Finkel Reforms to Governance of Electricity Market

Among the many counter-productive recommendations the Finkel report offered was an increase in the electricity market’s “governance”.  This is a demand for even more of the political tinkering which, in the space of just 15 years, transformed the Australian electricity industry from the cheapest in the world to one of the dearest. Distortionary subsidies to renewable energy, which have also undermined reliability, are paramount in this.  

Finkel decided that renewables are inevitable (which is why Malcolm Turnbull appointed him) and commissioned economic research to demonstrate that this is so. By torturing the data the modelling managed to show prices would be lower if we replace low cost coal generated electricity by high cost wind and solar!  

See more from this piece by ALAN MORAN in Quadrant

AEF Petitions US: Withdraw from Paris Agreement

AEF joined 41 other think tanks who joined together in a letter to Donald Trump urging him to withdraw the US from the Paris Climate Change Treaty.  The letter's lead sponsor was Myron Ebell from the Competitive Enterprise Institute, who headed up the President's transition team on the environment.  All institutions other than AEF are US based.

The text of the letter suggests the following alternatives to President Trump.  

First, you could submit the Paris Climate Treaty to the Senate for its advice and consent with a recommendation that the treaty not be ratified. Submitting the treaty to the Senate would return us to and restore the proper constitutional method for treaty-making and require a future administration to go through proper procedures if it were to attempt to rejoin the treaty.

Second, you could withdraw from the underlying UN Framework Convention on Climate Change (UNFCCC). This action would also achieve your commitment to “stop all payments of the United States tax dollars to UN global warming programs,” including the Green Climate Fund, which is a part of the UNFCCC.

Third, you could announce your intention to withdraw the U. S. from the Paris Climate Treaty according to the four-year schedule specified in the treaty and continue the process of repealing the regulations that the previous administration submitted as part of its NDC. This option is the least preferable because it runs the risk of legitimizing the Obama administration’s false claim that the treaty is merely an executive agreement.

The undersigned organizations believe that withdrawing completely from Paris is a key part of your plan to protect U.S. energy producers and manufacturers from regulatory warfare not just for the next four years but also for decades to come. We will strongly support your decision to keep your campaign commitment to withdraw from the Paris Climate Treaty. READ LETTER


Submission to 2017 Review of Climate Change Policies

Pursuit of policies designed to suppress 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 .... READ MORE

Submission: Impact of Climate Change on Marine Fisheries & Biodiversity

Australia’s fishing industry has greatly underperformed both in the catch of wild fish and in aquaculture. Australia could easily accommodate a tenfold expansion of aquaculture, currently worth $1 billion a year. It is prevented from doing so by the regulatory intrusions.
It is barely conceivable that human induced climate change, if it is taking place, could have an effect on fish numbers in the oceans – fish swim and plants also migrate in response to changing conditions. If there were to be any net effect of climate change it would be a shift in the locations of different species.  Read more

Review:“The Anthropocene Equation” by Gaffney & Steffen 

This paper claims to represent the disruption of the climate system by humans in the form of a mathematical equation and then warns that the climate could reach a totally new dangerous equilibrium point very different from any climate that the earth has ever experienced in the past. The authors claim to prove that all non-human effects on the “earth system” add to zero, i.e there are presently no natural fluctuations in climate. It is concluded that human induced changes in the biosphere could be discernible on earth for millions of years. 

To an audience that does not understand mathematics, the equation
     𝑑𝐸 𝑑𝑇 = 𝑓(𝐻) 
(where  H = f(P, C, T) , T = f (En, K, Pe) and A, G and I tend to zero)  may give an impression of sophistication and precision, however it is effectively meaningless and not useful in any way. 

Where maths is used to model natural or manmade systems the variables in the equations must represent some measurable quantity which will have a tangible unit of measurement. Physicists, for example, will measure mass in kilograms, and energy in Joules and the production of energy is given by the equation E = mc2 where c is the speed of light (measured in meters per second). Engineers and economists will use maths in a similar way and variables will always represent real measurable quantities. 

By contrast the single equation in this paper uses undefinable and unmeasurable variables which are combined in a completely unspecified manner to produce an equation that predicts nothing and has no conceivable possibility for validation. All of the variables represent nebulous ideas such as “political economy” “Technosphere” and “Knowledge” , given the symbols Pe , T and K respectively, that may look impressive enough to convince an unwitting journalist that this is real mathematics. Unlike E = mc2, which can be checked by measurement and has survived the test of time, the “anthropogenic equation” cannot be checked because none of the variables are measurable. It thus uses pseudo-mathematics to produce pseudo-science. It is as meaningless as the answer to “life the universe and everything” which according to The Hitch Hikers Guide to the Galaxy is 42. 
Prof Peter Ridd
Physics Department
James Cook University

Loon in...Turn on...Black out

Finkel has no answers to resolving his task of decarbonisation, energy security and low cost electricity, and he won't find them on his foreshadowed trip to Denmark and Ireland.

