The Spectator: We should be afraid of rising fuel costs, not climate claims Alan Moran 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.

Robert Balling worked in cooperation with science blogger Warwick Hughes to demonstrate that long-established Australian weather stations remote from an urbanisation effect had recorded no increase in temperatures. In 1992 Balling quipped that we should not knock climate alarmism. He noted it was providing him consultancy work that doubled his professorial salary and the satellite data, first established in 1979, in a dozen years would prove the furore to be a hoax and by then he’d be about ready to retire!

He was right about the data, which has failed to substantiate the warming forecast by climate models, as the graphic below demonstrates — and the only model accurately tracking the data does not incorporate an amplification effect of CO2 from water vapour.

But Professor Balling was sadly wide of the mark in understanding the deceit that scientists, radical leftists and businessmen could muster to extract government funding out of consumers and taxpayers.

global temperature actual and modelled.jpeg

Indeed, the lack of corroboration of the forecast global temperature increase has simply spawned other supposed markers of the catastrophian agenda like regional temperatures increases, drought, floods, hurricanes, sea-level rise, polar bear demise and so on. Each of these has also proven to be unfounded but a leftist media, academia and political class remains unmoved.

As evidenced by the censorship by Australian university and taxpayer funded The Conversation, the alarmists are entrenched in the education establishment and have become increasingly strident in seeking to suppress the voices and scientific findings of the climate realists.

Business leaders, even when they doubt the alarmists’ forebodings, are obliged to do them homage to avoid both direct activist pressures and those representing fearful investors. A group of 500 investment firms, said to represent $35 trillion in global assets, is calling for additional measures to meet the Paris targets. In Australia, some 87 major companies, representing a combined market capitalisation of $US2.3 trillion, have signed onto a zero emissions pact. Governments’ go-to businessman, Sir Rod Eddington, after years of promoting the renewable subsidies that have destroyed industry competitiveness now says, “I believe in markets.” But he does so only to oppose government intervention to redress the adverse effects his preferred regulatory measures have caused.

Supposedly to settle the matter, Alan Kohler has called for a Royal Commission on climate change. He is not the first to do so – the late Professor Bob Carter also wanted one. But as cynics have said, “you don’t call a Royal Commission unless you’re certain about its findings”.

In line with his views and business interests, Alan Kohler would see a Royal Commission headed by alarmists like David Karoly, Will Steffan and Tim Flannery and ideally with current Treasury Secretary Steven Kennedy, the author of the hysterical Garnaut Report, heading up the Secretariat. Now that he is seconded to the University of New South Wales, Michael Mann, the creator of the now discredited “hockey stick” climate trend, could also be a candidate.

Bob Carter might have picked former BoM head of research Bill Kininmonth, former Professor of Physics at JCU Peter Ridd, and Professor Ian Plimer, and perhaps the world’s most distinguished climate scientist, Richard Lindzen.

There is no middle ground in this debate and one certain outcome is that a Royal Commission report would be rejected by its authors’ opponents. Positions and interests are entrenched. Even politicians with the determination and confidence of Donald Trump tread warily. Trump appointed the distinguished climate scientist Will Happer as director of the National Security Council with a view to empanelling a climate science review but senior White House officials stonewalled the proposal fearful that it might prejudice the President’s re-election.

As part of the justification for their subsidy claims renewable energy proponents are constantly telling us that the economics of wind/solar will soon mean cheaper electricity. But this is a constantly receding mirage. Last year the leading energy consultancies ACiL and Frontier forecast 2020 electricity prices averaging $52-55 per MWh. The outcome is contracts selling at $91 and $112 for NSW and Victoria respectively. Three years ago, the price was under $40 per MWh.

Eventually, the inferior economics of renewable energy and realisation that the world climate is in its normal permanent change must bring a collapse of the climate crisis malignancy. Countries showing scant regard for emission suppressing policies – China, India and most developing countries as well as the US – will experience much faster growth forcing others to abandon their own ambitions. But Robert Balling’s dozen years is already 25 years and unless the substitution of high-cost renewables brings an (unlikely) collapse of the energy system, Australia’s continued excessive energy prices and economic underperformance will persist for many more years.

2019 Bob Carter Commemorative Lecture

The 2019 Bob Carter Commemorative Lecture will involve a lecture tour by Dr Peter Ridd on the scientific reliability of the claims that human activity is irreparably damaging the Great Barrier Reef. Between 12 and 20 August 2019 Dr Ridd will deliver his lecture in the Queensland sugar towns of Bundaberg, Mackay, Ayr, Ingham, Innisfail and Cairns.

Bookings for any of these Lectures may be made at our Events page.

Dr Peter Ridd

Dr Peter Ridd

A major issue in science has emerged over the last decade known as the “Replication Crisis”. Around half of the literature published in a wide range of scientific disciplines has been subsequently found to contain serious flaws. This remarkable and worrying statistic is being addressed in a number of ways by various scientific funding bodies, research institutions, and scientific academies around the world. but with limited success to date.

In his Commemorative Lectures, Dr Ridd will point out that the system of peer review — the primary quality assurance mechanism that is used in science — is grossly insufficient. This is particularly so for science that is used to make important and expensive public policy decisions such as those that seek to address the adverse impacts of human activity on the Great Barrier Reef (GBR).

Dr Ridd will demonstrate that many of the threats to the GBR, are likely to have been greatly exaggerated. They include the impacts of sediments and nutrients from agricultural runoff and the impacts of climate change — whether natural or human in origin.

Dr Ridd will propose that far more rigorous quality assurance processes need to be introduced so that scientific results can be made more reliable. This is all the more important when legislation — which seeks to regulate the human activity that is thought to be associated with negative environmental impacts — is based upon poorly quality controlled scientific results.

