humans might be creating would easily be solved by technological developments and that these developments would come all the more readily and cheaply if we refrained from imposing costs on the economy.
He was excoriated for this apostasy in Denmark and elsewhere, (including by establishment academic journals like Nature and the Scientific American) as only a reformed leftist can be.
Even so, back in 2008, he was named one of the “100 the most influential people on the planet” by Time, a “global leader for tomorrow” by the World Economic Forum, and “one of the 50 people who could save the planet” by The Guardian. ..... Read more
National Energy Guarantee
Submission from the AEF, 6 July 2018
Government policies, largely involving renewable subsidies, have caused Australian electricity costs and prices to escalate and to become among the highest in the world. The NEG shifts the basis of the deleterious subsidy regime to become an emissions intensity scheme or carbon tax.
Though ostensibly responsive to the Paris Agreement, the NEG is actually an industry policy proposal designed further to shift Australia to an “inevitable transition to a clean energy future”.
On the basis of harmful and cripplingly expensive subsidies, renewables have much increased their market share. But their on-going need for subsidies, as well as undermining the industry as a whole and increasing prices, indicates an on-going lack of commercial competitiveness.
The NEG’s claim to bring about policy certainty is not credible:
The Paris Agreement is dysfunctional, applies to at best 20 per cent of global emissions and will inevitably collapse.
The political forces within Australia have vastly different aspirations for renewable energy and coal.
The NEG will not promote reliability since the absence of this is a consequence of the many interventions it seeks to pursue by alternative means. In attempting to proceed along this well-trodden path many billions of dollars will be wasted and prices to households and businesses will remain cripplingly high.
The only sensible policy approach is for the government to unwind all subsidies and to call for tenders for new despatchable electricity generation on the basis of long term contracts.
All these issues aside the NEG is seriously remiss, even within its own framework because it:
Does not reduce emissions at least cost.
Discriminates in favour of some electricity customers and suppliers in favour of others
Wind forces up electricity prices in direct and indirect ways
Catallaxy Files, 2 July 2018
Different generator types earn different average prices in electricity markets. Australia’s National Electricity Market can see prices at anywhere between $14,200 per MWh to -$1,000 per MWh in response to different demand and supply situations. The price variability provides incentives for suppliers to stand ready to take advantage of high price situations, thereby also evening out the actual price.
The average price is now $80 per MWh, double the level that prevailed prior to the regulatory measures that favour wind forced major coal stations to close.
Hydro provides the ideal supply source to supply the peaks since water supply limits its availability to run but it can switch on and off quickly. This makes it an ideal balance to other fuels both for peak operations and to take advantage of sudden price surges caused by unanticipated demand increases or plant breakdown. The Snowy system runs, and was always intended to run, when demand and hence the price is high. It produces on average about 4500 GWh of electricity a year, 13 per cent of its theoretical capacity of 4100 MW.
Wind and solar are the opposite of hydro and can only run when the weather conditions are appropriate. Being non-dispatchable and dependent upon the weather, unlike coal, hydro and gas, they cannot take advantage of high prices to be ramped up to take advantage of high price periods in the wholesale electricity market. ..... Read more
Domestic gas shortage averted – not even nearly beneficial
Catallaxy Files, 23 June 2018
The Australian Energy Market Operator (AEMO) recently produced forecasts that gas availability would not be a constraint on electricity supply over the coming years, notwithstanding the tremendous increase in Liquefied Natural Gas (LNG) exports. AEMO projects the following picture.
The expanded LNG demand is supplied by the export oriented west coast gas facilities (which produce about half of the nation’s gas) and by the, mainly Queensland, unconventional gas resulting from fracking. It is this Queensland gas that has been the subject of controversy as the availability of terminals to allow its export has caused the domestic gas price to rise from a traditional $3-4 per petajoule to over $12 before settling at its present level of around $9 per petajoule.
Particular concern was the supply of gas for electricity generation (GPG in the above chart). Gas provides about 10 per cent of electricity (wind, solar, rooftop about the same; hydro 7 per cent). Last year’s high prices led to government jawboning and threats to the east coast miners that they would be forced to divert some supplies from exports, unless they did so “voluntarily” ..... Read more
NEG: Standing Fast on a Sinking Ship
Quadrant Online, 18 June 2018
With the National Energy Guarantee (NEG), Australia is locking itself into more and more intensive greenhouse gas emission restraints, when the Paris Convention that is the supposed framework for such action is falling apart.
Of the nations which signed on to the Paris Convention, only the developed countries have any commitments to take emission restraining measures, at least for the next 12 years. Led by China, at 30% of emissions, the developing countries, including India, the Middle East oil producers and the former USSR, account for some two-thirds of emissions. Those signing on to restraints account for only 30%. ..... Read more
Here are the policy commitments:
Energy policy, price escalation and the destruction industry competitiveness
Catallaxy Files, 8 June 2018
For some in Australia, the renewable rich UK electricity market is a beacon.
Wind produced 15 per cent of the UK’s electricity in 2017 and was running at 29 per cent earlier this year bringing Emma Pinchbeck, executive director of RenewableUK to opine, “The move to a smart, renewables-led energy system is well underway.” Greenpeace UK’s energy campaigner, Nina Schrank, added, “The plunging price of renewables is allowing low carbon energy to replace coal and gas”.
The green soothsayers spake too fast! Calm weather in the nine days to June 7 brought wind’s share down to around 4 per cent and forecasts are for such conditions to persist for another fortnight.
In a prequel to developments planned in Australia, subsidies to wind in the UK have led coal to virtually disappear. Years of destructive regulatory measures in the UK have transformed what was, in 1990, the world’s first genuine competitive national electricity market into a high cost system. Ministers, as is their wont, are panicking, and planning to subsidise a new nuclear power station to paper over the giant fissure their policies have created.
As in Australia, there was in the UK a near unanimity among the political classes inhabiting the swamp that wind and solar are the waves of the future. Renewable subsidy was piled on renewable subsidy and coal, the lowest source of supply and originally the backbone of UK generation, is virtually defunct.
In Australia the interventions in the market in favour of wind and solar created a doubling of the wholesale price once the measures started to bite in 2015. A tiny reduction in retail prices announced by Origin this week led Minister Frydenberg to declare that, “We are through the worst of it, we have turned the corner when it comes to energy prices. I’m very confident that my colleagues and indeed the states and the territories see the National Energy Guarantee (NEG) as being in the national interest”. ..... Read more
Superannuation funds’ “ethical” investment behaviour
Catallaxy Files, 30 May 2018
The debate ignited by the Productivity Commission over the effectiveness of superannuation funds as pension funds contains some enigmatic facets. One is that the funds themselves, especially the trade union dominated “Industry Funds”, tend to make their investment choices overwhelmingly at arms-length on the advice of professionals.
Many funds use the same advisers hence might be expected to have a similar portfolio. Moreover, in that respect, the work of the trustees is confined to selecting the optimally priced advisers. This may well be a good thing and might have implications regarding the proposal by the PC to have an expert selected list of 10 “best in show” funds as well as the alternative proposal by Peter Costello to have a national safety net government fund.
Funds seek to differentiate their competitive offerings in a number of ways. Investment funds, other than those adopting a highly conservative risk-averse approach, aim to beat the average value gain of the market, which is why they hire expert consultants. Some seek to focus on particular areas – technology, mining, infrastructure and so on. Others seek to exclude particular firms or types of firms on social grounds.
Conventional theory going back to H. M. Markowitz. (1952. The Journal of Finance, Portfolio Selection) is that the goal is risk reduction, which is achieved by diversification, and that departures from this by denying participation in any particular sector is likely to reduce returns. ..... Read more
Liddell is just part of a bigger battle
The Spectator Australia, 22 May 2018
Like a border skirmish that develops into a global conflagration, John Howard’s policy to require “two per cent additional energy” be met with renewables has escalated into a measure destroying the electricity market. Back in 1998, the idea sounded good: give renewables a leg-up while they march to their inevitable destination involving cost-competitively displacing fossil fuels in electricity supply.