There is only one solution. We must unwind the subsidies and regulatory interventions that have created the problems. Governments spend or impose regulatory costs like the renewable subsidies that amount to about $5 billion a year.  These are poisoning the economy as well as costing each household $500 per year.  We need politicians to announce that all subsidies to energy will be removed immediately and that there will no longer be any favouring of particular power sources. Only then will we see the supply system convalescing and recovering so that it once again provides the cheapest electricity in the world and all that entails for living standards. Read more

Submission on Preliminary Report of Finkel Inquiry

The Independent Inquiry into Future Security of the National Electricity Market (the Finkel Inquiry) issued its Preliminary Report in December 2016.  The Preliminary Report has:

  •  inaccurately assessed the Australian electricity market;
  •  misunderstood the nexus between global and national climate change politics and electricity markets;
  •  failed fully to recognise the costs being imposed on the market as a result of increasing levels of  renewable energy and other greenhouse gas abatement policies; and  
  •  offered guidance that is inappropriate for the market’s future development.    

The report canvassed different options, but of the seven themes identified as showing a future path, only one of these ”Prices have risen substantially in the past five years” can be said unambiguously to be true.  Most of the others are palpably false and even the one correct theme is not necessarily a guide to the future unless the policies that have been pursued over the past 16 years continue to be kept in place.  READ MORE

More government propaganda on green energy

This week, Julie Bishop reaffirmed Australia’s support for the disastrous Paris Climate accord at the same time as Trump underlined his determination to destroy it by appointing Oklahoma Attorney General Scott Pruitt to run the EPA.  Pruitt has been a leader in preventing the EPA from achieving its goal of a staged forced closure of coal fired generators by using the Clean Air Act.

That said, Pruitt felt compelled to trumpet his credentials as an environmentalist by letting everyone know that as Attorney General of Oklahoma (where the wind comes sweeping down the plain) he had presided over a wind share of electricity at 15 per cent.  If he tries for that share nationally (comparable to that Australia’s aiming for) he would undermine the low cost energy strategy that is a central pillar of the Trump to objective to “make America great again”.   

In the climate field the next target is NASA.  Who can forget how warmist pin-up scientist Brian Cox was allowed to show a NASA doctored temperature map in a Q&A gotcha moment designed to humiliate Senator Malcolm Roberts (presently in Washington at a meeting with Myron Ebell, who heads up Trump’s EPA transition team,) 

Gavin Schmidt, who has inherited the much arrested James Hansen in heading the climate alarmist branch of NASA and has warned off Trump.  Fat chance! 

The action on the EPA adds to that targeting NASA.  Bob Walker, a former congressman and Trump’s space policy adviser, said he’d like to shrink NASA’s Earth-monitoring programs. “We see NASA in an exploration role, in deep space research,” he said. “Earth-centric science is better placed at other agencies where it is their prime mission.” (ironically NASA got its responsibility for monitoring the atmosphere in 1985 under President Reagan). 

One area of NASA that is unimpeachable is the global temperature satellite-based records of the UAH in Huntsville, Alabama overseen by Roy Spencer.  These show a persistent undershooting of the temperature compared to modellers’ forecasts. 

In 1991, with the Rio environment meeting foreshadowed, the issue was little more than a glint in the eye of the more science-oriented politicians, people like Australian Science Minister, Barry Jones.

It was to be another six years before the first hesitant regulatory steps were taken with John Howard announcing a “target of an additional 2% of electricity to be sourced from renewable sources by 2010”.  The ambiguous tone was swiftly reinterpreted as “2 per cent of electricity” and this became quantified as 9,500 GWhs, a staging post to the current objective of subsidies to ensure 33,000 GWhs of large scale plus perhaps 12,000 GWHs roof top.  Current programs cost Australian consumers and taxpayers a growing $5 billion a year.   

The issue is being heightened in Australia ahead the December 2016 meeting of the energy ministers.  This has been preceded by the release of the Terms of Reference into the post 2020 Climate review.  Mr Turnbull, having been forced by a backbench revolt, to abandon this as a catalyst for his renewed push for a carbon tax placed the blame for raising it on Josh Frydenberg, in the process cruelling the prospects of a possible leadership contender.  Following the backdown, South Australia is threatening to go it alone with renewables and a carbon tax – the latest power outage shows how well that would go!

Mr Turnbull appointed a team under Chief Scientist Alan Finkel (“We are losing the battle against climate change”) to examine the national electricity market.  Dr Finkel was appointed Chief Scientist by Malcolm Turnbull and was formerly the chief technology officer of the now bankrupt green power business, Better Place Australia.   None of the team have experience in the key issue: the effect of intermittent wind energy on the wholesale market and its implications for transmission spending.  

Ministers therefore got another magic pudding variation of the energy intensity tax that Malcolm Turnbull has long promoted but was forced to disown following its airing as a logical corollary of the Post 2020 Review.  The Finkel review offered seven themes it argues are crucial.  These are

1.  Technology is transforming the electricity sector
But the technology they refer to is renewable wind and solar’ these are transforming the industry only because governments force their use with subsidies and regulatory requirements on users

2.   Consumers are driving change
But consumers are driving change only in the sense that government regulations that make it profitable for them to do so.  The change is driven by green propagandists and businesses seeking government funding.

3.  The transition to a low emissions economy is underway
But such a transition is underway only because it is being dictated by government.      

4.  Variable renewable electricity generators, such as wind and solar PV, can be effectively integrated into the system
Quite so but only at considerably more cost in terms transmission lines and reserve power to back up intermittency and low reliability of wind and solar

 5.  Market design can support security and reliability.    
True but at an additional cost

 6.  Prices have risen substantially in the last five years.

 7.  Energy market governance is critical

The Finkel group worked closely with and drew from another group with a pre-set agenda which produced a CSIRO paper, “Energy Networks Transformation Roadmap”.  Chock-a-block with assumptions, this suggests that, “$16 billion in network expenditure could be saved by 2050 if the grid buys support services from customers with onsite resources”.  According to the report, shifting to 100 per cent renewables by 2050 would mean:

  • An annual saving of $414 in average household electricity bills (compared with roadmap counterfactual, business as usual, pathway)
  • A medium family who cannot take up distributed energy resources is over $600 p.a. better off through removal of cross subsidies

The paper has the usual array of fanciful wavy lines just to prove it has been honest and diligent.  