The Lecture Tour is in the process of being extended to include Townsville and Melbourne in September. The details will be announced once they have been settled.

The scare is settled? Have the climate catastrophists won?

Alan Moran

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.

Brian Fisher’s study of Australian policy options to reduce emissions found the Coalition policy of cutting emissions by 27 per cent involves a tax of $263 per tonne of CO2 and that of Labor, for a 45 per cent reduction, would mean a tax of over $900 per tonne (the abolished 2013 carbon tax was $24 per tonne). Costs of Labor’s policy would be $1.2 trillion (two-thirds of annual GDP). That of the Coalition is a “mere” $80-90 billion. Addressing the Fisher report, Labor’s Mark Butler showed wilful incuriosity in claiming “firmed” renewable contracts are “only” $70 per MWh (itself almost twice the price previously prevailing) when the average market price is around $100.

Against studies showing renewables to be expensive, we see other reports from the government-funded research agencies like CSIRO, the Chief Scientist, as well as from commercial interests, maintaining that renewable energy is now cheaper than fossil fuel driven energy. Renewable energy supporters, usually without acknowledging an incongruity, also advocate subsidies via tax breaks or regulations to penalise fossil fuels. Those subsidies are often, like the “National Energy Guarantee” and the Renewable Energy Target, clothed in misleading language with the (intended) result that people do not recognise them as costs. For example, hardly anyone installing rooftop solar panels in Australia understands that half the cost of the energy the panels generate is unwittingly financed by other electricity customers.

The agenda setting is virtually complete within the developed world, where every country has implemented carbon emission restraining measures at some cost to their economies.

Dire warnings on what we are doing to the earth are flung out by America’s best known Congressional representative, Alexandria Ocasia-Cortez. But every Democrat Presidential candidate is signed onto climate change legislation, normally citing this as a means of simultaneously saving the planet and creating vibrant new industries. The measures involved would build upon the Investment Tax Credit, which lowers a solar project’s capital costs by about 30 per cent, and wind projects’ Production Tax Credit, which pays about $22/MWh for energy generated, a subsidy of 50 per cent.

President Trump rejects the emission controls central to the Paris Agreement and has rescinded Obama era requirements making CO2 capture and storage (CCS) mandatory for new coal plants. However, the Bipartisan Budget Act of 2018, extended and expanded the 2008 tax credits for CCS. The credits are $50/tonne ($35 when used to enhance oil recovery) but even with this support, only one plant is in operation.

And where there is push-back, as in Canada, the Conservatives adopt a form of subsidy like that in Australia which involves subsidising selective emission reduction programs.

Trump, however, remains a real hope as his policies show a widening gap between costs and economic performance of the US compared to other developed country economies.

And while most of the developed world will engage in virtue signalling, for the developing world this takes a backseat. Coal is talismanic, it is core to supposed causes of climate change while remaining the cheapest and most reliable source of electricity and the backbone of the future global electricity supply. Nothing Australia, nor indeed a coalition of developed countries, can do will alter this trend. And nothing Australia can do will reduce global emissions of carbon dioxide. As illustrated below, Australia has little more than one per cent of the global operating capacity of coal generators. Approved additions in China alone are four times the total Australian plant.


Source: Coalswarm

Many consider that the ALP/Green policies would soon, if implemented, be recognised as harmful and lead to an early electoral debacle. This may be wishful thinking. After all, Venezuela’s socialists survived five elections by assembling coalitions of the poor and a bloated public service who willingly voted for a party offering them favours at the expense of the affluent and foreigners. They did so even though this impoverished the nation. In the past, the only ALP government with a preconceived radical anti-capitalist agenda was that of Whitlam in 1972. The Hawke/Keating government was in many ways a reformist improvement on the Fraser government it replaced, while Rudd campaigned on paring back the size of government.

For many conservatives, the strategy to prevent a disastrous climate policy-induced downsizing of the Australian economy is to campaign on less drastic “me-too” platforms. Such an approach is akin to that which characterised conservative policies in the post-1945 period when rear-guard actions are fought against a seemingly inevitable but unpalatable shift to socialism. It took outstanding leadership of Reagan and Thatcher to capitalise on observable failures of anti-market policies to stop the rot.

Somehow those tutoring the children demonstrators, the great majority industry leaders, politicians and the public service including, if court decisions are a guide, the judiciary are on board with the notion that global warming is taking place as a result of carbon dioxide emissions. This misconception is compounded by another – that counteracting it by banning coal generation, perhaps all mining, in Australia is both feasible and low cost. The only outcome of such policies is an acceleration of the damage those in place have already done to the economy.

Alan Moran’s latest book is CLIMATE CHANGE: Treaties and policies in the Trump era.

The Myths of the Murray Alan Moran

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.

The Murray Darling Basin’s Development

In the period 1922-1939 the Murray saw the Hume Dam and other facilities transform it into a river no longer swelling and drying in response to annual precipitation. Having been developed over the twentieth century into a tranquil working river, largely responsible for allowing its basin to become home for 41 per cent of the nation’s agricultural output, the waters of the Murray Darling are now being re-allocated to non-productive uses.

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 claims included, “salt is destroying the rivers and land like a cancer”, and that animals and plants were facing extinction.

None of this was true – land salinity, for example, affects only 0.4 per cent of Australia, almost all of it due to natural salt outcrops. And, a century of Murray-Darling dam building and the accompanying management had replaced the irregular, salt infused waterway that the explorer like Charles Sturt found in the eighties, with today’s continuously flowing river.

In addition to being driven by green fictions, the Murray-Darling water policy also seeks to ensure freshwater in the lakes at the Murray mouth. Paradoxically, that water allocation actually modifies nature by feeding lakes that would be naturally brackish water.