In the interim, an immediate bonus would be that the subsidised renewables, being virtually all sunk and no variable cost, would automatically bid into electricity supply taking whatever price they could get. This would, so all the modelling demonstrated, bring lower market prices from the get-go.
There was a shadow of guilt by those who recognised that a subsidised product, in depressing the price of coal-generated electricity with its huge fixed sunk costs would be partially expropriating those investments. Moreover, in having “must-run” characteristics the renewables’ intermittent nature imposed unanticipated stop-start costs on the dinosaurs they were to replace.
But few gave much thought to these considerations – after all, it was said, the investments themselves were made many years ago and were overdue for the scrap heap. .....Read more
Long on Spending, Short on Discipline
Quadrant Online, 12 May 2018
There is no evidence whatsoever that increases in income redistribution over the past 15 years have brought any improvement in national happiness, no matter by whichever yardstick you might care to measure it. Yet from Treasurer Scott Morrison, more of the same
Governments normally sugar-coat budgets, packaging a combination of give-aways and, increasingly, cross subsidies, with boasts of how much of our money they are returning to us. Fifteen years ago, Bill Shorten and Malcolm Turnbull sparred over whether the top income tax rate should be 30% (Shorten) or 35% (Turnbull). Neither, of course, had any resolve to confront the lower level of spending that such reduced funding would entail. Neither now seriously proposes a maximum less than 46%.
The key budget issue is spending. In terms of the Commonwealth, this has been a gradual, if interrupted, upward trajectory since the late 1960s. The government share was pushed along strongly in the ALP administrations, followed by the Coalition pegging back spending somewhat, but never totally. Spending commitments are made and undoing them is extraordinarily difficult. Politicians recoil from taking back funding from those who receive it and have come to consider it as no less than their right and due. The prospect they will change their votes looms large. As a result the Commonwealth spending share of GDP has risen from 18% in the early 1970s to today’s 25%, give or take a whisker of a percentage point. ..... Read more
Turnbull’s chosen energy supremo says wind is cheaper than coal
Catallaxy Files, 5 May 2018
On Thursday, at the Energy Users Conference, the government’s chosen head of the chive quango running the electricity supply industry, Kerry Schott, remarked that coal plants could no longer compete. According to The Australian (her speech has not been made public) she said “you are unlikely to see a new coal-fired generation plant unless there is a change in technology and a decline in the price of coal”.
Had she simply wandered off her politics-free advisory role and opined that, given the level of agitation against coal, a new plant is unlikely, her remarks would have been unexceptional. But her clear inference is that coal is now behind exotic renewables in the price pecking order.
This shows an unawareness of the 1000 plus generators under construction around the world, including in Japan where coal’s role has been elevated to supply 30 per cent of electricity by 2030, with 36 new plants, compared to 10 per cent previously envisaged. Nor is she aware of different generation costs, including that of the thorough analysis commissioned by the Minerals Council which showed new coal plant, even with costs to reduce emission levels (though not the elusive carbon capture and storage technology), could be built in Australia to be profitable at $40 per MWh
If renewable plant could be built to provide energy at such a price we would now still be seeing electricity at the $40 per MWh price we saw in 2015 before the renewable bite brought a doubling of prices. Renewables, as well as getting the $80 per MWh market price also get the Renewable Energy Target (RET) subsidy of $85. There are alleged renewable contracts at some $60 but in all cases the subsidy would be added to this. ..... Read more
Wage regulations: yet another measure undermining living standards
Catallaxy Files, 23 April 2018
See saw Marjorie door
Johnny shall have a new master
He will earn but a penny a day
because he can’t work any faster
The unions have found a cause in Barry’s– a brother and sister run café in Melbourne’s Northcote. United Voice got a big enough crowd to fill a TV screen to protest against “wage theft”.
The café was paying casual staff the (lower) permanent staff rate but giving them free coffees and meals. The ABC, which as a taxpayer financed supplier can readily afford to pay the wage rates designated by some isolated umpire, was offering great publicity to the union campaign.
Quite reasonably, one of the owners said of the employees, “I presumed that when they accepted the job, they were happy with what they were getting.” Such a statement would be obvious in any other transaction – we are rightly outraged when the ACCC declares that petrol cannot be discounted because the discounter may hurt their competitors – but fortunately such distortions are rare in transactions involving goods and services. Not so with wages, and the restoration of the union control with a Shorten ascendency would offer the certainty of additional rigidities and cost escalations being ..... Read more
Emissions and the meeting of energy ministers
Catallaxy Files, 19 April 2018
Ben Potter, who as a useful idiot, was leaked a copy of the National Energy Guarantee (NEG) report by the Victorian Government, reports today that the states are likely to sign off on the NEG at their meeting tomorrow. Potter is excoriated by Terry McCrann in today’s Herald Sun for his pandering to green energy myths.
NEG has twin features of reducing greenhouse gas emissions from the energy sector together with a measure that ensures wind supply has a firming contract to compensate for its inherent unreliability.
Former Senator Ron Boswell entered the fray with a piece in today’s Australian calling for Liddell to be replaced saying,
“Some have likened the option to socialism. Rubbish. The energy market was socialised by intervention a long time ago. A $45bn subsidy and guaranteed market share for renewables is not socialism? Would the car market be a real market if the government said 23 per cent of cars sold had to be a Tesla and that Tesla would receive a subsidy of $30,000 for every car sold?” ..... Read more
Energy Battlegrounds and Furphies
Catallaxy Files, 13 April 2018
I have this piece in this morning’s Australian which addresses the direction of energy and climate policy in light of Josh Frydenberg’s Press Club address. Aside from demonstrating how the renewable program has wrecked the electricity supply industry and brought a doubling of prices, it has two main themes.
First, it demonstrates that government statements bend the truth in saying that the National Energy Guarantee (NEG) will be neutral between energy sources.
The NEG will be set to achieve aspirations for a level of greenhouse gas emissions from the electricity sector in line with the government’s Paris commitments on greenhouse gas emissions and will oblige suppliers to adjust their energy sources accordingly. It is, in short, a mechanisms under which suppliers contract more renewable energy than they would without the NEG and less from fossil fuel generators. This is accomplished by, in effect, the fossil fuel generators paying a price penalty and the renewables getting a price bonus.
Secondly, there’s the Liddell closure issue. Supply security and price is uppermost in the battleground over this and has brought calls for some Coalition MPs for direct investment in new coal fired generators. The outgoing head of the electricity industry lobby group, Matthew Warren thinks the planned Liddell closure would not be a problem but politicians and regulators are not so confident. .....Read more
Australians suffer as big emitters get a greenhouse gas free pass
The Australian, 13 April 2018
Environment and Energy Minister Josh Frydenberg’s tour de force at the National Press Club on Wednesday and his opinion piece on this page yesterday show a man on top of his brief and using it to smite the ALP and the Greens as well as those on his own side promoting direct investment to counter the continued damage being done by renewable energy subsidies.
Renewable subsidies have caused a doubling of wholesale prices by forcing the premature closure of coal generators. Requiring electricity retailers to buy wind and solar energy, soon to be 23 per cent of supply on the way to 40 per cent, gives them a subsidy of $80 per megawatt hour on top of the market price of $85/MWh. That market price was $40/MWh before renewables forced the closure of key power stations such as Victoria’s Hazelwood and the Northern in South Australia.
The minister cited data showing that renewable subsidies were costing electricity consumers $60 a year but, on top of that, by raising all wholesale prices, they had increased the burden by another $300 a year. And the burden on businesses is far greater since firms’ wholesale component of electricity costs is much higher than that of households.
