Garnaut treats symptoms not causes

1 July 2011

The Energy Supply Association of Australia has rejected Professor Ross Garnaut’s position of refusing assistance to electricity generators to transition to a low emission future as it risks achieving a smooth transition to a low emission electricity sector.

esaa CEO Brad Page said the energy supply industry strongly supports an efficient, equitable and enduring emissions trading scheme enabling a smooth transition to a low emission economy and delivering reliable electricity.

But Mr Page said Prof Garnaut’s report is simply a continuation of wanting to treat the symptoms instead of the causes.

“The policy of providing loan guarantees for assets in distress caused by the clumsy application of a carbon price is just not sensible,” said Mr Page

“This does not assure energy security because companies in this situation will have no ability to trade their way out of financial disaster despite the guarantee, leaving the Australian tax payers exposed to a massive loss.”

Mr Page said a recent Investment Reference Group Report indicated that the allocation of capital to Australia’s generation sector on the best possible terms depends fundamentally on the government treating existing capital with care while resolving carbon policy uncertainty.

“The transition to a low emission energy sector comes at great cost and it is in the national interest to minimise this by encouraging – not dissuading – capital from our shores,” Mr Page said.

“This is most successfully done by ensuring any carbon pricing scheme recognises up-front the disproportionate losses – for debt and equity – and recompenses them.”

Mr Page also said Australia has never introduced such massive structural change without supporting the affected industries to adjust to their new environments.

“The Australian automotive industry is a prime example,” he said. “By 2021, it will have received more than $12 billion to transform its operations as tariff protection rates are reduced,” he said.

“But by using Professor Garnaut’s approach, the electricity industry which drives Australia’s economy would be provided with no assistance whatsoever to fundamentally alter its emission performance, dramatically increase its chances of stranding billions of dollars of assets in the process and as a result, threaten the reliable supply of electricity.

“This approach is not sensible. It is poor policy and is more likely to hinder rather than help Australia achieve a low emission outcome.” Mr Page said.

Ends.

Media contact:            Caroline Page          0421 103 089

The Energy Supply Association of Australia seeks to positively influence government policy decisions to ensure that Australia enjoys the benefits of a safe, secure, reliable, sustainable and competitively priced electricity and natural gas supply.

esaa’s 40-plus member businesses have more than $120 billion in assets and infrastructure investment plans worth over $49 billion over the next five years. The Association is fuel and technology neutral and member businesses have investments across a wide range of fossil fuel and renewable generation technologies.