Green activists and their supporters in academia and the bureaucracies have continuously raised the ante on the amount of water sought to be taken from farmers to remedy concocted environmental ills. In 2002 they sought 1,500 gigalitres of irrigators’ water (14 per cent of the total) and the Howard Government settled for 450 gigalitres.

But the new radicalism of anti-modern farming was fermenting a more potent brew. In this it was assisted by the millennial drought – wrongly forecast as a turning point for water availability due to presumed links between precipitation and massively reinforced passions about calamitous climate change.

The post 1980 notion of anthropogenic induced climate change and its adverse consequences to mankind was embraced by politicised scientists from the outset. Their work has continued to provide fuel for regulatory action. Thus, in January 2008 the nine authors of an influential CSIRO reportAn Assessment of the Impact of Climate Change on the Nature and Frequency of Exceptional Climatic Events, fallaciously declared:

Over the past 40 years (1968-2007), exceptionally hot years are typically occurring over 10-12% of the area in each region, i.e. about twice the expected long-term average of 5%. By 2010-2040, the mean area is likely to increase to 60-80%, with a low scenario of 40-60% and a high scenario of 80-95%. On average, exceptionally high temperatures are likely to occur every one to two years.

Even prior to then, in 2005 alarmist Tim Flannery, boosting the case for the Sydney Desalinisation plant, had said:

If the computer models are right then drought conditions will become permanent in eastern Australia.

And in April 2007 as Australian of the Year, he said:

What we now know is happening around the world is that rainfall may be declining in some areas – in the order of 10 to 15 to 20 per cent over a 50 year period. We’ve seen that in south-east Australia.

Ross Garnaut, another of the climate alarmists to whom the government turned, opined in his review issued 30 September 2008 (Chapter 15.3):

Declining runoff in southern Australia is a significant threat to the continuation of irrigated agriculture in the Murray-Darling Basin. … Existing strategies for managing water supplies were developed in the second half of the 20th century, during a period of higher rainfall, and are not suited to a progressively drying climate.

Rather less soberly, Professor Garnaut, described as the government’s top climate change adviser, warned that if climate change was not tackled it would destroy the Great Barrier Reef, end agriculture in the Murray-Darling Basin and wipe out the country’s snowfields.

The passage of time has demonstrated all these jeremiads to be utterly incorrect.

Regulatory measures and agriculture in the Basin

The litany of alarmist statements were meat and drink to the mixture of underperformers who typically hold the agriculture portfolios and even more so for those on the cataclysmic bandwagon like Malcolm Turnbull and Tony Burke. They provided a catalyst for regulatory intrusion and Shadow Water Minister Tony Burke says the cap which prevents Government from buying more water from the nation’s food producers would be removed under a Labor Government.

The AEF has been highly critical of the measures taken with regard to the Basin. In our December 2015 submission to Senate Select Committee on the plan we said

The Australian Environment Foundation (AEF) supports the submission to the Committee by Dr. Jennifer Marohasy, who was a founding director of AEF. Accompanying, and forming part of, this submission is a report prepared for AEF by Dr. Marohasy in 2012 Plugging the Murray River’s Mouth: The Interrupted Evolution of a Barrier Estuary, which demonstrates that The Australian Government’s $10 billion plan to “save” the Murray-Darling by reconfiguring upstream irrigation so that more water is sent to the Lower Lakes, Murray’s mouth and Coorong, is based on a false premise; a misunderstanding of the fundamental nature of the Murray River’s estuary and the coastal processes that continue to shape it.

This reconfiguration amounts to a substantial reduction of water available to farmers and communities upstream and important upstream wetlands and other natural upstream environments through the Murray/Darling basin in effect to preserve an artificial fresh water environment in the Lower Lakes created by the barrages or dykes constructed during the 1930s, which dammed the Murray River’s estuary stopping the sea tides and making Lake Alexandrina wholly dependent on Murray River flows.

The AEF went on to point out that it is essential to get right the balance between conservation and productive use of water through the Murray/Darling basin. To do that we argued first, for an examination of the costs of withholding from productive use of some 3000 gigalitres of water – over one quarter of that previously used for irrigation – mostly to maintain an artificial fresh water environment in the Lower Lakes; and secondly, to ensure that these costs are outweighed by the conservation benefits. Instead, the Basin Plan gives an absolute priority to the meeting of environmental flows with no cost/benefit estimates.

The Plan’s goal is one that oxymoronically “droughtproofs the environment”. The dams and other interceptions have converted a natural environment of drought and flood into a stable system that moderates these extremes, with benefits to irrigators and other users of the river.   At huge public expense in pursuit of goals that ostensibly seek to bring about a return to an idealised mythical natural environment, the regulatory management now being put in place is undoing this.

A review of the Basin Plan by a SA Royal Commission headed by Bret Walker supported this pre-eminence of environmental goals. Mr Walker was critical of the Basin Authority for taking some economic and social factors into account in determining the volume of water for irrigation as well as the seemingly sacrosanct environmental needs that are alone permitted to be considered under the Water Act. In this respect the Commissioner resembled a Flannery clone basing his criticism on the authority’s failure to consider “catastrophic” climate change, and to act on the best available scientific knowledge when determining how much water should be recovered for the environment across the basin,

Mismanagement of the system is a key feature. Well over 200 gigalitres of water has flooded the Barmah-Millewa forest since Spring 2018, which has been attributed to operational losses. This has meant farmers have stayed on zero allocation. If the 200 gigalitres were used to produce rice, that would mean 200 000 tonnes and $100 million of real income being produced.

Similarly, there was a massive, probably unprecedented fish kill in 2019 due to the draining of the Menindee Lakes in 2016 and 2017 to save on evaporation; that excessive release meant the low inflows in 2018 could not be supplemented, bringing about a later diminution of the water’s oxygen levels in the Darling. It is a bitter irony that the management of flows under the Basin Plan targeted at environmental improvements have had the opposite effect.