Like NASA, CSIRO has become highly politicised over the years.  At one stage in the Rudd-Gillard era, science commentator and AEF Director, Tom Quirk (see estimated that half of the agency’s resources were directly and indirectly associated with the climate change issue.  With the election of the Abbott government, this share fell, though perhaps only because programs were re-badged. 

The latest post-2020 energy policy review shows we have yet to make any progress in restoring the energy market to the highly competitive one that offered contracts at $40 per GWh before ministerial interventions destroyed investment confidence and forced the replacement of cheap, reliable coal by wind and solar.  Energy contracts are now priced at over $100 per GWh in South Australia and $80 per GWh in Queensland.  It appears that it will be some time off before the unravelling of this commencing with the government taking Senator Cory Bernardi’s advice and withdrawing from the doomed Paris agreement, and removing all subsidies and spending on the carbon caper.     

Climate change regulations cut Australian fish harvest

Environment and Communications Reference Committee Inquiry into the impacts of climate change on marine fisheries and biodiversity

Australia’s fishing industry has greatly underperformed both in the catch of wild fish and in aquaculture. Australia could easily accommodate a tenfold expansion of aquaculture, currently worth $1 billion a year. It is prevented from doing so by the regulatory intrusions.

It is barely conceivable that human induced climate change, if it is taking place, could have an effect on fish numbers in the oceans – fish swim and plants also migrate in response to changing conditions. If there were to be any net effect of climate change it would be a shift in the locations of different species. 

See AEF Submission 

Higher energy costs to placate green activists & financiers

The trove of emails that Wikileaks is publishing help to explain what drives political decision taking.  This is especially evident in the environmental sphere.  US “charities” linked to Clinton campaign are funding lawfare and other opposition to Australian coal, oil and gas developments.

International finance flows to influence policy on climate change also go from Australia to the US.  Wikileaks reports an email to Hillary campaign chief John Podesta as “Here is the plan to go after WSJ and FOX on climate. I have 500,000 of this pledged if I can raise another million. It’s a real pledge from Graeme Wood in Australia. I sure hope something like this can happen it’s long overdue.”  Podesta has had many green business links to tap into subsidies including with Russian interests he now disowns.

But, according to the propaganda, subsidies for renewables are unnecessary since, as activists have been saying for the past 30 years, ‘clean green’ energy is soon going to be cheaper than the dinosaurian fossil derived stuff!  Recent electricity supply bids in Abu Dhabi with solar at 2.42 cents a kwh (cheaper than coal in Australia) are said to bear this out.

Politicians however are taking no chances and forging ahead with carbon taxes.  Canada is the latest with the Trudeau Government announcing a carbon tax starting at $10 per tonne in 2018 and rising to $50 in 2022.  The Canadians however, as they demonstrated by being the first country to renounce its Kyoto pledge, are often more enthusiastic with commitments than with actions.  For its part, having hosted the Paris Climate agreement, France is now considered unlikely to introduce its foreshadowed 33 euro per tonne carbon tax.

With all the financial flows greasing political campaigns and financing activists it is little wonder that no Australian government has found the resolve to stand against the green tide that is steadily degrading our power networks and raising energy costs.

While the Commonwealth is looking for cheap ways out of green energy imprisonment, having barely paused following renewables causing the South Australian electricity meltdown, state governments are already seeking new means of subsidising renewables.  Queensland is already planning 50 per cent renewables.

The latest move from Victoria foreshadows a “reward” to solar households with a payment for the environmental value their public spirited decisions to install rooftop panels has brought about.   That reward would be on top of the Commonwealth cross subsidy of $40 per MWh (in itself greater than the cost of fossil fuel derived electricity) and existing requirements on retailers to offer uncommercial prices for surplus generation from rooftops.  Almost all these involve hidden regulatory charges that politicians hope will be invisible to those paying them.

Little seems to staunch impetus to subsidising green energy that is making us all poorer.

Requiem for a failed electricity system

The trouble with wind

South Australia has on average over 40 per cent of its internally generated electricity derived from wind. This is one of the highest levels in the world for a load with a relatively small interconnection with other sources (the two interconnectors with Victoria have a capacity to supply about 20 per cent of the state's needs).

Wind/solar generation has two features that are of concern.

The first is that it is intrinsically high cost. As a mature technology, it will remain three times the cost of coal powered generation in Australia. It can only compete because it is subsidised by a regulatory charge on the consumer (thereby also not facing the same scrutiny if its support was through the Budget). It receives the subsidy whenever it runs, hence wind has an incentive to generate whenever it can, forcing established fossil fuel plant to be placed offline.

Wind's additional capacity depresses prices in the short term. Because most of the costs of existing fossil fuel plant are sunk, they will continue to operate. But once major repairs are necessary the established coal plant is scrapped.