Frydenberg’s message is that we must advance cautiously towards a renewable energy future, the certainty of which he endorses on grounds of increased cost competitiveness of renewables and public and diplomatic pressures to abandon coal. ..... Read more
Trump's breakthough on trade rules
Catallaxy Files, 11 April 2018
Though under pressure from the Mueller investigation seemingly trying to establish a link between Russian influence on Trump and the pornstar Stormy Daniels who claims a one night stand with Donald a decade ago, Trump seems to have kicked yet another goal.
Following Trump’s pressure on China and others to bring about greater “fairness” in international trade rules, China has blinked with promises to reduce tariffs and open the economy to greater investment. The Australian’s Cameron Stewart, a critic of Trump, gets the message. Predictably, John Kehoe, the AFR’s man in Washington, called upon his fellow visceral anti-Trumpers to label President Xi’s the promises a nothing burger and empty promises. The AFR is fortunate in having, in Jennifer Hewett, a more balanced writer doing the op eds on the issue.
Another who misses out on the developments is Julie Bishop. Taking a break from attending sporting occasions with her beau, Australia’s Foreign Minister is giving a speech today at La Trobe University, in which ‘Ms Bishop will again denounce the Trump administration’s move toward a “full-scale trade war” with China while laying out a “clear-eyed” map of challenges under the federal government’s foreign policy white paper.’ Bishop herself is little more than a mouthpiece but her words are a dreadful commentary on those formulating Australian foreign and trade policy. ..... Read more
Energy policy takes center stage
Catallaxy files, 10 April 2018
The action is getting hotter on the energy front. Having been in a small minority for years, readers and writers on catallaxy are now finding themselves closer to the mainstream on the policy on energy/climate.
To recap, the recent initial incendiaries were thrown by backbencher Craig Kelly in forming the Monash Forum and calling for the abandonment of the renewable energy subsidy policy which is destroying the competitive fibre of the economy. Unnerved by the whole process Mr Turnbull then moved once again to gently suggest to AGL that it might defer the next planned power station closure (Liddell in 2022).
I covered the developments here and Judith covered them here in a critical article about the market regulator Audrey Zibelman that brought Ms Zibelman to castigate the AFR for alleged misrepresentation (not that this caused the AFR to pause in its rooting for renewables and claiming AEMO as a cohort).
AGL rejected Mr Turnbull’s legendary persuasiveness. It now claims precedence over the government as the nation’s social arbiter, saying the closure must go ahead since Australia must reduce its greenhouse gas emissions. Some part of this is a rationalisation for the huge profits AGL earns from closing down capacity and boosting prices – the firm earns 80 per cent of its profits from the coal that it demonises. ..... Read more
Can the backbench energy revolt steer us back low cost electricity?
Catallaxy Files, 4 April 2018
It all came so suddenly.
Over the Easter break a ginger group of Coalition backbenchers, the Monash Forum, was announced. Chaired by Craig Kelly, one of the few MPs who has really studied the economic disaster that greenhouse policies are causing, it counts at least 20 MPs as members including Tony Abbott, George Christensen, Eric Abetz and Kevin Andrews.
The forum’s manifesto states opposition to all subsidies and argues that no private company will now invest in coal given the risk that government policies have imposed. It proposes a new government owned 2000 MW Victorian brown coal power station (about the size of Loy Yang A).
If nothing else, at one stroke the Forum has changed the agenda. The PM has joined Energy Minister Frydenberg in calling for a neutral technology policy which he says the National Energy Guarantee (NEG) provides. Maybe it does if you forget about
the on-going wind/solar subsidies that give small scale roof top facilities a subsidy of $40 per MWh (the full commercial cost of coal in those far off days of 2015) and wind farms $85 per MWh; plus in both cases state government support and direct support from the budget – in all over $5 billion a year.
the $4 billion plus that is to be spent by the Commonwealth in Snowy2
increased coal royalties especially in Victoria
a gaggle of groups financed by governments who decry fossil fuel power as archaic and maintain- as they have for the past 30 years – that renewable power will in any event soon be cheaper. ..... Read more
Why some power bills are poles apart
Alan Moran, Herald Sun, 30 March 2018
Electricity bills have doubled over the past three or four years.
The main reasons are twofold.
First, state and federal governments have required retailers to source increasing shares of the electricity supply from low reliability wind and solar, which receive subsidies from consumers hidden within their bills.
These costs to consumers are amplified by the subsidised electricity forcing the closure of low cost and dependable power stations like Hazelwood and the South Australian Northern Power Station. As the electricity regulator confirmed yesterday, the forced closure of these power stations reduced competition and brought a sharp rise in wholesale prices.
The second cause for the price increases has been increased charges for network use - the poles and wires, which comprises the largest component of household electricity bills.
Victorian and South Australian consumers avoided much of these excessive network costs.
That’s because, as shown in a recent report by the ALP tax funded “think tank”, the Grattan Institute, excessive network price increases were largely confined to government owned networks.
In fact, the average network cost in the privately owned Victoria system is one third less than that in NSW. ..... Read more
Beware of propaganda organs extolling new electricity power
Catallaxy Files, 29 March 2018
While the ACCC’s Rod Sims may have had a Damascene conversion when he noted that he would like to get the price of electricity down half a dozen years after the reason for the price surge became obvious (hint look at the forced growth of subsidised renewables). What he will do about it, short of reinforcing the cries on this blog to abandon regulation, is anybody’s guess. (Post script, the Australian Energy Regulator which is housed within the ACCC, having been in November 2016 asked to report on price rises in the wake of the Hazelwood closure, reported today that ……. the price rises were caused by the reduced competition following the Hazelwood closure!).
One direction where the regulators need not look for advice is the well resourced agitprop on-line daily, Reneweconomy. The publication never skips a beat in telling us how cheap batteries, wind and solar are (it seems to have a down on that other magic pudding, Snowy2, probably because they have not come to the fund-fest).
Remedial Ed for Renewables Fans
Quadrant Online, 29 March 2018
The fall from grace of the Australian electricity industry has been breathtaking. At the turn of the century, Australia had perhaps the world’s lowest-cost, most competitive electricity industry. This rested on cheap, low-sulphur coal, which was responsible for 85% of generation, ample supplies of gas, and modest but useful hydro-electricity generation capacity.
Reform in the 1990s harnessed these assets to create a low cost, highly reliable system. The reforms included:
a national electricity system that required competitive provision of generation and retailing through a spot market and power contracts,
privatisation of most of the industry, and
disciplined pricing of the monopoly networks.
Seventeen years later the low-cost market-based system had collapsed. Electricity price increases, having risen somewhat less than the Consumer Price Index, started to surge after 2008 ..... Read more
Tariffs and trade: not that simple
The Spectator Australia, 13 March 2018
The attention attracted by US import duties is important on many dimensions.
Alan Kohler, in the process of suggesting that Trump might be deliberately trying to start a trade war, pointed out that the policy communication came at a press conference, following talks with steel executives. Right at the end of the press conference, the President unexpectedly announced, “Twenty-five per cent for steel. It will be 10 per cent for aluminium. And it will be for a long period of time.”
The action was not taken on anti-dumping grounds but under national security provisions, which are anchored on ‘domestic production needed for projected national defense requirement’ determined by a review by the Secretary of Commerce in conjunction with the Secretary of Defense. Previous US actions under this provision have numbered only 14 and have focussed on parts of industries with clear defence implications, like Integrated Circuit Ceramic Packaging (1992) and Antifriction Bearings (1988). The provision does not require that exporters have been cheating.
Although, ostensibly these were neither anti-dumping measures nor an attempt to save specific jobs, these considerations have been prominent in the consequent rhetoric from the President ..... Read more
The Snowy scam, the Donald and death of Australian industry
The Spectator Australia, 6 March 2108
It seemed too good to be true: Snowy being bought by the Commonwealth from state governments in what appeared as a money creation process – the Commonwealth had no apparent increase in debt or other costs, while Victoria and New South Wales got $6 billion for their Snowy shares. The reason behind the acquisition was to simplify the political process whereby the Snowy 2.0 pump storage project is pursued.