Mismanagement aside, it remains the AEF view that a careful specification of the environmental goals of any expenditures should be made and set against the costs involved. This view has been reinforced by our examination of the findings of the Productivity Commission (PC), in its recent review of the Basin Plan. The PC summarised the program as:

The Australian Government earmarked $13 billion to implement the Plan, including:

  •  $3.1 billion to purchase water entitlements for the environment. $2.7 billion of this has been spent to recover 1227 gigalitres (GL).

  •  $4.8 billion for investment in modernised water infrastructure, with $3.9 billion spent. Of this, $2.8 billion has been invested in projects that delivered 677 GL of water savings to the environment.

  •  $1.3 billion for supply measures, of which $34 million has been spent on developing projects.

  •  $1.8 billion to recover an additional 450 GL to pursue enhanced environmental outcomes, of which $14 million has been spent.

  •  $2.0 billion for other programs and activities, with $1.9 billion spent. Almost $8.5 billion has been spent, and $4.5 billion is still to be spent by 2024.

The PC concluded:

Significant progress has been made. About 20 percent of the water that was available for consumptive users a decade ago is now dedicated to the environment.

About $6.7 billion has been spent to recover about 2000 gigalitres (GL). Water recovery is within five per cent of the July 2019 target.

The arrangements for managing environmental water are working well, with evidence of improved ecological outcomes at the local and system scale.

As a result of the reduced supply the price of “permanent” water allocations has risen fivefold. These prices become costs that are factored into the overall cost of produce.

The PC was critical about the machinery of the Plan’s management, lack of political oversight and absence of transparency. Yet, aside from identifying the fact that the compensation farmers got for selling water was usually adequate for them, the PC report offers little evidence of the plan bringing improvements on the system’s environment, still less does it evaluate any such improvements against the $6.7 billion already spent. Nor does the PC review offer means of measuring the impacts and outcomes that are associated with the Plan.

These omissions are most unfortunate given the profound uncertainties that exist in our scientific knowledge of the complex ecology and hydrology of the Basin, not to mention the economic and social consequences associated with changing water use there. In the debate over the Plan these uncertainties have received little or no acknowledgement, let alone attention, even from scientists and other specialists in these matters.

This is remarkable. Public funds have been used to buy and quarantine from commercial use over 10 per cent of the water in the nation’s most productive agricultural region. Yet, we have no metrics that define the outcome desired and no measurements that allow such an outcome to be tracked. This should not come as a surprise since many within the environmental pressure groups have radical goals that involve the displacement of irrigated agriculture and the human communities that depend upon it. Any restraints on the use of non-environmental water are merely stages towards that goal.

The way forward

Reform must follow the suggestions of Australian Environment Foundation in its December 2015 submission to the select committee on the Murray-Darling Basin Plan, which noted:

  • A key rationalisation for the diversion of water in the Murray-Darling Basin from irrigation to environmental uses was the notion that the activity was leading to salinity with costs to both commercial agriculture and to environmental values. These concerns were misplaced – salinity has proven to be easily controlled and the water is less saline today than it was 35 years ago.

  • The more contemporary scare centred on supposed global warming leading to climate change that would reduce the water available. Rainfall data has proven this to be unfounded – there has been no reduction in precipitation across the basin.

  • The cost of the Basin Plan in de-rating the region’s agricultural potential has been enormous, especially to the once prosperous communities living within the region. In aggregate terms this is likely to be in excess of $3 billion per annum with a serious impact on the ability of Australia to take advantage of the export opportunities stemming from the rapidly developing nations to our north.

  • The measures adopted in the Basin plan were reactions to ill-founded and disproven concerns about human damage to the environment. The Commonwealth should cease incurring costs in preventing water use for irrigation and should start re-selling the water it has banked to those willing to pay for it.

Energy policy: the $72 billion fair dinkum disaster Alan Moran

The Spectator, 26 February 2019

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.

To establish credentials among virtue signalling global warming alarmists and renewable energy subsidy-seekers, Scott Morrison has also announced a new version of the Labor-lite policy approach. The new policy entails an additional $2 billion – albeit over 10 years – of “Direct Action” expenditure on renewables, lowering farming output, subsidies to pumped storage and other misanthropic policies. It comes on top of existing subsidies to wind and solar.

The deleterious effects of these policies on efficient supply are further enhanced by state government restraints (bans in the case of Victoria) on the search for additional gas supplies.

The malaise of increased electricity prices compounded by less certain reliability reflects seductive agitprop describing renewables as being freely donated by the sun and wind.  Free they are, but harnessing them and delivering the diffuse power they provide is very expensive.

According to the exhaustive evaluation by Solstice, while a new coal plant could deliver electricity at a cost as low as $40 per MWh, the best wind could achieve is $64 per MWh with solar at $90 per MWh and both wind and solar also require firming contracts in view of their unreliability. These lift the cost of wind by over $30 per MWh.

Forcing substitution of existing low-cost coal energy by high-cost wind/solar energy panders to those who have swallowed, contrary to the evidence, the myth that human development involving fossil fuel use is bringing dangerous global warming.

The vocal support of climate alarmists is bolstered by that of others who claim that getting out of coal/gas/oil will not be expensive since wind/solar is cheaper.  Nobody making that claim has sufficient confidence in it to adopt its corollary: the elimination of subsidies supporting these forms of energy.

Economic modelling analysis of the effects of renewable regulations has offered diverse forecasts.  Such analyses are dependent on their assumptions about future costs of different energy forms, the ability of economies to adjust rapidly and the costs of such adjustment. What is certain is that three-quarters of our exports are from mining; without fossil fuels – the goal of the green left – these would disappear leaving Australia’s living standards closer to those of the third world than first world countries.