Gradually the electricity price will rise to reflect the higher cost wind generation that is being substituted for the non-subsidised supplies. But this rise is muted as the higher prices will cause high energy intensive industries to close, reducing demand. Already we have seen the Point Henry aluminium smelter close and the Kurri-Kurri smelter mothballed. The same outlook appears imminent for the Portland smelter.

Secondly, wind/solar is inherently less manageable than fossil, nuclear or hydro-generation. It requires its fluctuating supply to be shadowed by counter fluctuations. This requires additional costs and careful management.

South Australia's electricity system breakdown

The preliminary report of the Australian Energy Market Operator (AEMO) on the south Australian blackout was published October 5. It summarized the position as

Generation initially rode through the (weather induced) faults, but .. 315 MW of wind generation (then) disconnected .. result(ing) in … the Heywood Interconnector overloading,, tripping the interconnector. In this event, this resulted in the remaining customer load and electricity generation in SA being lost (referred to as a Black System)

Actually the AEMO had already spilled the beans. In its Market Notices system amidst some the 30 or so routine operating statements that AEMO posts each day came Notice 516103 on 3 October. This not only said the collapse in wind generation had caused the system to black-out the whole state but went on to redefine nine wind farms as unreliable generators. AEMO basically said that the event is not a one-off contingency but that the cascading effect of a state wide South Australia blackout as a result of losing some pylons was intrinsically likely to re-occur.

This finding did not prevent the promoters of wind and other sources of power from placing themselves in denial. Tony Wood of the Grattan Institute wrote an article in The Australian headed, "Don't blame renewable energy for the state's plunge into darkness". Many other apologists for the renewable industry were scathing about those like Minister Frydenberg who suggested wind had played a part. And even after the publication of AEMO's report, the industry's propaganda journal, RenewEconomy, was claiming it "raises questions answers none".

Who's to blame?

AEMO itself as an entity is not immune from criticism. On many occasions its engineers have said that operating a system with high wind share is technically feasible.

In public has drawn attention to problems of integrating more wind but expressed confidence in doing so and been hopeful that this would be further facilitated by advances in battery storage technology. But, as Brendan Pearson's quote of the Chief Scientist Alan Finkel makes clear, this is overly optimistic. The Chief Scientist estimated that "if we retrieved all of the batteries made for use in mobile phones, laptops, cars and industry in 2014 and used them as back-up for the electricity system, we would have enough energy to power the world for just nine seconds."

And in its submission to the Senate in July of last year AEMO, while expressing some concerns about high wind penetration in South Australia, said

Based on experience to date and analysis of likely future outcomes, AEMO considers that it is technically feasible to integrate the renewable energy likely to emerge from the RET while maintaining the security of the power system. In the longer term if even higher levels of renewable generation eventuate, there is likely to be some additional grid support costs to maintain system security and to meet frequency standards. (Select Committee on Wind Turbines Submission 469)

The former head of AEMO Matt Zema (who, sadly, has since died, hence his private counsel is no longer confidential) was less sanguine at least in private. Mr Zema during the course of a private briefing in April of this year the former head of AEMO, made the following comments

The renewable developments and increased political interference are pushing the system towards a crisis. South Australia is most vulnerable with its potential for wind to supply 60 per cent of demand and then to cut back rapidly. The system is only manageable with robust interconnectors but these operate effectively only because there is abundant coal based generation in Victoria.

Wind, being subsidised and having low marginal costs, depresses the spot price and once a major coal plant has a severe problem it will be closed. New coal plants cannot be built because governments are hostile and banks will not finance them. Wind does not provide the system security. But the politicians will not allow the appropriate price changes to permit profitable supply developments from other sources. In the end the system must collapse.

Mr Zema thought that once network collapses occurred, Ministers would search for a fall-guy and would plump for AEMO. In the light of the agency's guarded public statements, AEMO may have cause to fear being accused of culpability in the collapse.

The political landscape on energy is littered with cant. It is conditioned by a public persuaded that global warming will bring untoward harm and that the costs of substituting wind and solar (both of which are depicted as fundamentally free) will be, at worst, trivial. This is powered by rent-seeking businesses, conventional energy suppliers included, which see a path to greater profit from investments which have their risks underwritten by governments to give assured returnsl.

The PM and his colleagues energy minister Frydenberg, industry minister Hunt and South Australian frontbencher Christopher Pyne have been forthright in hitting their political opponents. In the main this has been because of inconsistency between state plans and incentives. The ALP remains a supercharged romantic wedded to a 50 per cent renewable target by 2030.

But the Coalition has been little less supportive the patronage-rich renewable industry. Indeed, South Australian wind farms were built on the back of federal and not state subsidies and few demurred at their level until the earlier near miss blackout in July of this year.

In fact, the Coalition, while criticising the ALP's goal of 50 per cent renewables by 2030 itself has a goal of 23.5 per cent renewable share by 2020. Given that hydro cannot be increased, this means it is looking for 15 per cent from wind and solar by 2020. That implies a massive and unachievable expansion from those sources' present contribution of six per cent.


Each state has reacted differently.

In Victoria energy minister D'Ambrosio is powering ahead with increased renewable programs and supplementing this with prioritising battery storage. She is shown here with her advisers.

This entails horrendous additional costs. But the state is passing down the same de-industrialisation path as South Australia and if wind expansion causes Hazelwood power station to close will be partly offset by mothballing the Portland smelter, hence immediate price effects will be suppressed.

The South Australian government is shell-shocked at having moved from the frontier of a Brave New World to third world status. Queensland is now saying its 50 per cent renewable goal was just aspirational though a new report claims to show different paths to the goal.