The credibility of innovative balance sheet practices aside, what we also now have is a major electricity generator owned by the government operating as a rival to other businesses in a market which is highly competitive. The Minister for Energy is responsible for the government’s energy policy and is also the shareholding minister of the major entity.
How does that role of maximising the value of one entity gel with the ministerial role of ensuring the lowest possible sustainable price for electricity for the nation? Some conflicts of interest issues in electricity supply have arisen in the past with union pressures requiring over-staffed government owned electricity networks and the allegations of government owned Queensland generation entities with market power ratchetting up prices to the benefit of their shareholder (and at the cost of the consumer) ..... Read more
Hysterical claims drown out the facts on water
Herald Sun, 2 March 2018
The South Australian election has temporarily benched the political struggle over water use in the Murray-Darling.
That region, responsible for over 35 per cent of Australia’s agricultural output, has become a political football with farmers facing pressure from greens and green academics.
In 1995, around 11,000 of the system’s 32,000 gigalitres were allocated to farmers (about 2,500 gigalitres is for drinking water) when state governments agreed to issue no more irrigation licences.
Green activists then orchestrated hysterical claims focussing on the state of the river. “Our continent is falling apart”, said the catastropharian Tim Flannery-led “Wentworth Group of concerned scientists”. Other bloodcurdling assertions claimed, “salt is destroying the rivers and land like a cancer”, and that animals and plants were facing extinction. .... Read more
Housing regulations: a blow to the poor and to everybody’s living standards
Catallaxy Files, 1 March 2018
The information that the price of new housing land in Melbourne jumped 36 per cent last year might be great news for existing house owners who can expect a further leap in value of their main asset but it is a disaster for those who are renters or seeking to purchase a home.
The average Melbourne house price at the end of 2017 was $817,000 with Sydney at $1,117,000. Across Australia, house prices adjusted for general inflation increased 34 per cent over the past five years, notwithstanding a slight fall in prices last month as restraints on foreign buyers started to bite. And although new stock of housing is only a small proportion of the total housing stock, its costs are the main driver for all housing prices.
The average Melbourne lot price of $329,500 is rapidly catching up with the $480,000 cost of a new lot in Sydney. This is in contrast to the costs of new housing blocks in those US cities which have a permissive approach to new development on their outskirts. Thus, in Australian dollars, fully developed lots in Houston and Atlanta sell for $70,000 – $100,000 and average house prices in those two cities are $300,000 and $350,000 respectively. ..... Read more
Deregulate energy market and go back to coal
The Australian, 22 February 2018
The catastrophic outcome of government energy market interventions is palpably clear. As the latest new regulatory body, the Energy Security Board, diplomatically puts it: “Fifteen years of climate policy instability ... (have) left our energy system vulnerable to escalating prices while being both less reliable and secure.”
Australia has seen electricity prices double since 2015 and the once reliable supply is now suspect. From enjoying the world’s lowest cost electricity a decade ago, Australia now has among the most expensive.
The main cause has been subsidies and regulatory favours to renewable energy — chiefly wind — that have forced the closure of reliable coal-fired generators, particularly Northern in South Australia and Hazelwood in Victoria. Without these subsidies, costing about $5 billion a year, there would be no wind or solar. Not only are customers and taxpayers slugged with the subsidy costs but the outcome also has been to raise prices and reduce reliability. ..... Read more
Courts refuse to protect Australian private property rights
Catallaxy Files, 19 February 2018
In a nutshell, Peter Spencer was a NSW farmer whose land was devalued from a worth of $9 million to $2 million by the regulatory actions of the NSW government which progressively reduced what he might do on the land. In the end, the NSW government offered to buy his land for the $2 million – its devalued worth stemming from its regulatory actions – but Mr Spencer rejected this. The government’s actions were unquestionably “takings” of Mr Spencer’s property rights. But, according to the original judgement, he was due no compensation and the offer by the NSW government was therefore generous! ..... Read more
The Future of Energy
Adelaide, 6 February 2018
We have seen the wholesale price for electricity rise from under $40 per MWh with very little trend up until 2012, and was still $40 in 2015, to its present level of around $90 per MWh
Wind has risen from nothing in the early part of the century to a share of over 10 per cent today. All of that wind is dependent on subsidies currently around $85 per MWh. In addition, there is the roof top solar (subsidised at $40 per MWh plus advantageous export tariffs). Rooftop solar is logged as a reduction in demand.
Due to its abundant coal supplies, Australia had perhaps the cheapest electricity in the world ten years ago. As a result of the renewable subsidies it is now among the most expensive. Aside from increased direct costs to households, this has immense adverse consequences for the competitiveness of Australian industries and hence the nation’s living standards.
We can reverse direction and perhaps the demonstration effect of the US will provide the catalyst. Read More
Politicians have stacked the deck against cheap coal
Herald Sun, 2 February 2018
Nobody should believe what any Australian government minister tells them about energy.
Influencing politicians are self-interested lobbyists, and voters who have fallen for green falsehoods that the coal fired power station that supply four fifths of our electricity are dirty and no longer needed. Many politicians have themselves drunk deeply from that Kool Aid.
Their policies have led the nation into an abyss of high electricity and gas prices, with uncertain reliability.
A few years ago Australia had the world’s cheapest electricity and low cost gas. But Government programs stacked the deck against cheap coal-generated electricity and prevented the search for and development of new gas supplies.
We have just gone through two weeks of a conventional summer and, while the electricity supply had only minor outages, prices have doubled. That’s what happens when supply is reduced.
The current crisis of high electricity prices and supply shortages stems from the closures of Hazelwood Power Station in Victoria and the Northern Power Station in South Australia .... Read more
Excessive house prices: land use regulation and not immigration is the solution
Catallaxy Files, 28 January 2018
Tony Abbott must surely be the only possible route by which Australia can emulate the benefits that the US is now reaping from the election of President Trump.
While being a more refined politician than The Donald but falling short of many of our hopes when in office, Abbott shares Trump’s goals of small government, and like him contests Political Correctness, and is pro-liberty and democracy. Abbott’s unadvertised selfless, personal charity work among Aboriginal communities marks him as unique, possibly differentiating himself from any other politician in the world.
In his agenda, Abbott identifies several policies that most of us would welcome, at least as a start. They include:
Stop all new and frivolous spending to fix the budget
End further subsidies of intermittent and unreliable energy
Keep Jihadis off the streets. Stop hate-preachers
End funding for bully bureaucracies and welcome straight talking
Scaling back immigration numbers to include some genuine political refugees among a general programme largely limited to those that offer a net benefit is to be welcomed. But not because this would take the pressure off house prices. Pressure on house prices is not derived from immigrant numbers – and certainly not from the immigrants from basket case countries that are causing social problems. ..... Read more
US economy surging in spite of some economists’ despondency
Catallaxy Files, 28 January 2018
Although the economic cycle points to a downturn in the US, growth and especially the stock market is surging. A newborn confidence is evident and the tax reforms are augmenting investment and hence economic health. That growth in investment was already evident prior to the passage of the tax reforms ....Read more
Government induced power crisis averted, for now
Catallaxy Files, 21 January 2018
At 12 PM on 19 January the electricity market manager, AEMO, to its own and everybody’s great relief announced “VIC AND SA ENERGY SUPPLY REMAINS SECURE”.
It had been a knife edged couple of days with hot weather bringing high electricity demand (even though much of Australian industry remained on vacation). As often occurs on hot days, wind velocity was low and this, the fabled modern source of electricity, was feeding in less than half its capacity. On the spot market, prices reached $14,000, once, as often happens during periods of excess strain on generators, one of the Loy Yang B generating units had to close down. Here is a graphic (right) of the prices .... Read more
Renewable Energy: the mad saga continues
Catallaxy Files, 17 January 2018
Bloomberg New Energy Finance (BNEF) lobbies hard for renewable subsidies and estimates global “clean energy” investment at $333 billion. This excludes hydro-electricity other than Politically Correct “small hydro”. Some 85 per cent of expenditure is in wind or solar with the rest including biomass, electric vehicles and waste-to-energy.
