Victorian Energy Minister, Theo Theophanous, has called for the Commonwealth Government to show greater leadership in promoting low-carbon fuels and carbon sequestration. Such policies aim to reduce carbon dioxide releases into the atmosphere and combat the risk of global warming.
Claiming that Victoria wants to promote more "community" debate on the issue, he said that his Government was funding non-government organisations to assist this. Using public money to promote a particular view -- and the Victorian Government is most unlikely to direct funding to bodies opposing its beliefs on these matters -- begs questions about the appropriate role for government. Is it the "servant of the people" or is it the master and guide of the people?
Mr Theophanous's call for greater Commonwealth leadership is also more than a head-butt at a political opponent. The Commonwealth's primary responsibility for greenhouse policy allows State Governments to grandstand without suffering criticism for the higher electricity prices that their proposals cause.
The Commonwealth already has a Mandatory Renewable Energy Target. This is forcing an increase of $350 million per year in electricity prices. Aware of the importance of cheap electricity to Australia and the need to compete at a national level, Canberra is resisting calls for further such cost imposts.
In NSW, the Carr Government actually supplements the national scheme with an additional consumer impost. Victoria, however, conscious of its precarious competitive position against other states in attracting new investment, has declined to follow that lead. The Victorian Government is also aware that, unlike NSW, the state will require new base-load electricity plant in the next few years, investment that will be discouraged if it foists additional costs on the industry.
Events in Western Australia last week drew attention to the impact of inadequate electricity capacity. Extensive black outs led the government to sack the Chairman and CEO of its state-owned electricity monopoly. Western Australia's misfortune demonstrated how the need for additional plant can suddenly creep up. Delays in commissioning it can have unexpected, catastrophic effects as well as price increases resulting from a need for less efficient plant to be brought on line.
Although the Victorian Government has rejected the NSW approach of a supplementary consumer tax on high carbon emitting electricity sources, another of its policy approaches will have a similar effect. The Government is demanding additional carbon dioxide emission targets for the Hazelwood power station as a condition of new planning approvals. These would reportedly cost Hazelwood's owners some $250 million. Because prospective investors will also be focused on these requirements, any such cost increases will reduce the viability of new investment and, at the very least, delay new plant. As Western Australia is now discovering, this can bring a bitter harvest some years ahead.
The Bracks Government has aspirations to occupy the Ministerial offices far into the future. It should be wary that what seems in 2004 like low-risk policy of requiring an established investment, like Hazelwood, to carry additional costs, may return to haunt it.
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