Published in On line Opinion 13 October 201

The death of property rights

Using sophistry, courts seek loopholes through which law is stripped of tradition and its fundamental purpose in protecting the individual's liberty to use as he sees fit that which he owns. Now, the prevailing and abhorrent philosophy rationalises seizures in the name of 'public needs'

Australian regulatory attacks on modern agriculture have vastly reduced the capacity of the farming sector to adapt to new technologies and markets and have damaged the nation’s agricultural productivity. 

In the case of the Murray Darling Basin, Australia’s only really significant irrigated agriculture province, until recently farmers used about half of the rivers’ water.  Inspired by fallacious notions, including that salinization is occurring, bodies of self-appointed scientists and activists like the Wentworth Group lobbied to pressure governments into buying a quarter of the irrigation water farmers formerly used. This water was then directed to unproductive environmental uses.  Governments’ susceptibility to agreeing to such unfortunate policy measures was reinforced by claims of their appointed soothsayers, notably Ross Garnaut, who maintained that climate change will make irrigation impossible in the Murray Darling Basin. 

At least in the case of water, governments actually bought the rights from farmers (though in the spirit of Communist electoral victories, those promoting the purchases have sought to foreclose opportunities for successors to unpick them).  In the case of land, farmers’ rights have simply been stolen through regulations that make the land unproductive.  

One landowner who has taken a stance against this was Peter Spencer.  The Federal Court of Australia in July of last year decided against his claim that the value of his property had been taken by the NSW Government and the Commonwealth acting in concert.  Mr Spencer, who has appealed the decision, maintained that the NSW Government had enacted restrictions on land clearing that had expropriated the value of the property and this process enabled the Commonwealth to acquit the greenhouse gas abatement obligations it accepted under the Kyoto Protocol signed in 1997. 

The judge found that the New South Wales government had in fact “sterilised” or “taken” Mr Spencer’s land.  She found that this took place sequentially from 1972.  Under a process between then and 1984, the Soil Conservation Act had subjected 88 per cent of Mr Spencer’s land to a prohibition or restriction upon clearing that rendered it unviable for farming.  The State Environmental Planning Policy 46 – Protection and Management of Native Vegetation, enacted in August 1995 took the remaining 1,915 hectares of the property. 

In 2007, the NSW government offered to buy Mr Spencer’s land for $2.17 million, which it said was fair value given that its regulatory measures had all but eliminated the land’s productive capacity.  A valuation Mr Spencer had had prepared put its worth at $9 million in the absence of the regulatory restraints on its use.  The judge insouciantly suggested that “given Mr Spencer’s evidence of his current somewhat desperate and strained circumstances, his refusal to take up the exit assistance package could be characterised as unfortunate”[1].

Although the judge accepted that the regulatory measures of the NSW Government amounted to a taking of the property, she merely shrugged her shoulders with regard to this, accepting, as others in the judiciary had previously done, that land theft by state governments was a fact of life.  The most generous interpretation of her decision was contained in one of her statements[2], “there may have been a “taking” but there was no acquisition” because although the state had rendered the land all but valueless it did not actually take it off the owner! 

In comparison to state actions, land theft by the Commonwealth is, or was, more difficult to excuse because of section 51(xxxi) of the Constitution.  Made famous by the film The Castle, this formally requires the Commonwealth to provide fair compensation if it takes property. 

In addition to showing an indifference to state government takings of private property, the Courts however, have also allowed a whittling away of the Constitutional safeguards to property from Commonwealth seizure.  And in the recent High Court decision on plain packaging of cigarettes the Court decided no compensation was due because, although the tobacco companies’ property rights had been taken, those rights had been extinguished rather than used by the government.

The judge in the Spencer case used a variation of such mangled logic in considering whether the Commonwealth owed compensation.  The taking of the property provided “benefits” to the Commonwealth in that it helped achieve the target that had been agreed in the Kyoto Protocol.  The Howard Government sought to meet this even though the Protocol was only ratified under the Rudd Government in 2007. 

The judge accepted that without the prevention of land clearing Mr Spencer “could have pursued his projects and development plans throughout the later 2000s and onwards. Emissions from his clearing of land would then have been counted in Australia’s inventory and would have contributed to an increase in emissions reported[3].”  This would have required the Commonwealth to find offsetting savings elsewhere.  She also recognised that this was clearly part of “the impetus for the intergovernmental agreements and the increase in regulation over the clearing of native vegetation, in New South Wales and in other parts of Australia[4].”

Nonetheless she rejected that an informal arrangement was in place between the Commonwealth and the State, an arrangement that might allow an avoidance of Commonwealth compensation under the “just terms” clause of the Constitution.

Coming to that decision required considerable verbal gymnastics.  David Kemp, the federal Minister for the Environment and Heritage from 2001 to 2004 said the Commonwealth Government had been concerned to reduce emissions in order to meet its Kyoto Protocol targets, and to encourage that reduction the Commonwealth was keen to see broadscale land clearing reduced or stopped in Queensland and New South Wales (the principal states responsible for emissions of greenhouse gases from land clearing in Australia).  He communicated this to those States. As the judge expressed it, “He stated that the Commonwealth was concerned by the lack of effective action in New South Wales at the time and was seeking reform of the way in which the NSW Government managed vegetation clearance, including by way of Commonwealth programs seeking to influence the rate and character of vegetation clearing. Commonwealth’s only real concern with the NSW legislation was that it did not prevent the Commonwealth pursuing its strategies and that New South Wales was prepared to cooperate with the Commonwealth in pursuit of those strategies[5]. ”

Similarly Premier Bob Carr on the ABC – Late line with Philip Adams and in Federal Parliament delivering his maiden speech was pleased to admit he and Premier Beattie had stopped land clearing in NSW and Queensland and by doing so had enabled Prime Minister Howard to meet his Kyoto targets[6].