In a press release of 16 January, BNEF includes this graphic (right) of Australian renewable investment trends ..... Read more
Snowy 2: the policy of despair
Catallaxy Files, 10 January 2018
Snowy Mark 2 as a pump storage is designed to use cheap off peak power to pump water uphill to a reservoir so that it can be used at a later stage when electricity prices are high. It does not create any new energy – in fact it requires some 15 per cent of the available energy to be used up in the pumping process.
Starting out with a $1.5-2 billion estimated cost when announced by Mr Turnbull in March of last year, a heavily redacted feasibility study has now put the cost at $3.8 to $4.5 billion but this is likely to increase when a further iteration is published in April and excludes some considerable upgrade costs to the transmission system. Snowy would be hoping consumers would fund these though electricity rules ostensibly require the generation facility to cover such costs. Transmission costs are likely to be at least $3 billion and Judith Sloan’s speculative $10 billion cost may well prove conservative.
Unperturbed and donning his political salesman’s hat, Minister Josh Frydenberg endorsed the project but he would do that wouldn’t he? He claims to favour Snowy 2 partly because, like all those wind farms, it creates “up to 5,000 jobs” presumably in construction. I bet the 5000 jobs could be multiplied many times over if the crews did not use modern machinery! The Minister suggested the alternative fast start generation would entail $180 billion in Tesla power walls.
Snowy’s CEO says “As for claims that the economics don’t stack up — I refute them categorically. Snowy 2.0 can be funded off our balance sheet, while delivering a healthy internal rate of return of 8 per cent.”
Well, he would need to get that through his shareholders. It would be easy to do this with the spendthrift Commonwealth which owns 13 per cent but the NSW (58 per cent) and Victorian (29 per cent) are less likely to agree. If the Commonwealth wished to proceed it would need ..... Read more
Inventing benefits from regulations reducing farmers’ use of water
Catallaxy Files, 10 January 2018
An article by the excellent rural reporter Sue Neales, examined the sales and purchases of irrigation water rights for agriculture in the Murray-Darling Basin (agriculture uses about 90 per cent of water collected in dams for industry and personal consumption). The focus of the article was on the overseas purchasers of the water rights, the prices of which have risen strongly – high security rights now trade at $3000 per megalitre, more than tenfold the price 15 years ago.
Reasons for this increase include enhanced agricultural demand from overseas, but the most significant cause has been the curtailment of water supply for agricultural use and its diversion to a panoply of environmental uses. The policies (and John Howard started the ball rolling) are taking 2,750 gigalitres per annum from the region (out of 7,000 gigalitres “high security” and 10,000 gigalitres in total of water available) from productive agriculture to uses designated as “environmental”.
These diversions from productive use started with claims about salinity, which were driven by the ACF and WWF and supported by their spokespeople in the government owned media showing pictures of salt-infused farmland. The facts are that only 0.4 per cent of farmland showed any signs of salinity and almost all of this was due to natural salt outcrops.
The initial production-suppressing measures were built upon during the millennial drought ..... Read more
Frydenberg: Saviour or Suicidal?
Quadrant Online, 5 January 2018
The Member for Kooyong, mooted as a prime minister-to-be, earnestly believes he is cushioning the cost impositions of the disastrous renewables program. His timidity, and an apparent wish to cruel rival Tony Abbott's return, may damage his prospects while definitely harming the nation.
In the slow news period that is the first few days of the year, The Australian broke a story about dissension in the Coalition ranks regarding the “in principle” decision, announced by Energy Minister Josh Frydenberg, to allow Australian firms to acquit their carbon dioxide emission obligations by buying overseas credits.
Mr Frydenberg was at pains to say this merely advanced a decision to “consider” these measures taken when Tony Abbott was at the helm. And when Mr Abbott and others denounced the option of overseas emissions purchases, which will, of course, be either totally bogus or downright fraudulent, Minister Frydenberg made a smart-alec comment: “It is worth noting that Mr Abbott’s position on international permits is closer to the Greens than that of Australia’s big employers.”
hat disingenuous remark was made in spite of the minister being fully aware that Abbott’s position now – and then – was diametrically opposite to that of the Greens. And, to the degree that business leaders favour the policy, this reflects their interests in reducing the costs of the carbon impost that the present Prime Minister and the opposition leader require ..... Read more
Trump making headway
Catallaxy Files, 29 December 2018
Just in case there is any doubt about the media and Trump, here is a graphic from a Pew Foundation study that shows media attitudes to Trump and the previous three Presidents in the first 60 days of their first terms.
Trump has faced unprecedented hostility from a media that overwhelmingly shares a green left PC frame of reference.
Drudge however shows that Trump ended the year with 46 per cent approval, exactly the same as Obama in spite of the latter benefiting from representing a media with the same goals and attitudes.
The US tax act and Trump’s rejection of the Paris Agreement has brought widespread scorn in the media and among the political class. But it is bringing solid gains, like that of the Pratt Group pledging $2 billion of new investment in paper facilities in the US as a result of the highly competitive tax and energy environment Trump has created and we even see the state of Pennsylvania seeking to attract Australian energy intensive businesses with its low energy costs stemming from fracking friendly policies.
Will this force a re-think in Australia? Doubtful in the case of Turnbull and his supporters who prefer mediocrity, placating green troglodytes and the approval of the international community .... Read article on Catallaxy Files
Where to start with spending cuts
Catallaxy Files, 23 December 2017
Australia’s policy dice is loaded in favour of more spending and regulation. Major expansions in recent years have been on education, people with disabilities, the national broadband network (NBN) and renewable energy.
Even those rare politicians who are genuinely concerned about excessive spending are reluctant to oppose those lobbying for such measures and the votes they promise. Nonetheless an injection of personal responsibility would be useful even if limited to the most egregious and misleading programs politicians have introduced – the NBN and solar rooves being cases in point – just as business leaders pay a personal price for deceit of shareholders.
I have a piece in the Herald Sun today (“How to cut $26 billion in government spending without even trying”) where I point to the progress towards a better budget balance having been overwhelmingly driven by revenue increases; the agreed savings in a $460 billion a year budget comprise a mere “rounding error” of 0.02 per cent .....Read more
How to Save $26BN in Government Spending Without Trying
Herald Sun, 23 December 2017
This year, the Commonwealth’s mid-year budget review shows some progress towards reducing the nation’s $30 billion deficit.
That was thanks to increased taxation revenue – mostly due to exports from mining that, ironically, have had to defeat the headwinds of draconian regulatory impediments.
Lower government spending has made a trivial contribution. Savings agreed by the Senate amount to about $100 million a year (the Senate rejected another $500 million a year proposed savings). The agreed savings in a $460 billion a year budget comprise a mere “rounding error” of 0.02 per cent.
And yet we see astronomical government waste, which offers many avenues for expenditure reductions.
We could save $1.4 billion by giving the ABC and SBS to their controlling worker-collectives, leaving them, like other media, to find willing payers for their services.
We could cut out all but emergency foreign aid, which rarely brings benefits other than to consultants and corrupt politicians, saving $3 billion .... Read more
AGL: impoverishing the nation to boost its bottom line
The Spectator Australia, 14 December 2017
The supporters of renewable energy continue to claim – as they have for the past 30 years – that wind/solar is or soon will be cheaper than energy from coal generators. Even so, renewable energy supporters continue to lobby for ongoing subsidies, which today provide $85 per megawatt hour on top of the spot price of $80.
