Prime Minister Malcolm Turnbull's electricity and climate package is a welcome attempt to end a decade of policy mismanagement by providing the stability and certainty industry has been pleading for to underpin much-needed investment.
The potentially crucial breakthrough is that the package appears to envisage a market-based price on carbon emissions, widely acknowledged as the most rational and cost-effective mechanism for the transition to renewable energy, the price of which is becoming compellingly competitive.
Let there be light: Prime Minister Malcolm Turnbull discusses his climate and energy package.Credit: Alex Ellinghausen
It is too early to assess whether the policy is the "game-changer" Mr Turnbull claims; it is yet to be fully detailed and depends on the support of the states, a number of which want a faster shift to renewables. Federal bipartisan support is also vital to the certainty and confidence required by investors.
Although the package rejects Chief Scientist Alan Finkel's recommendation of a clean energy target, which was a compromise proxy for a price on emissions, it can be seen as arriving at a similar outcome, because it forces retailers to reduce pollution through a national energy guarantee.
Some will be better able to do that, which will create a secondary market where the dirtiest providers of electricity will have to buy renewable energy credits – either locally or on the international market.
Given the surging competitiveness of renewables, the Coalition's package reasonably ends subsidies for clean energy. But it arguably creates an undue fillip to fossil fuels, because the national energy guarantee will force suppliers to rely more than they otherwise would on coal and gas to constantly provide a minimum amount of electricity.
There is doubt the policy will sufficiently reduce emissions for Australia to meet its international commitments. Should need be, the mix can be adjusted. The government's claim that a typical household could save between $110 and $115 each year for a decade from 2020 is so long-range and based on so many variables as to be unreliable.
The business community's muted, cautious support for the package simultaneously reflects doubt about success yet hope and relief that the policy sclerosis might be over. There has long been consensus in business that a carbon price is a crucial element of an optimal energy policy.
Australia's economic and environmental future will be underpinned by clean energy. Mr Turnbull's policy might not be optimal, but it could provide a reasonable route to that future, and help end a self-inflicted crisis that has cost households and businesses dearly.
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