Less implausible than most such studies is a recent one by Brian Fisher.  This finds the effect on energy prices from the ALP’s goal of 45 per cent emission reduction target would reduce GDP $144 billion a year by 2030.  He also estimates that what the present government considers to be sound administration, its 26-28 per cent emission reduction target, would still mean GDP $19 billion lower in 2030.

Over the past decade, renewable energy “investments” in Australia have soaked up some $72 billion in capital. None of this would have taken place without subsidies.  By forcing the closure of lower cost coal generators, that expenditure has had a negative value-added.  It has more than cannibalised available capital and in doing so has contributed to the very low levels of productivity growth Australia (like other, similarly placed countries) has experienced.

Businesses, including those owned by governments, with existing coal and hydro generation assets, have seen a massive profit bonanza from the doubling of prices that has been the outcome of the subsidies to renewable energy.  This is most tellingly illustrated by the NSW coal generator, Vales Point, sold in 2015 for $1 million and now worth in excess of $700 million. The big three with coal assets (AGL, Origin and EnergyAustralia) have made corresponding gains, as have the coal generators owned by the Queensland government and the major hydro assets in Tasmania and the Snowy.

Such windfall gains are by-products of regulatory measures rather than from meeting new or expanded customer needs.

The way forward has to include the removal of all subsidies to wind and solar but, given the proclivities of governments to intervene in the energy market, such measures may now be insufficient.  Loss of investor confidence in the stability of energy policy may now require additional assurances, perhaps in the form of contractual guarantees.  Such an approach is envisaged in the government’s Underwriting New Generation Investments (UNGI) but that program is at pains to provide scope for renewables to also gain further subsidies.

If the UNGI does represent half a step to redressing the subsidy to renewable energy, it is accompanied by multitudes of steps backwards.  Not the least of these is the cavalcade of regulatory barriers placed one after another before the prospective Adani coal mine in Queensland. This is a message to all investors that politics is raising the cost of doing business in Australia.  Then there is the dictum in the Rocky Hill case by the head of the NSW Environment Court which would seem to ban all future coal mining, or at the very least exorbitantly raise its costs by requiring expenditure on offsetting emission reductions.

In addition, we are seeing investor associations, reported by the Australian Financial Review, especially by funds with extensive exposure to renewable investments, placing pressure on coal industry mining firms to desist or slow down coal investments.

Almost all the portents for the immediate future of the Australian energy system (and hence for the Australian economy) are negative.  Aside from the minor conservative parties and a handful of Coalition politicians, the politics is driven by focus group analyses which report people being in favour of ‘free stuff’.

There is little stomach for leadership by politicians who either support the prevailing ideology or, valuing their careers above the public good, prefer not to explain that the free stuff is both paid for and undermines the low-cost electricity from which Australia should be benefitting.

Sub-optimal economic performance is therefore set to continue.

Longer term relief for Australia may have to await the results of the outcome in strong economic performance stemming from the leadership that President Trump is demonstrating in abandoning costly measures that require suppression of carbon dioxide emissions. Trump has shown commendable scepticism about climatic catastrophism.  Moreover, he has recognised that actions by the US – indeed the entire western world – can have no climatic effect in view of the explosive growth of India, China and other developing nations, growth that is powered by fossil fuels, the resulting emissions of which now dwarf those of the rest of the world.

Trump’s leadership is already paying dividends with US growth outpacing that of other developed countries.  Energy-intensive industries, including those of the Pratt Group, are responding by shifting the balance of new venture spending towards the US.

But it may be some time before Australia awakens to the self-inflicted injurious policies that have transformed the nation’s energy supply from the world’s cheapest to among the world’s most expensive.

Labor’s energy deal: Shorten facts, but you’ll pay more

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. Read more

Renewable subsidies: destroyers of low cost 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. Read here

Socialism will impoverish you, but it won’t solve climate change

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”.


Big call!


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


Pursuit of policies designed to supress emissions of carbon dioxide and other “greenhouse gases” is severely harming the Australian economy with no compensatory environmental benefits. We address this in the context of energy, land clearing and forestry.

In the case of energy, measures taken to suppress carbon dioxide emissions have been centred on regulations to promote renewable electricity supply (especially wind and solar). These have, over the past 15 years, transformed Australia from having one of the world’s cheapest electricity supplies to one of the most expensive. This takes a direct toll on household bills. But far more damaging is its indirect costs in undermining what once comprised the key national comparative advantage of cheap energy inputs. Policies forcing higher energy costs destroyed cost advantages across manufacturing, mining and agriculture to the great detriment of living standards.

Land clearing restrictions were devised to meet the 1997 Kyoto Protocol under which Australia agreed to limit its emissions of greenhouse gas to an eight per cent increase by 2012. Those restrictions reduced Australian emissions by 110 million tonnes of carbon dioxide equivalent, without which Australian emissions in 2012 would have seen a 21 per cent increase.

To bring about these land clearance reductions, the Commonwealth in cooperation with the Governments in NSW and Queensland adopted planning regimes that prevented land being cleared for agricultural purposes. Not only did this deprive the nation of valuable resources for agricultural expansion but the land was taken from its owners without any compensation. One estimate is that the costs in terms of devalued land worth were $200 billion. Though relaxed in recent years, such measures remain in place and an ALP Commonwealth Government has said it would fully re- implement them.

In the case of forestry, what commenced as a policy to ensure a balance of timber-getting and environmental conservation has resulted in a virtual cessation of commercial native forestry in Australia. This has throttled a valued domestic industry. Its effect has been augmented by stringent regulations on timber imports, under green pressure, to combat the import of timber supposedly to assist in preventing illegal logging overseas.

The rationale for all these policies rested on supposed global detrimental effects of greenhouse gas emissions. Irrespective of the merits of the science behind that rationale, its implementation possibilities were never more than flimsy.