Renewable energy, on the basis of forward markets, will continue to receive a subsidy of $50 per megawatt hour in the next decade. Work commissioned by the Minerals Council of Australia showed that a new coal generator in Australia would be viable at $50 per megawatt hour. This price is consistent with that behind the 1,600 new coal generator units currently planned mainly in Asia. Those new developments scotch the myths, recently reiterated by AGL CEO Andrew Vesey, that new coal would not be able to attract financing.
NAB, now under Ken Henry’s green oversight, says it won’t lend for new coal but there are plenty of other sources and anybody looking for such financing would start with the following top 20 suppliers:
AGL’s proposed power station closure would ensure continued excessive electricity prices
Catallaxy Files, 10 December 2017
Yesterday AGL confirmed its plans to close the Liddell coal powered electricity generator in 2022. It did so in the face of calls from the government – even by notorious green aficionado Malcolm Turnbull – for its life to be extended.
AGL epitomises the sort of firm that Warren Buffett invests in – that is a “business any fool can run, because someday a fool will”. It has previously been managed by a fellow fresh from running a Danish wind turbine manufacturer, Paul Anthony, who wiped out much of its value leaving it to now retired CEO Michael Fraser to rebuild value. Fraser did so largely by some astute purchases of coal generators including the planned-to-be-closed Liddell. AGL is now Australia’s largest energy supplier and on top of the 2,000 MW in Liddell it has over 6,000 MW in major fossil plant capacity (Loy Yang A, Bayswater and Torrens Island) plus other smaller fossil fuel plant and, of course, some wind generation.
Under its present management, led by American Andrew Vesey, the firm has taken the opposite tack to that adopted by his predecessor, firmly embracing the notion of wind and solar energy and lobbying for increased and longer-lived subsidies, without which that form of electricity could not be viable. Renewable policies have been responsible for Australia losing its pole position in electricity competitiveness transforming the industry into, on some measures, one of the most expensive in the world. ..... Read more
Musk magic and the Tesla torment
Catallaxy Files, 2 December 2017
Bad luck for the much hyped Tesla battery when the grand opening in South Australia yesterday coincided with storms that brought power outages in its immediate vicinity.
Designated as reliability-proofing a state that has seen the future of electricity generation more clearly than Lincoln Steffens saw how effectively the infant USSR would work , it was launched with the usual puffery of how it could power 30,000 homes for an hour in the event of a blackout. This leaves 737,267 South Australian homes without even that amount of comfort.
In December’s Climate News issued yesterday, I had this to say
The giant Elon Musk battery designed to future proof South Australia was completed on time on 1 December. The battery charges up when prices are low and feeds into the grid when they are high. The battery is also contracted by the government to provide fast-response stability services. It will allow 100 MW of power to be produced for about one hour – enough to supply five per cent of South Australia’s demand.
Euan Means estimates that to enable a grid size storage adequate to serve a renewable energy dominated UK would require 1.8 TWh at a notional cost of £48 billion with pumped storage, if such a scheme were feasible. To do it with Musk-style South Australian batteries would require 14,000 of these 129 MWh facilities at a cost of £405 billion ..... Read more
Lower Corporate Taxes and We All Benefit
Herald Sun, 24 November 2017
In Korea earlier this month, President Trump contrasted North and South Korea which in 1950 had similar levels of income per head. Today South Koreans, having embraced free markets based on low taxes and secure property rights, earn 40 times more than their northern counterparts.
The North Korean regime deliberately stifles private initiative. Others – almost all the world’s poorest countries - do so with punitive regulations and high taxes on entrepreneurial income, especially on company profits.
In response to punitive taxation, individuals and firms alike seek to minimise their taxes.
This brings deadweight losses that range from paying tax accountants and investing in low tax activities, to the measures that include shifting funds into tax havens. The leaked “Paradise Papers” reveal such avoidance activity is undertaken by businesses, sports stars and even the Queen.
Prominent among President Trump’s plans to reinvigorate the US economy is a lowering of tax rates. In particular he intends to reduce the business profit tax from its current 35 per cent to 20 per cent. Australian businesses pay 30 per cent profit tax.
Trump’s low tax policy will reduce the attraction of tax havens and has immense implications for all countries, including Australia.
In seeking a dramatic reduction in corporate income taxes, the US President shows he has learned how poorly performing economies can lift themselves up ..... Read more
Turnbull’s energy policy proposals: more steps forward than back?
The Spectator Australia, 22 November 2017
The Government has now received but not yet released a report into the energy market plans it wants to put in place.
These plans entail retaining the increased availability of the Renewable Energy Target (RET) subsidies until 2020 and then maintaining payments of those to installed plant until 2030.
Currently the subsidies, which are direct transfers from consumers, pay wind/solar $85 per MWh in addition to them receiving the spot price now at $80 per MWh (double the price prior to the Hazelwood closure).
Prior to releasing the report on which the numbers are based, Energy Minister Josh Frydenberg in an op-ed for The Australian and in press releases to other media has paraded the forecast effects of the latest of dozens of energy policy shifts that have been announced over recent years.
The estimates are made by the government’s soothsayer of choice Frontier Economics, headed by Danny Price. Frontier has made a handsome living from projecting energy prices and outcomes from different market interventions. It was paid one million dollars by the besieged South Australian government to provide advice on how the state’s ideologically-driven renewable energy policy could work. Mr Price was also the architect of the 2009 Turnbull-Xenophon emission intensity scheme where penalties on plant would increase in relation to their emissions per unit of output. ..... Read more
Post-mortem of the Australian electricity Industry
Catallaxy Files, 20 November 2017
All thinking people actually know what has gone wrong in the Australian electricity industry: a doubling of wholesale market prices, diminished reliability, investment being policy – directed into fashionable but high cost avenues – wind, solar batteries, pumped storage.
Unwilling or unable to accept this, like a car careering down the wrong side of a motorway, state and federal governments have set up inquiry after inquiry to provide insights and cheaper ways of forging the future they wish to see.
It is difficult to find market reviewers that are politically acceptable to the alliance of climate worriers and subsidy seekers. Almost all – none more so than Finkel – are either too much a part of the established renewable chorus or were elevated to influence because they would soon adopt Politically Correct views favouring renewables as a means of shifting the electricity supply away from sources that emit carbon dioxide.
Handpicking the inquiry undertakers means the same erroneous autopsy is conducted finding that:
The future is assured and it does not include fossil fuels or nuclear.
Renewable energy is already or about to become the lowest cost supply.
The ancient coal based generators are about to close anyway and nobody would invest in a new one.
Additional fixes will resolve the reliability shortcomings of intermittent supply.
Problems of high wholesale prices at present are as a result of gas being exported to foreigners rather than used locally.
Most of the cost increase is associated with inefficient network businesses increasing costs.
Other problems are associated with inadequate competition in the retail markets caused by competition driving up costs or, in the wholesale market, caused by lack of competition driving up costs. ..... Read more
Is renewable energy competitive?
Catallaxy Files, 10 November 2017
Energy Minister Josh Frydenberg is now on his way to the UN conference in Bonn to pay obeisance to a global warming fraternity strengthened by two new members (Nicaragua and Syria) to the loss of merely one (the USA). Renewable energy (other than Politically Incorrect hydro) is the UN’s posterchild.
Yesterday, two boilers from the last coal power station in South Australia were blown up. Apparently not in relation to the demolition, SA Premier Weatherill tweeted “coal is dead, long live renewables”.
And so it would appear. The industry lobby sheet RenewEconomy reports that a new proposed 700 MW wind/solar adds to the recently announced 1000 MW wind, pumped solar and battery plant that is said to be powering the Whyalla steelworks, will make South Australia 100 per cent renewable.
Elsewhere, confidence in the competitiveness of renewables has been bolstered by a Chinese firm, Goldwind, having purchased a 530 MW planned project at Stockyard Hill in Victoria for $110 million from Origin, which has agreed to buy, between 2019 and 2030, “all of the power generated by the wind farm and the associated Renewable Energy Certificates (RECs) for a ….. price of below $60/MWh.” ..... Read more
Opinion polls on green energy: a glass half full
Catallaxy Files, 31 October 2017
There is some interesting material thrown up by today’s release of the Newspoll results on climate change. One interpretation is that a majority of respondents would prefer to leave the Paris Agreement, which the Government uses as justification for green energy policies, in light of Trump having already so opted, if this “could result in lower electricity prices”.