In spite of this evidence and more, the Judge managed to find that an informal arrangement between the states and the Commonwealth was not proven[7].  

Mr Spencer’s case is unusual only because he has chosen to make a fuss about the theft of his land.  Barnaby Joyce[8] has 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 apparently arrived at by comparing land values where regulation prevented productive use, to values of land that was unaffected.  If confined to land that was value-impaired as a result of greenhouse gas abatement provisions, the $200 billion works out at $2,300 per tonne of CO2.  This is based on the official estimates of emission reductions from ceasing land clearing, 87.5 million tonnes a year; over the course of a century $2,300 per tonne would, coincidentally, amount to $23 per tonne per annum, a figure similar to that of the carbon tax that the Gillard Government introduced and that the Abbott Government repealed. 

In adverting to these costs, Mr Joyce argued that we should “change the legislation to bring back a sense of justice for the theft of this asset and return it to the people from whom it was stolen.”  Interestingly, Dr. Kemp said there was no intention to acquire property – at least that of Mr Spencer- on other than just terms.  There is however no record of him seeking such compensation provisions in the course of pressuring the NSW to take regulatory action to prevent clearing.

The fact is that regulations over land have progressively created the costs.  But governments, rather than incurring these costs on behalf of the people as a whole, paying “just terms” for the taking and spreading the costs across the community, have simply seized the assets from landowners with no compensation. 

This is the nadir of legal decision making.  The courts have stood by while state governments have robbed particular citizens to achieve the environmental benefits they claim the people as a whole want.  In imposing such costs on a narrow section of the community, governments were acknowledging that the benefits they claimed were not valued sufficiently strongly by the community as a whole.  Governments were confident that the theft would avoid any general opprobrium that would accompany general increases in taxation. 

The courts have shamelessly allowed such transgressions to take place.  In doing so, they have sheltered behind a concocted fiction of precedents.  These have gradually chipped away at the notion of property rights protected from arbitrary taking by the government.  The courts cavalierly dismiss any “just terms” requirements under state law because they are not mentioned in state constitutions.  And they reinterpret the federal Constitutional provision to make it easier governments to override. 

From medieval times, common law and commercial law developed on the basis of judgements grafting common sense to principles of fairness in dealing with property.  In the fractured Christendom of continental Europe, this “merchant law” was enforced by embargo – a jurisdiction that got a reputation for swindling merchants would soon see trade dry up as merchants decided risks were too high to do business there. 

In England, united under a single jurisdiction, the common law developed whereby judges agreed to follow each other’s decisions to ensure consistency.  And as Jim Spigelman[9] reminds us, Magna Carta, which had many pre-cursers and was reaffirmed over 50 times in the years following 1215, was essentially about preventing the king taking property.  

The fundamental principle that governments would not take property from individuals for public purposes except on “just terms” became the Fifth Amendment of the American Constitution in 1790 once the former colonials realised that the absence of a king did not mean the absence of potential sovereign seizure.  The Fifth Amendment was a recognition that one-man-one vote could bring about the now all-too-familiar tyranny of the majority. 

In watered down fundamental rights set out formally in Constitutions and implicitly in other legal jurisdictions, the legal fraternity would seem to have had a philosophical change of attitude to the promotion of benefits. Until relatively recently courts tended to be biased in favour of productive activities against unproductive. Thus in 1927, the US Supreme Court (276 U.S. 272 (1928) decided cedar tree owners’ trees in Virginia must be destroyed without compensation since diseased cedar trees could damage apple orchards and apple growing was a "principal agricultural pursuit".

Whatever the underlying cause, we are seeing a judiciary that has ceased to be the impartial protector of property rights that was its original contribution to nurturing prosperity.  Using sophistry, courts seek out loopholes through which law becomes interpreted not in ways that maintain its tradition of defending property rights against the government but which provide a rationalisation for the seizure of private property to meet public needs.  Justice and liberty aside this has deep seated implications for the efficient operation of economies.  Individuals’ uncertainties over the rights to enjoy and prosper from ownership of property will mean a weakening of the wealth creation process. 

(first published Quadrant on line 11 October 2016)


[1] Mortimer J, Spencer v Commonwealth of Australia (2015) FCA 754 (201)

2 FCA 754 (386)

[3] FCA 754 (247).

[4] FCA 754 (248)

[5] FCA 754 (97)

[6] FCA 754 (344)

[7] FCA 754 (385

[8] 9/04/2010 Hansard: Finance and Public Administration Reference Committee, Reference: Native vegetation laws, greenhouse gas abatement and climate change measures


Tom Quirk on the SA electricity debacle

 It looks like a natural disaster but brought on by the fragility of the South Australian power system caused by the size of the variations in wind power.

 The failure is most likely to have been triggered by the violent fluctuations from the Snowtown wind farms (Figure 1 and 5). Shortly after 3 pm there was a loss of 200MW with a partial recovery some twenty minutes later of 100MW. The total wind farm supply for South Australia also shows these variations (Figure 2).