Global measures to reduce greenhouse gas emissions were ostensibly enhanced as a result of the Paris Agreement of 2015, but this had severe shortcomings. Chief among these was that, although developed nations agreed to reduce their greenhouse gas emissions by over 26 per cent, there were no disciplines on developing countries to take similar action except far into the future. Developing nations comprise a growing 60 per cent of global emissions. With the election of President Trump, the US will cease its own abatement program. This renders the Paris Agreement worthless and means Australian policies are a form of pointless self-harm.

The measures addressed in this submission are only some of those Australia has introduced to pursue a meaningless and impossible goal of reducing global carbon dioxide emissions. The measures should be rescinded at the earliest opportunity. see here

Australia's faunal extinction crisis

Australia's faunal extinction crisis:

AEF 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

The Bitter Fruit of a Bad Green Marriage

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

Modelling, Schmodelling - how to rationalise policies that would destroy the economy

In a reprise of the feeding of the 5,000 with five loaves and two fishes, 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!

Modelling commissioned by the quangos responsible for devising the policy forecasts great price reductions from what is a new version of the government regulatory interventions that have caused such distress over recent years.  The earlier modelling outputs projected similar bonanzas from the regulations their sponsors supported. No modeller picked the 2015-17 doubling of prices in the wake of the subsidies to renewable energy - and that's because the models assume the losses forced on (coal) generators from the subsidies to wind/solar will be carried indefinitely. 

Underlining the fragility of modelling, the “Guarantee” or emissions intensity carbon tax at the heart of it was estimated to result in a 2030 price of $115 per MWh by Jacobs in 2016, $52 by Frontier in 2017, $68 by Jacobs in 2017.  The latest modelling by ACIL Allen estimates the 2030 price to be $48 per MWh.

The rationale for the NEG is that it provides certainty on top of the supposed lower costs of wind/solar and as a result borrowing costs are lower and these get passed on in lower prices.  There are several problems with this

  • There is no way that the NEG will not be changed by a different government, even the same government if it sees a reason to do so.
  • Minister Frydenberg, in yet another leaked document, has signalled that the 10 year guarantee can be five years, undercutting the NEG’s supposed certainty.
  • The data underlying the ACIL Allen forecasts is inconsistent with the certainty driven by the NEG: all the new generation is rooftop solar which, if the ACCC report is to be accepted, will see the subsidies removed from 2021; there is no new fossil fuel generation and AGL is assumed to maintain its price-boosting decision to withdraw the Liddell power station from the market rather than sell it to a rival.

The ostensible rationale behind this new intervention is the reduction of greenhouse gases, (the reliability provisions are unnecessary as retailers will pay insurance, “firming contracts”, without regulatory direction). Even as a greenhouse abatement , the NEG, on its own numbers fails.  The model shows only a trivial reduction in emissions without the NEG because the costs of wind/solar are assumed to be cheap but not so much so that they can survive without the RET/carbon tax subsidies.

The farce is that this plan has nothing to do with climate change, its ostensible justification.  There is no provision for emission obligations to be sold overseas to accredited (ahem!) sources and very limited, if any, possibility of firms acquitting their requirements by paying other sectors to do so more cheaply. The plan is concocted to pursue a 30 year dream under which renewable energy, always on the cusp of commerciality, displaces all that archaic and politically incorrect energy derived from fossil fuels and uranium. 

See more at

Energy: Addicted to Waffle and Disaster Alan Moran

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. See here for more

National Energy Guarantee Submission


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.

Read submission here


Property Rights Can Help Save Biodiversity

The US Property and Environmental Research Centre has shown how assigning property rights to protected species helped turn a hazardous landfill into a conservation bank that provides valuable habitat for endangered species. 

The US Endangered Species Act often makes developers offset the impacts of a development on endangered species. Historically such offsets have generally involved the enhancement and conservation of nearby habitat but these mitigations have proven to be time-consuming, expensive, and do not guarantee success.

Entrepreneurs have come up with a potentially better approach. They create a for-profit conservation bank to take over a developer's liability to mitigate specific biodiversity impacts. The conservation bank then purchases land to be conserved and managed to benefit of the species in question.  The bank ensures that this benefit is sustained over the long term by incorporating a conservation easement into the land title and setting up an endowment to pay for habitat maintenance and monitoring.

The US Fish and Wildlife Service issues credits to conservation banks for conservation or restoration of specific habitats. The banks can sell the credits to developers who thereby avoid having to do the conservation work themselves. For several years this model has helped mitigate biodiversity impacts associated with wetlands and creeks.  


Wetlands Research Associates (WRA) — a leading developer of conservation banks — has further developed the biodiversity conservation model with its redevelopment of Ridge Top Ranch in northern California—see the photo above.  The 301-hectare cattle property is now valued at A$24 million largely because of its wildlife credits. Prior to redevelopment, it was a net liability due to its proximity to a hazardous waste dump.  

The wildlife credits flowed from the introduction of an endangered frog species and habitat protection for a species of butterfly at Ridge Top Ranch, which WRA had identified as commercial opportunities prior to redevelopment.

Tony Abbott to Give Lecture, Melbourne, 3 July 2018


The Hon. Tony Abbott—the former Prime Minister and current Member of the House of Representatives—will give the second Bob Carter Commemorative Lecture.

The Lecture will be held at CQ Functions in the  Melbourne CBD, on Tuesday, 3 July 2018, starting at 5:30pm.

The AEF established the lecture series to commemorate the life and work of Bob Carter, an AEF Director and its Scientific Adviser at the time of his death in 2016.  

Our Events page has more details. Bookings should be made through Eventbrite [link here].