Politicians should pay for errors
Herald Sun, 27 October 2017
Victoria’s Wonthaggi desalinisation plant will be five years old this December.
At an initial cost of $5.7 billion and an eventual cost of $19 billion, the plant will never be required. The $19 billion eventual price tag means a direct and indirect cost to the average Victorian household of $13,000. A far more productive alternative – a new dam - could have been built for only one billion dollars.
Other states also built costly, unnecessary desalinisation plants, responding to the climate alarmists’ claims that drought would be endless and too fearful of green hostility to supplement supplies by building new dams.
The money spent has been irretrievably wasted. To put it in perspective, the Wonthaggi facility’s cost represents enough funds to replace three older coal fired electricity generators thereby future- proofing Victorians against unreliability and the doubling of wholesale power prices that has taken place.
Among the merits of the desalinisation plant, according to then Premier Bracks, were 4,750 full-time
equivalent jobs during construction and a $1 billion economic boost to the state ..... Read more
Australia’s Crony Capitalism Inc.
Quadrant Online, 25 October 2017
Many of us have a nostalgia for the days, commencing with the Hawke-Keating competition reforms, when there was a phalanx of business people calling for deregulation, privatisation and smaller government. Prior to the 1980s the manufacturing groups were calling for more support against imports, including stopping “dumping” a policy approach that Australia took to global heights.
Farmers were not too bothered about import protections, which raised their costs, but certainly wanted more subsidies for fertilizers and other grants, while they also spent a great deal of energy keeping out low cost overseas produce like bananas and oranges.
The mining industry, being export-oriented, was alone in seeking smaller government and diminished regulation. But even they campaigned long and hard to maintain the tax-free status of gold mining (lost in 1988).
Among tertiary organisations, some like the Pharmacy Guild were dedicated to preventing competition. Others like the Housing Industry Association were keen to protect their small business membership from being unionised (and taxed as employees) but also were first in line for new subsidies for their customers, including low and preferred interest rates and support for “first home owners”; they were not overly concerned about regulations restricting housing land supply, largely because their members had, out of sound business practice, assembled land holdings with building approvals, holdings that would be devalued if land supply were to be deregulated ..... Read more
A Low-Wattage PM’s Useless ‘Guarantee’
Quandrant Online, 19 October 2017
The government's electricity "reforms" merely confirm the existing subsidy arrangements for renewable electricity, with consumers paying the renewable tax till 2030.
Its "reliability guarantee" adds no greater certainty but will entail a vast new inflexible bureaucracy.
The measures will not result in the forecast lower prices.
Here in this piece in Quadrant, I conclude
Josh Frydenberg must understand these deficiencies of the energy policy he is marketing. Presumably his nightmare is that unless the present situation is stabilised, the renewables share will be further boosted, and the economy ruined, by the high prices and diminished reliability this entails.
But in stabilising the renewable energy at its present and 2020 projected level we can be certain that Australia’s former comparative advantage in energy costs — the very same advantage present policies have destroyed — will not be restored and our living standards will be very much lower than they would otherwise be.
End the renewables rorts now for cheap power
The Spectator Australia, 17 October 2017
The government’s abandonment of the expanded renewable energy target that the Finkel report recommended represents a careful compromise.
The Prime Minister remains a rusted on fan of renewable energy which he considers marks the future. Malcolm Turnbull has put himself through multitudes of hoops to salvage this prospect – including the absurd plan to implement Snowy II and pump water uphill to allow it to supply more profitable time slots.
Like all renewable energy apostles, the Prime Minister is bewitched by confident forecasts that sometime in the near future advances in technology will make renewables cheaper than fossil fuels. Such forecasts have been promoted by idealists and carpetbaggers since the 1980s but the fact is that renewable energy still costs $115per MWh and, as recent work by the Minerals Council showed; a new Australian coal power station would profitably operate at under $50 per MWh. ..... Read more here or here
ACCC offers some clarity but much obfuscation in its report on electricity price rises
Catallaxy Files, 16 October 2017
The battle of the causes of Australia’s excessive electricity prices is well and truly on. Having moved from the world’s lowest cost electricity to among the highest cost in less than a decade, finally questions are being asked.
The government commissioned the ACCC to provide advice on the elements bringing about the price increases and in a selectively released “draft” Rod Sims has said about seven per cent ($100) is due to renewables. A great chunk of the increase was blamed on ‘”strategic conduct” by companies to bid or not to bid to supply the National Electricity Market and manipulate the price’. This provides a foot in the door for the competition regulator to act. But its report seriously misrepresents the issues.
The ACCC analysis of price increases and its attribution of blame is shown here. Aside from the 40 per cent due to network prices the costs increases are put as being due to generation (17 per cent), green energy (16 per cent) and retail (26 per cent) ..... Read more
The Death of Property Rights
Quadrant Online, 11 October 2017
Using sophistry, courts seek loopholes through which law is stripped of tradition and its fundamental purpose in protecting the individual's liberty to use as he sees fit that which he owns. Now, the prevailing and abhorrent philosophy rationalises seizures in the name of 'public needs'
Australian regulatory attacks on modern agriculture have vastly reduced the capacity of the farming sector to adapt to new technologies and markets and have damaged the nation’s agricultural productivity.
In the case of the Murray-Darling Basin, Australia’s only really significant irrigated agriculture province, until recently farmers used about half of the rivers’ water. Inspired by fallacious notions, including that salinization is occurring, bodies of self-appointed scientists and activists like the Wentworth Group lobbied to pressure governments into buying a quarter of the irrigation water farmers formerly used. This water was then directed to unproductive environmental uses. Governments’ susceptibility to agreeing to such unfortunate policy measures was reinforced by claims of their appointed soothsayers, notably Ross Garnaut, who maintained that climate change will make irrigation impossible in the Murray-Darling Basin.
At least in the case of water, governments actually bought the rights from farmers (though in the spirit of Communist electoral victories, those promoting the purchases have sought to foreclose opportunities for successors to unpick them) .....Read more
Labor threatens renewed land expropriation to meet greenhouse emission reductions
Catallaxy Files, 6 October 2017
Among the egregious instances of government property theft, planning regulations contain some of the greatest calumnies. And, within planning regulations, a stand out is the conspiracy of state and federal governments of allegedly different political stripe to seize rural property values without compensation as a means of meeting emission reductions of greenhouse gases.
I covered the matter in Quadrant last year.
To summarise: in order to meet the Kyoto commitments, the Howard Government under Environment Minister David Kemp pressured the ALP governments of NSW (Carr) and Queensland (Beattie) to prevent land clearing. Both Premiers readily acquiesced in the process though, at least in the case of NSW, the planning authorities had to be cajoled and threatened by Canberra.
The seizure of private property allowed a “saving” in greenhouse gas emissions of 87 million tonnes a year – about 15 per cent of the nation’s emissions and sufficient to allow Australia to claim that it had met its Kyoto commitment.
No compensation was paid to the landowners, who were estimated to have seen $ 200 billion of worth stripped from them. At one later hearing on the issue, David Kemp claimed he never intended at the time he was Minister (2008) to have the properties’ value taken without compensation but there is no record of him seeking such justice for the expropriated landowners. And as for the legal fraternity, as I said in may Quadrant article:
The courts have shamelessly allowed such transgressions to take place. In doing so, they have sheltered behind a concocted fiction of precedents. These have gradually chipped away at the notion of property rights .....Read more
BHP Billiton’s ‘green activism’ comes at a price
Herald Sun, 28 September 2017
AUSTRALIA’S mining skills have enabled BHP to become one of the world’s largest companies.