This would have put a shock to the system for frequency stability at 50 cycles per second. For most of the day the local gas fired generators were only supplying 100 MW (Figure 3) with the balance to match demand with supply coming from Victoria. But the local generators started to increase and vary their output with first a 150 MW loss at Snowtown just before mid-day and then 50 MW variations that followed. Shortly before 3 pm the Hallett wind farms lost and then recovered 70 MW in a 20 minute interval (Figure 4 and 6). This added to the final Snowtown wind farm 200 MW loss. This detail is shown in Figure 5.

So the system instability could trigger Victoria shutting off the link to South Australia and the blackout followed.

The physical network may not be very robust as can be seen in images of broken pylons. Transmission lines are expensive at $1 to $3 million per km. Each wind farm must be connected to deliver maximum power to the network even though its average performance might be only 33% of maximum so connection costs may have been held to a minimum..

The trouble was north of Adelaide so could it have been isolated with the remaining network continuing or was so much power coming from the north that a blackout would follow no matter what was done

Figure 1   Snowtown `1 2 3    150 km north of Adelaide


Figure 2 Total South Australian wind farm production

total SA.png

Figure 3 Total fossil fuel supply from gas turbines (and diesel?) generators


Figure 4Hallett 1 2    150 km north of Adelaide


Figure 5Snowtown wind farms Data source AEMO

snowton c.png

Figure 6 Hallett wind farms Data source AEMO

Post script.  AEMO  somewhat corroborated this analysis at 9 a.m. on 5 September as follows

"The preliminary report explains how severe weather moved through South Australia on the afternoon of Wednesday 28 September 2016, with high winds, thunderstorms, lightning strikes, hail, and heavy rainfall. The weather resulted in multiple transmission system faults including, in the space of 12 seconds, the loss of three major 275 kV transmission lines north of Adelaide.

"Generation initially rode through the faults, but at 16:18hrs, following multiple faults in a short period, 315 MW of wind generation disconnected, affecting the region north of Adelaide. The uncontrolled reduction in generation increased the flow on the main Victorian interconnector (Heywood) to make up the deficit and resulted in the interconnector overloading.

"To avoid damage to the interconnector, the automatic-protection mechanism activated, tripping the interconnector and resulting in the remaining customer load and electricity generation in SA being lost. This automatic-protection operated in less than half a second at 16:18hrs and the event resulted in the SA regional electricity market being suspended."

Flawed economic modeling used to destroy mining

Alan Moran

The Australia Institute has commissioned research seeking to demonstrate that banning investment in coal mining would have a negligible effect on the Australian economy.  The research results rests on a near total transferability of capital, labour and technology to almost identical opportunities deemed to be present elsewhere in the economy.  

The research found a ready market with kindred spirits within our very own ABC.  But the message behind it also has a wider currency not only with The Greens but also with sections of the ALP and even withing the coalition.  We must find a way to deliver the message that investment in resources (and modern agriculture) is not only essential to our standard of living but also fully consistent with maintaining a pleasing environment.  

See the following piece at Spectator on line.

Fracking restraint denies us wealth & has no upside

Alan Moran

The Andrews Government in Victoria has set in motion regulatory arrangements that will permanently prevent hydraulic fracturing (fracking) and other measures of tapping “unconventional” gas while maintaining in place an embargo of all other on-shore gas exploration until 2020.

Such intervention to prevent wealth creation has come a long way in a short time.  Five years ago, Friends of the Earth and other green alarmist agitators garnered support among the farming community to oppose fracking and other production technologies that allow gas and oil to be extracted from coal seams and shale.  The farmers had little to gain from the mining and were susceptible to opposing anything new that someone said would hurt them. For the green groups it was just another step on the way to banning search for and use of all fossil fuels.

Fracking involves the use of tiny quantities of benzene and other chemicals to tease out gas and oil from geological structures that are difficult to mine under conventional procedures.  Fracking itself has been around for 65 years but it is only in the last decade or so that it has been extensively used.

Two million of wells have been sunk worldwide – mainly in North America and, though green groups raise scare campaigns, the US EPA has found not one case of harm.

Meanwhile the technology has revolutionised the energy positions of the US and Canada, and now accounts for more than half of oil and gas production.  Though the Obama Administration has been antagonistic, banning fracking on federal lands and opposing pipelines carrying the gas the technology has transformed the US into a net energy exporter.  In Canada it has driven down electricity generation costs – in the case of Ontario from the previous five cents per kWh to two cents – and a tenfold expansion is expected over the next 25 years.  Energy developments based on fracking and similar technologies have been a rare bright spot in the US economy over the past decade.

Green groups have had great success in focussing opposition to the technology in Australia.

Only in Queensland has the government placed few restraints on unconventional gas production.  Even so coal seam gas now accounts for one-third of total Australia production with most of the Queensland supply earmarked for export.

Working with shock-jock Alan Jones with a claim that fracking will harm farming green groups have bullied the NSW government to place 90 per cent of the state off-limits to the technology.

Even greater damage has been done in Victoria.  Spooked by the FoE campaign, a pusillanimous Victorian Coalition government in 2012 placed a temporary ban on fracking for gas and gas exploration generally.  Reviews of this, notably by Peter Reith, found that the technology poses no threat and the bans can only harm the state’s economy.