Australians Suffer, Big Emitters Get Free Pass on GHGs

The Australian 3 April 2018, Alan Moran

Environment and Energy Minister Josh Frydenberg’s tour de force at the National Press Club  and his opinion piece  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. With respect to the supposed inevitable march to renewables competitiveness, proclaimed but unfulfilled for 35 years, he allows himself a touch of scepticism when he says: “It has always struck me as paradoxical that the first to say renewables are cost competitive are often the loudest to call for another round of subsidies.”

The bedrock of future policy is the 2015 Paris Agreement, under which nations agreed to take action on their greenhouse gas (GHG) emissions, a large share of which come from electricity generation.

In Australia’s case this entails a cut in emissions by 26 per cent by 2030. However, the Paris Agreement places no obligations on developing countries, responsible for 55 per cent of global greenhouse gas emissions. Moreover, US President Donald Trump has disavowed the agreement and is promoting a US fossil fuel energy resurgence. The US is another 15 per cent of global emissions, meaning disciplines are on less than 30 per cent of the total. If Trump’s policies reinvigorate the US, others will adopt his low-cost energy approach. Two other major emitters, Canada and Japan, showed no compunction about reneging on the Kyoto Agreement, the forerunner of Paris, once the going got tough.

Australia achieved its Kyoto target not by curtailing fossil fuel use but by putting a stop to land clearance (without compensating farmers). The government’s proposed way forward is the national energy guarantee, which it says is “not a new tax, subsidy or emission trading scheme”.

While the details of the NEG have not yet been devised, it has two components. The first is a mechanism by which the greenhouse gas emissions for electricity will be specified. Suppliers will be allocated targets. Unless renewable energy suddenly becomes cost-competitive, this will force the market to provide growing payments for renewable energy to foster its increased supply. This component is, in short, a cost-enhancing subsidy from coal and gas generators to renewable generators — an emissions trading scheme.

Superimposed on this is another mechanism that will force the non-dispatchable electricity sources (wind and solar) to have back-up supply. Frydenberg has previously estimated the cost of this at $16/MWh. For the most part, this provision is unnecessary since the risk management departments of retailers already insist their wholesale purchasers buy such insurance against non-delivery by wind and solar.

The issue of supply security and price is uppermost in the battleground over the proposed closure of AGL’s Liddell power station in NSW’s Hunter Valley and the calls from some Coalition MPs for direct investment in new coal-fired generators.

The government is resisting such calls but is leaning heavily on AGL to keep Liddell open. The firm’s claims that its alternative investments will be superior just do not pass the credibility test. AGL has said it needs policy certainty. Prominent ALP spokesman Nicholas Reece made it clear on Wednesday night that a Shorten government would not permit Liddell’s closure before 2025.

The long-term answer to restoring to Australia the world’s lowest cost electricity price is to abandon all subsidies, ensure profits of long-lived assets are not undermined by future subsidies to their competitors and to prevent demonstrators sabotaging new developments. But with a 20-year history of government meddling in the electricity industry, how do we get there from here?

Alan Moran, author of Climate Change: Treaties and Policies in the Trump Era, is with Regulation Economics.

Courts Refuse to Protect Private Property Rights

Last week, the Federal Court confirmed that property rights in Australia are held at the whim of governments.  The Court was hearing an appeal in the Peter Spencer case.

This is an issue I covered on several previous occasions, for example hereherehere and here.

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!

The whole case has far reaching ramifications.  Many of those 19th Century jurists discussing the establishment of the Australian Constitution were of the view that property rights were so enshrined in the common law that no explicit provisions, akin to the US Bill of Rights, were necessary to attest to this.  Provisions against uncompensated takings of property are not in state law but the Commonwealth constitution had Article 51 (XXIII) saying the Commonwealth could not take property without offering “just terms” to its owners.

Mr Spencer’s strategy was to seek compensation from the Commonwealth on the grounds that the actions by the NSW Government were taken at the behest of the Commonwealth, which sought to prevent land clearing in order to suppress the emissions of greenhouse gases.  This allowed Australia to meet the terms of the 1997 Kyoto Protocol (which was ratified with Kevin Rudd in 2007 but which the Coalition Government had signed and were seeking to meet).

Under the Kyoto Protocol Australia agreed to limit its emissions of greenhouse gas to an eight per cent increase by 2012.  Land clearing restrictions reduced Australian emissions by 110 million tonnes of carbon dioxide equivalent (about a fifth of total emissions), without which Australian emissions in 2012 would have seen a 21 per cent increase.

Some other governments (notably Japan and Canada) failed to meet their own commitments and gained some international opprobrium as a result.  The Canadian government had been urged to follow the Australian example of preventing land clearing to meet its obligations but determined that such measures would be unconscionable.

In seeking to use the Commonwealth Constitution as a route to “just terms” compensation, Mr Spencer presented evidence showing that Premiers Beattie and Carr had proudly proclaiming how their actions in preventing land clearances had enabled the meeting of the Kyoto commitments.  He also maintained that Dr David Kemp, as the Commonwealth Environment Minister, withheld money from NSW until it became more aggressive in stopping the land clearing that was essential if the Kyoto commitments were to be met.  Dr Kemp acknowledged he had communicated such matters to the NSW Government.

The original federal court decision which was upheld by the appeals court was that the takings by the NSW government were not related to the Commonwealth’s wishes and the judge noted that such (uncompensated) takings had been underway since at least 1972.

While the case is not major of itself, it applies widely across Australia and Barnaby Joyce suggested that the expropriation of farmers for the carbon sequestration alone had cost them $200 billion. This figure (which was not contested in the Parliament) was arrived at by comparing land values where regulation prevented productive use, to values of land that was unaffected.

So there we have it.  Although benefitting in accolades from the domestic and international community for meeting its Kyoto commitments, the Commonwealth was found not to have been sufficiently collusive with the property seizures of a state government for it to be held liable for compensation.