But big firms often become overly bureaucratic and their management seeks to engage in matters well beyond the daily grind of trying to maximise the wealth of shareholders.
And so it is with BHP.
BHP acknowledges that its performance over the past five years has been poor.
Although productivity has doubled in the Australian coal and iron ore mines, global profit at $6 billion is half that of five years ago and the share price is down by a third.
The firm’s focus has become environmental issues with “sustainability”, code for reducing carbon dioxide emissions, listed as its most important goal. In spite of “integrity” being listed as its second most important goal, BHP knows how to play the political game.
It was a major supporter of the Gillard carbon tax and contributed heavily to funding the ALP’s taxpayer financed think-tank, the Grattan Institute, spending for which it also got a free pass from the ALP to pursue a takeover of its iron ore rival Rio ..... Read more
Gas and electricity crises need deregulation not more interventions
Catallaxy Files, 27 September 2017
It is perhaps a little cruel to apply the epithet, “The best energy minister we have” to the likeable Josh Frydenberg, especially since he alone with Tony Abbott actually writes his own media pieces. In today’s AFR he writes about the unfolding gas crisis. While he cannot blame the Queensland government, where the ALP has followed the Coalition in permitting gas exploration, he blames the ALP under Gillard for permitting too many exports and the Andrews government for forbidding gas exploration in the increasingly energy vulnerable Victoria.
Neither of these are balanced accounts of the unfolding energy disaster.
Gillard did not stop gas exports but ever since the Whitlam government restraints were undone 30 years ago, federal governments have not stood in the way of firms pursuing sales in the markets that are most lucrative. The absence of restraints had served us well in terms of new exploration and bringing resources to the market. In blustering about the Gillard government’s non-intervention the present government is inventing a straw man, and a dangerous one since it is now reimplementing the restraints that once brought new exploration to a standstill.
..... Read more
ACCC offers no answers to government created energy crisis
Catallaxy Files, 21 September 2017
Appointed as head of the ACCC by Rudd Gillard, Rod Sims has a long association with the ALP going back to the Whitlam years. His re-appointment by the Coalition is unsurprising given the callow nature of conservatives and the fact that many have interventionist sympathies that accord with those of the leftist intelligentsia that Sims represents.
In his speech to the Press Club Sims addresses two points that have been warmly embraced by like-minded people within the media.
The first covers the gas crisis. Sims, though tiptoeing around the wanton political destruction of state government bans, notes that the firms that undertook massive capital investments could not have expected to face a shield-wall of obduracy on the part of politicians with custody over our economic welfare banning the exploration for gas. Only Queensland, where the ALP has kept Coalition openness largely in place, has a relatively open policy.
However he favours a “nudge” approach, which he says the producers have followed, whereby they support the local market as much as possible (even if this is contrary to their commercial interests). He also says, offering a big hint “I am not disclosing the detail of what is in the ACCC’s report to the Treasurer on gas supply and demand. That will be made public shortly.” In other words he will advise the Commonwealth to force firms to break overseas contracts to redress the damage that state governments and environmentalists have created in starving the nation of new gas supplies. Naturally, like all such leftists he will advise on such actions that are pregnant with implications about the reliability of the nation’s export contracts, with a heavy heart. ..... Read more
Escaping the renewable energy subsidy trap
The Spectator Australia, 18 September 2017
An endgame is now underway in the renewable energy scam that has been responsible for destroying the nation’s electricity industry as a low-cost, efficient and self-managing sector.
Though, in Churchillian terms, countering the debilitating effect of the self-imposed cancer is beyond the end of the beginning it has a long way to go before we have anything like the market we once had.
The seeds of this malignancy were planted almost at the birth of the competitive market’s creation 20 years ago. At that time, having created a market based on some 30 suppliers, perhaps a half dozen of which were prominent, the conditions for competition to provide efficient outcomes were in place. Fundamentally coal-based, the market also had some fast start gas and hydro to allow the peak balancing required of a product with considerable diurnal and seasonal shifts in demand (and occasional disruptions in supply). ..... Read more
Andrews treads rocky power path
Herald Sun, 1 September 2017
Premier Dan Andrews is copying South Australia’s energy policy. The Premier aims to lift wind and solar’s share of the state’s electricity supply from its current 8 per cent to 40 per cent.
Wind is unreliable and, in Australia costs three times as much as coal; solar is even more expensive.
Wind and solar facilities receive a subsidy whenever they run. This has forced unsubsidised coal power stations to close causing prices to double and reliability to deteriorate.
Few expected this catastrophe. The nation’s abundant low cost energy resources should, of themselves, been an antidote to political idiocy.
In the decade prior to the year 2000, throughout Australia electricity supply was commercialised and partially privatised and became just about the cheapest in the world.
The first two decades of the twenty first century saw a transformation - Australia’s electricity supply become among the world’s most expensive.
The 1990-2000 reform era’s lower electricity prices stemmed from a massive shedding of surplus labour. In Victoria, modernisation beginning with the ALP Kirner Government, slashed the numbers employed in generation to under one sixth of those in 1990. At the same time operational improvements increased plant availability from around 70 per cent to over 90 per cent.
Other sectors of the industry and other states also showed impressive productivity improvements.
In those days getting more output using fewer workers was recognised as providing economic benefits.
Nowadays, bereft of any economic expertise, Mr Andrews favours creating more jobs to produce less output.
In fact, jobs created in constructing and maintaining high cost renewables are more than offset by the lost jobs from the resulting higher taxes and energy costs that drag down overall living standards.
The seeds to the deterioration of the Australian electricity industry were being planted even as it achieved leadership in global efficiency. In the 1990s energy ministers’ predispositions towards imposing harmful costs onto the industry were tempered by core advisers who, as energy experts, were able to demonstrate the damage this would cause. Gradually those experts were replaced by environmentalists who fed interventionary measures to receptive politicians.
Compounding the problem, Premiers and Prime Ministers became more actively involved. Nowhere is this more evident than in the Commonwealth where Energy Minister Frydenberg is supervised by a Cabinet Committee chaired by the Prime Minister. Mr Turnbull is himself a green advocate who, on assuming office, appointed Martin Parkinson, former head of the ALP’s Climate Change Department, as his Departmental head.
Like Premier Andrews, Mr Turnbull’s solution to the power price crisis is to double down on the subsidised renewable energy programs that created the tragedy. He is promoting more wind and similarly costly measures including the Snowy Hydro $2.2 billion pump storage, a measure that itself uses up 20 per cent of the Snowy’s potential output. Mr Turnbull shares the Dan Andrews view that bad investments actually create jobs!
This week the PM again met with major energy retailers to jawbone them into reducing their prices.
But the high prices are created by wind subsidy policies and can only be lowered by abandoning the renewable program. Yet the PM says there are “no plans” for coal, the lowest cost technology.
Unless he swallows his ideological antipathy to commercially generated electricity the energy crisis will intensify. ..... Read entire article
Liberal, Green and ALP politicians conspire to destroy the economy
Catallaxy Files, 24 August 2017
Yesterday, Malcolm Turnbull, unveiling the plans by Pratt for new investment in containers said, “You know everything my government does is designed to encourage Australian businesses to invest.” The absurdity of this was underlined by Anthony Pratt informing us, “Our cost of energy in America is 2½ times lower than Australia.’’
One fifth the costs of the Pratt business’s production is energy and the facility is only possible by providing subsidies to the in-house production of this. Here is how our political leaders tell us that we now build wealth: tax energy consumers and re-allocate the funds only to the most expensive energy sources.
Like a saboteur chastising the owners of the facility he has destroyed, the PM is said to be going “to eyeball the energy companies over bills”. He will doubtless say, “how can it be true that prices are rising so savagely when Finkel, assorted blood-sucking subsidy-farmers and I myself say we have fabulous renewable resources and are seeking to incentivise more of them with the outcome being cheaper prices?”