This is more about politics than anything. It wedges a deeply divided Coalition as it pulls the ground from under the Coalition's feet.

I'm depressed.

Most conservationists advocate a stabilisation objective below 450 ppm CO2-e on the grounds it would give the globe a good chance of avoiding warming of greater than 2 degrees C above pre-industrial levels.

The science suggests a 550 ppm outcome is likely to lead to an increase in the global average surface temperature of around 2 to 4.5C, with a best guess of 3C. Hence, the Government's policy is consistent with an atmospheric concentration outcome that locks in a substantial risk of major climate-related disturbances,

That is not good news for the Great barrier Reef; or the southern part of the Murray-Darling Basin where with every degree centigrade rise in temperature you get 15% reduction in inflows. That is 45% reduction on top of the current inflows which have been way below normal

Me too Nan.

I'm sorry.
Some time ago, many moons, there was a post here implying criticism about Penny and the ALP and the lack of positive action/policy on carbon reduction.
Sort of in mild rebuke I posted a newspaper article which said that Penny was furious, downright bloody angry in fact, with the treatment she was receiving from the meetings she was having with industry groups, that is the big polluters. I sort of suggested that this was a promising sign that flushed with the knowledge that as the popularly elected government of Australia the ALP was going to override the vested interests of big business not cave in to their outrageous demands and instead do what was best for 90% plus of Australians, heck even do our bit for the world.

I was wrong.

OK my previous comment hasn't appeared yet, I'm presuming it will cos I didn't swear once. Or at all.
Anyway I referred to an article about Penny clashing with the big emitters.
Here it is.
http://www.theaustralian.news.com.au/story/0,25197,23781070-5013404,00.html

These excerpts are interesting:
-"Big business and economists are growing concerned about the Government's refusal to budge on its 20 per cent renewable energy target by 2020 on top of an emissions trading scheme."
-" The Rudd Government is pushing ahead with its aggressive program ..."
Note the word 'aggressive'.
-"The Productivity Commission last week launched a scathing attack on the proposed targets.."
-"Senator Wong is also understood to have signalled the Government's reluctance to compensate owners of coal-fired power stations for the multi-billion-dollar losses in asset values they face..."

fred,
the global financial crisis happened in the period from May to December, with the consequence of the end of the resources boom. It's big happening since the only growth strategy that Australia had was selling ever more iron ore and coal to a booming China. Infrastructure development was meant to speed up the delivery of the product to China.

Rudd and Swan don't have a new growth strategy. The China boom was meant to provide an insurance policy/ backstop as Australia slowly made the switch to a low emissions economy and increased its investment in human capital in an information economy.

Rudd and Co see an emissions trading scheme as a cost on the economy during a period of low economic growth, and that makes things difficult for the energy business to junk its dirty capital assets--eg., in the La Trobe Valley, Victoria, with all its fossil fuel deposits.

So Wong had to change her tune. The end of the China boom and the crash of the gungho miners changed the cards in her hands. She played safe---survival of the Rudd Govt

fred,
the Rudd Govt had to avoid an investment strike by the energy companies ----there has to be investment in new sources of energy. Rudd cannot afford a series of blackouts across the states with an election coming up in 2010.

All that cash given to the coal-fired electricity generators is an insurance policy against such a strike by capital.

What is missing is the renewable energy side of the equation. It is true as Keith Orchison points out in Business Spectator that:

Rudd, Wong and company have committed Australia to a carbon-constrained economy, an extra-ordinary goal for a country so heavily dependent for its reliable, cost-competitive energy supplies on coal, gas and oil. In doing so, they have recognised the substantial costs the process will impose on consumers, especially trade-exposed business, and sought to mitigate the burden.

Politically, the fine-tuning is now down to the Senate. If the government can’t wear a compromise, will Rudd go to the polls next year to get a mandate for his policy?

Orchison adds that:

Before he can get away with that, he will need to drop the other shoe: the policies to establish an enlarged renewable energy industry and they, too, will need to be negotiated through the Senate.
It would be helpful if he could bring himself to publicly acknowledge the cumulative cost of all this – not far south of $150 billion over 10 years by my arithmetic – and to state clearly the volume of greenhouse gases abated by the process (rather than playing the per capita game, which is meaningless to most of us).

