In most countries, energy policy has traditionally comprised two features. The first is for revenue raising. The relative insensitiveness of demand for petrol has made it an ideal, if unfair, taxing vehicle. When Paul Keating was shadow energy minister, he charged the Fraser government with transforming every petrol bowser into a tax collector.
Once he became treasurer he simply continued increasing the tax rate.
Second, and more importantly, a longstanding goal of energy policy involves facilitating, or at least not impeding, the cheap supply of reliable petrol, gas and electricity.
Australia's gas and electricity prices are among the lowest in the world. This owes much to our huge coal resources, and to good supplies of gas in Bass Strait and Moomba.
Due to privatisation and other reforms over recent years, productivity levels have vastly improved across all areas of the energy industry. Although this is most marked in the privately owned businesses, especially in Victoria, improvements in other states are also evident.
Even so, all is not rosy. While there are no imminent risks of market collapse, government regulations threaten the stability we have seen.
For gas, regulations have meant uncertainty for those wishing to develop new pipelines because the Australian Competition and Consumer Commission has generally sought to force prices down.
This has reduced the confidence of pipeline owners in achieving a proper return on new investments and resulted in less development.
For electricity, the risks are due to government ownership and environmental regulations.
In the case of government ownership, Queensland's encouragement of its own generators to build new baseload capacity in excess of demand has seriously dampened prices across the eastern states. This undermines private-sector incentives to build, and could be damaging in the future.
Queensland's approach actually may have countered the impact of greenhouse gas-inspired measures discouraging new coal-fired power investment in NSW and Victoria.
However, we cannot rely on such fortunate outcomes from an unstable policy basis.
Environmental concerns about carbon emissions of energy supply have introduced a huge new regulatory layer.
The latest piece of idiocy is Victoria's "five-star energy standard" for new houses. Though the Building Commission puts the cost of this at $1500 per house, the industry claims it adds between $8000 and $15,000. Requiring such standards gives green activists a way to promote their goals by forcing higher costs on others.
In this case, the plethora of requirements will make it harder for new home owners to get on the first rung of the home ownership ladder.
Unseen environmental cost impositions are widespread. In fact, Australian consumers and taxpayers shell out over $700 million of subsidies for "alternative" energy. The annual costs of those that can be readily estimated comprise: the Commonwealth scheme for mandatory renewables, $380 million; federal subsidies for green power, $124 million; the NSW scheme, $222 million; the Queensland mandatory gas scheme, $68 million.
Yesterday, ministers John Thwaites and Theo Theophanous announced further studies to force consumers to use more expensive energy. But apart from the five-star standard, Victoria has largely confined itself to words rather than costly new imposts on the consumer.
This may change and the danger is that constant studies, even if aimed at diffusing calls for expensive new programs, can achieve their own dynamic.
Indeed, Victoria has joined other states to examine a carbon trading scheme. If this were superimposed on the existing host of measures, it would have no merit. Even if it replaced those measures, it would present difficulties. As acknowledged by ALP environment spokesman Anthony Albanese, its cost impost would require exceptions for certain energy-intensive industries. Doubtless this will entail a new bureaucracy to sift valued industries from unworthy ones.
As far as climate change is concerned, no new commitments were made at this month's Montreal conference.
The spotlight fell on the failure of Kyoto signatories to meet the reduced emissions they had committed to. Governments nonetheless agreed to keep discussing the matter. Hence, the 10,000 taxpayer-subsidised delegates at Montreal can rest assured about their funding.
Doubtless activists in Australia and elsewhere will maintain the pressure for continued taxes and regulations.
Our energy industry and those that benefit from its cheap and reliable power will therefore remain vulnerable.
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