But Victoria’s Coalition opposition made it clear that they would extract political capital from an ALP government relaxation of the embargo.  This may have been instrumental in ensuring an Andrews government that is, in any event, opposed to fossil fuel energy is now to impose a permanent ban on fracking and other methods of extracting unconventional gas.  It is also to extend the embargo on conventional gas exploration at least until 2020.

Green groups have expressed disappointmner that a window has been left open for conventional exploration after 2020.  Astonishingly, the state shadow energy and resources minister, the Liberal’s David Southwick, said that, in adopting the Opposition’s own policy, “Daniel Andrews is condemning Victorians to higher energy costs at a time when cost of living pressures are making life tough.”

Nobody knows how much potential wealth is being locked away as a result of Victoria’s ban on gas exploration.  The US Energy Department puts prospectivity in Australia as comparable to that of the US.  It is certain that the policy will mean dearer domestic gas and electricity prices.  It is even possible that the policy is preventing a vast new source of income being created.

All this is being prevented by a body politic that is extremely risk averse and refuses to take on leadership roles to combat green mysticism.

The Climate Change Authority's specious advice

Alan Moran

There have been several hundred Australian analyses of climate change policy and its costs and benefits.  Most have provided profundities and attractively presented impressive looking modelling, normally demonstrating that the medicine, though bitter at first, will make us better and possibly richer in the long run.

The latest such document is that of the Climate Change Authority and it does not disappoint.

It concludes, unexceptionally, that market mechanisms – in plain words a carbon tax — offer the lowest cost means of getting from A (a world where we would be at 650 parts per million CO2 equivalent) to B (a world where we would be at 500 parts per million).

To achieve this means a net return of carbon dioxide, now buried in fossil fuels, back into the atmosphere which brings about a rise in average global temperatures.  That increase is a little over 1°C (during Roman times temperatures were 2-6°C warmer than today) unless there is an additional feedback via water vapour but the climate models on which such a rise is estimated have so far proven to massively overstate the temperature record.  The real world shows temperatures to have increased 0.3°C about a third of the rate forecast by climate models incorporating a water vapour amplification.


At the heart of the Climate Change Authority’s analysis is consultancy work commissioned from Jacobs, which puts the average cost of abatement 2020-2050 at under $30 per tonne of CO2.  This translates into higher prices for electricity and other energy supplies.  In the absence of carbon taxes and regulations, Australia would be able to generate electricity, mainly from coal, at about $40 per MWh; a $30 per tonne tax increases this by about 70 per cent.  For household consumers once distribution and transmission costs are added-in this means a price rise of about 25 per cent; for large industrial consumers the price rise would approach 50 per cent.

Of course, if the economy proves highly flexible, the costs are even lower.  But any flexibility operates largely by choking off large and intensive energy users – making us poorer.  Politicians glibly assert, because the economic advisers they choose tell them, that we can manage with less energy and other inputs into production.  They fail or choose not to recognise that this means reduced output and less income.

Moreover, the CCA’s “modelled” tax of $30 per tonne is a price that is one among a bewildering array of estimates.  These include:

  • A Brookings Institute paper which puts the price at $US65-167 per MWh if gas is to displace coal
  • The OECD/Australian Treasury paper which puts the price for Australia at the equivalent of $US 75 per MWh
  • Buried on page 251 of the Garnaut report is an estimated 2050 tax of $250 per tonne/MWh, a price that itself incorporates some heroic assumptions about new technologies.
  • In 1994 ABARE put the tax Australia would need to achieve a 20 per cent reduction in CO2 emissions at $600.

Moreover, it appears that the $30 per tonne tax was selected arbitrarily and the consultants were required to use it.  The CCA on page 13 of Jacob’s modelling has a tax of $67 per tonne rising to $270 per tonne.  A tax of $30 per tonne might mean a wholesale electricity price of $70 per MWh compared with the business-as-usual price of $40.  But a tax of $270 per tonne lifts the wholesale price to over $300 per MWh.

Not only, therefore is the CCA report a case of garbage-in-garbage-out but the garbage put into the report itself has been tampered with.  This document confirms the original intent of the Abbott Government to scrap this sorry excuse for an advisory body as being correct.

No coal. No oil. No fracking. No nuclear. No GMOs. A different world is possible!

No coal. No oil. No fracking. No nuclear. No GMOs. A different world is possible!

They make It easy being green

Until they are stopped, the Greens will use regulatory stealth to stymie growth and throttle industries they want to see brought down. The Illegal Logging Prohibition Act is one of their nastiest and handiest tools, so why hasn't the Coalition done away with it?

While there has probably never been a stronger sentiment in the Liberal National Party (LNP) government that environmental policy is off the rails, little has been done in its two years in office to repeal or amend the raft of legal constraints which now purport to protect the environment. Reversal of excessive restrictions on agricultural chemicals levels is about all the LNP Government has achieved. 


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The climateers’ moveable feast

After the Paris powwow in December the action switched to Davos. Then the serried legions ofjetsetting carbonphobics repaired to the four corners of this tormented planet with renewed messages of a doom that only other people's money can avert

The Paris COP 21 at the end of last year may have set an all-time record for conference attendance of officials, NGOs and lobbyists—40,000 plus at least 5000 from the media. Virtually every world leader made an appearance, many changing their schedules at short notice to attend the opening rather than the close. There may have been a thousand booths of different organisations and countries, and in the course of the deliberations there would have been over 800 formal meetings and presentations.

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