There is very little from Rudd and Wong about those policies designed to establish an enlarged renewable energy industry.

What really depresses me is that the signs seem to be those that indicate an undermining of the growth of an enlarged renewable energy industry by Australia's renewable energy companies. Why?

"the Rudd Govt had to avoid an investment strike by the energy companies"
Pardon?
That was a joke surely?
I mean you are kidding aren't you?
Look at what you have said.
"HAD TO'. Really? No altenatives, no options no way around whatever may be imagined as a problem. That's how you reckon a government, of the people by the people for the people type of thing, should react to THREATS?
Of "STRIKE", that your word?
Just roll over and give in when a bunch of unelected fellas mumble 'we'll take our money and walk away'??
Rubbish.
Absurd nonsense.
Call their bluff.
Point out that there are others in the game too. Point out that there are alternative energy sources.
Point out that they will make enormous losses if they sulk.
Point out that they don't run the country the government does.
Oops that may be the weak point in my argument. I have a slightly more optimistic belief.
But if it is, then please don't pretend this is a democracy.

And note, certain implications follow from that.

fred,
an investment strike here means an unwillingness to invest in new technology by the energy companies because they have been too disadvantaged by the costs of an emissions trading scheme. The government cannot force them to invest--the market doesn't work that way. It has to be in the self interest of the companies to invest in new technology--ie., they can make money on it ---- and so the market has to designed to encourage them to see that it is their self-interest to take the low emissions pathway.

This hasn't been done yet. However, I agree with those who reckon that Australia's high-emission coal-fired generators are like the Detroit car makers----caught on the wrong side of technological change and changing consumer preferences.

I know what an investment strike is Gary.

What really irritated me about the post was the explicit blind assumption that the ALP had absolutely no alternative to abject surrender.
There are a range of alternatives which as you say haven't been done yet.
For micro examples of the 'threat' take the statement of Nyrstar recently.
Complaining that they were not getting a good deal and threatening they would close up shop and go home and gut employment in Port Pirie in the process.
And what has happened?
Bluff.
It was an empty threat.
Similarly Mitsubishi, took their millions and shot through anyway but Adelaide hasn't closed down.
Wasted money.

If we do get de-investment, unemployment etc, are there NO options, absolutely none, that a govt can take?
Short and long term.

Or do the HAVE TO give in?

fred
Nyrsta did the blackmail thing big time but it isn't an energy producing company. They are a heavy user of electricity for their Port Pirie smelter and so are like One Steel or Brighton Cement.

There is no indication from Nyrsta that they would be investing in alternative forms of energy as part of an enlarged renewable energy industry. They are just interested in cheap electricity from coal-fired power stations.

Gary's post refers to the failure of the Rudd Government in "scrapping the old polluting technology for new, cleaner tech, such as the gas and wind power stations now being built"; a process that would enable "Australia to become a leader in low pollution industries."

OK lets go back to the statement that caused my ire.
Which wasn't Gary's post but the comment by Peter with all its presumptions..
"the Rudd Govt had to avoid an investment strike by the energy companies".
Do you agree with this staement?

Fred,
I stand by the comment. I was trying to describe some of the calculations that Rudd + Wong would need to make in order to get their emissions trading scheme reform through---eg.,the legislation has to go through the Senate.

One of those calculations is the strong probability that the companies and governments (eg. NSW + Queensland) that own the coal fired power states would not invest in lower emissions technology to meet increasing future demand.

The assumption is that Rudd + Co are determined to defend the old energy economy despite their lofty green rhetoric. They effectively guaranteed unimpeded growth to 2020 in our worst carbon-emitting industries.

Why? Because the Government’s economic policy is all about the preservation of our current industrial structure whilst encouraging them to shift in little steps (not lose jobs and have the unions turn on them) to low emissions technology (ie.,geo-sequestration). King coal must be saved.

Personally I think that Rudd has given way too much to the biggest polluters, even if they now have to pay to pollute. Coal has had its day as a cheap source of energy, and the owners of the coal fired power stations have known what has been coming fo r a decade or more (when they bought the power generators from the Victorian and SA governments).

interesting debate. We are talking in market terms about the process of creative destruction here----the destruction of the energy industries with their coal fired power stations and the growth of new renewable energy technologies.