But the wider issue is the apparent untrammelled right of state governments to seize private property through regulatory measures without compensation.  A fundamental role of the government to protect private property rights has been seen since John Locke as  crucial to modern civilisation.

Nobody, until the onset of socialist parties, would have envisaged that democratic constitutions would have allowed the governments themselves to have been the instigators of property theft.  Now the highest courts of law justify it.

Deregulate Energy Market & Return to Coal: Alan Moran, The Australian, 22 Feb 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. A new Australian coal plant would produce electricity at about $50 a megawatt hour. A new wind farm can produce electricity, at best, at $110/MWh and its present subsidy is about $85/MWh. Solar is about twice the cost of wind Fundamentally, the cost disadvantage of wind and solar stems from their low “energy density”. To get the equivalent energy from a standard 500MW coal generation unit requires 300 wind generators or 900,000 solar panels, and storage or back-up capacity is required to offset the inherent unreliability of energy sources dependent on the vagaries of the weather.

Energy Minister Josh Frydenberg put the cost of this at $16/MWh, an optimistic estimate even with the government’s 23.5 per cent renewable target. Wind farm entrepreneur Simon Holmes a Court recently argued on this page that the world is abandoning coal for electricity generation.

Australia’s booming coal exports testify to the ludicrous nature of such statements. In fact, according to Greenpeace’s data, China has 300,000MW of new coal plant under way, increasing its capacity by a third; Japan has 20,000MW, which also would raise capacity by a third; while India has plans for an additional 148,000MW, adding 65 per cent to its capacity. Australian coal generating capacity is about 25,000MW. The US has no new coal generators planned. This is partly a legacy of Barack Obama, who declared his policies would bankrupt any new coal generators, and partly because of the US boom in gas and oil production. Due to fracking, a technology largely banned in Australia, the US has gas at less than half the Australian price, making it cheaper than coal for new electricity generation.

Holmes a Court was correct in drawing attention to the costly failures of “carbon capture and storage”, the global propaganda arm for which is largely financed by the Australian government, and of high-energy, low-emissions coal power stations. These technologies reduce carbon dioxide emissions but involve add-on costs.

The Minerals Council of Australia, anxious to retain the support of BHP, has promoted low emission technologies. For internal reasons, BHP supports renewables and opposes coal generation in Australia notwithstanding its dependence on international coal sales and cheap energy generally. The firm’s promotion of renewable energy confronted the reality of this with high fuel costs for its Olympic Dam mine in wind-dependent South Australia. It also took a $137 million hit from the 2016 wind-induced collapse of SA’s power system.

Many firms support renewable policies out of self-interest. Revenue from subsidies is itself valuable and, in addition, coal generators, as Origin Energy’s half-year results last week showed, are earning huge profits from the doubled wholesale price. Others are conscripted to support renewables for PR reasons, as part of what German political scientist Elisabeth Noelle-Neumann has called a “spiral of silence”, where a loud and confident group is perceived to be majority opinion, leading others to acquiesce in much of its message.

The ESB has been tasked with creating an electricity market blueprint that marries lower carbon dioxide emissions with lower costs and greater reliability. This is an impossible task and would require massive new regulatory interventions. The ESB’s proposals envisage creating a market combining emissions and energy in which every retailer and generator would need to participate. They would add new dimensions of complexity to electricity supply, bringing a further proliferation of administrative resources within the bureaucracy and the industry.

Envisaging such further controls as bringing improved efficiency represents a triumph of hope over experience. We can restore our latent competitiveness in cheap energy only by abandoning all the intrusions and distortions that are in place. Donald Trump has achieved success from such an approach and we may have to await full recognition of this before our politicians adopt similar deregulatory policies.

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.

None of this was true – land salinity, for example, affects only 0.4 per cent of Australia, almost all of it due to natural salt outcrops. And, a century of Murray-Darling dam building and the accompanying management has replaced the irregular, salt infused waterway that the explorer like Charles Sturt found in the 1820s, with today’s continuously flowing river.

In addition to being driven by green fictions, the Murray-Darling water policy also seeks to ensure freshwater in the lakes at the Murray mouth. Ironically, that water allocation actually modifies nature by feeding lakes would be naturally salt water some of the time – and at a cost of some $7.5 billion!

Green activists and their academic supporters have continuously raised the ante on the amount of water they want to take from farmers to remedy concocted environmental ills. In 2002 they sought 1,500 gigalitres of irrigators’ water (14 per cent of the total) and the Howard Government settled for 450 gigalitres.

The millennial drought brought now disproven claims that rainfall was diminishing. Water for irrigators was reduced by 2,750 (25 per cent of the previous allocation) in 2012. Current discussions are whether to make this 2,300 or to continue strangling the food bowl by raising it to 3,400 gigalitres. Meanwhile the green activists are already preparing the ground for taking back 7,000 gigalitres, almost two thirds of irrigators’ water.

Unsurprisingly, the reduced availability of water has contributed to a rise in its price – after adjusting for inflation it now sells for 2-4 times what it did 20 years ago.

Attracted by such high values and by government funded buyouts, many farmers have, understandably, been complicit by selling water rights for unproductive uses to the detriment of agriculture generally.

Water is crucial to all agriculture and irrigation is the only way its steady availability can be ensured in much of Australia, the world’s driest continent. If 20 or 40 per cent of water is taken from Murray Darling irrigators, their production potential in Australia’s most important agricultural province will be close to 20 or 40 per cent lower.

This is especially significant since politicians often trumpet the great agricultural opportunities presented by booming Asian economies. But they fail to make the connection between supplying these markets and the regulations they impose preventing farmers from providing that supply.

Regulations are throttling the Murray Darling region. The rest of Australia which supplies goods and services to the area faces consequent losses but most politicians are either asleep at the wheel or part of the problem. A