Rudd will not tolerate creative destruction. He will defend the old in the form of "clean" coal.

Rudd, Wong and Garrett must be feeling the heat about them being brown not green---- shoveling all that money into research for clean coal technology whilst doing very little to support renewables.

The Canberra Times reports that the $100,000 household income means test on solar power is to be lifted.

Under the new system, to come into force in July next year, the rebate will be smaller but everyone - households, businesses and community groups - can access it, regardless of income. The maximum rebate, for an average-sized 1.5 kilowatt system, will be about $7,500. A smaller-sized 1.0 kilowatt system will attract a rebate of about $5,000.The value of the rebate will fluctuate and it will decline from 2012

It's unlikely that they will admit that they made a mistake in putting constraints on the shift to solar power. Garrett will spin it with a straight face and crooked tongue.

The next step is make the shift from rebate to a gross feed in tariff for solar panels.

fred,
there is a good article by Jim Douglas--Rudd's green fades to grey in the Canberra Times. Douglas says that the coal-fired generating energy industry has

made not one single effort to do anything about it [greenhouse gas pollution]. Bear one thought in mind here: the coal-fired power plants in use in Australia are quite old; the capital used in their construction and occasional upgrades made, is well and truly depreciated. Sensible electricity tariff setting and significant reinvestment into lower emission power technologies would have been well within the reach of these utilities years ago, had they bothered to explore these options.

He adds that given their well-known ability to call state and federal governments to heel whenever they choose, and the complicity of the coalmining sector and other large emitters in this ostrich-like strategy, nothing of the kind was attempted.

You know Peter I agree with all that you say, hang on I'll re -read to make sure.
Yep. No problems with that. Particularly like this.."Personally I think that Rudd has given way too much to the biggest polluters,..."
Exactly.
The are stacks [not smoke stacks] of other options rather than go belly up because they are afraid of a possible strike. Which I note would be a two edged sword for the strikers.
The bottom line is that the Rudd govt. did not HAVE TO [as in an imperative] give in to the threat by the polluters [cos I'm sure Penny was given lots of hints], they CHOSE to.
Habit, I suspect. Mixed with fear.
Presuming that the power of the polluters and their allies is overwhelming.
It's not you know, strong yes, but not always overwhelming.

Fred,
I basically agree with Kenneth Davidson in The Age who says that we need deeper cuts in emissions and higher carbon taxes to drive structural change so Australia can engineer comparative advantages in the new energy-efficient industries and rebuild its manufacturing base.

He adds re the Rudd government's response that:

The tragedy is that [it] looks like another replay of the old story — a toxic combination of market and government failure to capitalise on Australia's combination of intellectual capital and individual genius for inventiveness, leading to our best ideas being exploited overseas. It should be obvious — it is easier to restructure in a recession because the collapse in private spending means there is no necessity for higher interest rates and taxes to "make way" for new investment.

Then he says something important---- the spectre of climate change provides a clear direction for industry policy. Given the importance of climate change, every policy, especially regulation, taxation and transport, should be examined through the prism of climate change and ranked inversely against its contribution to greenhouse gas emissions.

That is not currently happening in state and federal governments;

re the investment strike issue ---see this article by Robert Gottliebsen in Business Spectator.

It talks in terms of the looming bankruptcy of Victoria's Latrobe Valley power stations. They are unable to refinance debt in the wake of a big fall in the value of coal fired power generators. So the banks have to take them over. They cannot sell the power station cos of low asset value. So

what the banks can do is to try and reduce their exposure by accessing the power stations' cash flow. The best way to do that is to lift prices. Substantially. There are some regulations that might curb such an action that but now that we have a national grid they are not severe. The other states do not have the capacity to replace the vacancy left by the Victorian brown coal stations.

To replace the coal fired stations in Australia carbon free would require an enormous investment in renewable or nuclear energy.

What would be more economical would be for the states to replace them with new gas fired stations but that will take time and they would have to pay market prices for gas and not the discount levels that are currently being paid to producers.

Big problems looming.