Triumph of the impossible

A rational environmental policy underpinned by pragmatism can deliver the impossible trifecta of energy that is more affordable, more reliable and greener. By Nick Cater.

The conviction that global warming requires us to find new ways to burn other people’s money is hard-baked into the narrative of environmentalism.

Last week, the Grattan Institute took to cooktop shaming to make that case for switching to electricity. If you’re cooking with gas, we were told, you’re playing with fire.

Banning the installation of gas in new homes is “a prudent, no-regrets option” as a prelude to phasing out gas altogether.

“It may be painful for some in the short term,” Australia’s richest think-tank concedes, “but neither wishful thinking nor denial will serve us well.”

Installing electric cooking and water heating appliances adds $2500 to the price of a new house, and retro-fitting an existing house will cost $3800 more. What about the poor people? No problem. Electricity companies can pay for new electric appliances and recover the cost over time through additional electricity charges, says Grattan.

Electricity may one day be cleaner than gas, but to force a switch now would only increase emissions. Cooking with electricity is effectively cooking with coal for 60 per cent of the time and gas for another 20 per cent.

The incessant demand to commit to a target of net-zero emissions by 2050, if not sooner, ignores the fact that we don’t yet have the technology to get there. Pragmatism is an inadequate response to the apocalypse they insist is heading our way. It is tempting for a Liberal government to avoid the argument by making the pledge anyway. After all, Scott Morrison’s government will be in its 12th term before it has to deliver.

Yet a commitment to net-zero emissions in 2050 demands that we accelerate emissions reductions now, leading to the dangerous, knee-jerk responses of the kind advocated by Grattan.

Gas is a fossil fuel, ipso facto, it must be purged from our energy supply, or so the thinking goes. Hence Grattan’s expectation that gas will inevitably play a declining role in our energy mix, and we must start turning down the flame right now, whatever the cost.

The path to net-zero emissions will be revealed in the fullness of time and may or may not mean turning off the gas. It is bound to include offsets, such as the sequestration of carbon dioxide into soil where it can be put into productive use, producing better food, more productive farms, greater drought resilience and biodiversity.

The notion that the energy sector alone can achieve net-zero emissions is an assumption it has become heresy to deny. For some, the cost of over-ambitious emissions reduction targets is proof of their virtue.

Economic pain and environmental gain have become inextricably linked in the climate change narrative. Last year the same think-tank warned: “Australia will need to make faster, more expensive changes to get back on track.”

Yet the assumption that efficient technology costs more than the technology it replaces runs counter to our experience. A Honda Civic today costs roughly the same as a new model did in 1973 but delivers twice as much power and lower emissions, thanks to investments in research and development in a highly competitive market.

For the past 50 years, however, the environmental debate has become shrouded in apocalyptic thinking and overlaid by puritanical guilt, led by people who doubt the power of free-range human ingenuity to deliver a better future. In the dull, zero-sum world of sustainability, anything that adds to the joy of human existence imposes a cost on the rest of nature.

Rational thinkers on the centre-right have abandoned the space, leaving the ironically named progressives in charge. The oil crisis that gave birth to the hatchback reinforced the conviction that excessive consumption was draining the world of energy and that economic growth should be curtailed.

Innovation in both car manufacture and oil exploration has since allayed the fears that peak-oil was just around the corner, but the anxiety lingers.

Grattan’s speculative assessment that the price of gas will make it too expensive to bring down the price of electricity or the cost of industrial production underpins its claim that it is yesterday’s fuel.

Yet the spot price of gas has fallen considerably in the east coast market since its peak early last year. Lower-priced offers from gas-powered generators in turn helped bring down wholesale electricity prices, according to the Australian Energy Market Operator.

The removal of moratoriums to unlock supply in NSW and Victoria, together with the expected arrival of re-gasification terminals in one or more east coast locations, will further bring down prices, together with government moves to introduce more market transparency and new investment in gas pipelines.

The prospect of cheap and abundant gas should calm the nerves of those concerned about greenhouse gas emissions. The renewable energy sources in which we have invested so heavily will at last be able to pull their weight supported by quick-fire gas, which Chief Scientist Alan Finkel describes as “the perfect complement to wind and solar”.

The impossible trifecta of energy that is cheaper, more reliable and greener at last seems possible, a win-win for people and the planet.

This what a rational environmental policy might look like if a rational approach was ever articulated. It is advancement through incremental improvement rather than by abolishing capitalism and starting again.

A Liberal approach to the environment sees no conflict between economic wellbeing and the environment. Indeed, it recognises that a strong economy is a precondition for environmental improvement and that attempting to reduce energy consumption by constraining supply is a race to the bottom.

Crucially, it avoids the conceit of perfect knowledge in a policy realm that is exceptionally complex. It does not attempt to pick winners or over-promise. It prefers, in the words of FA Hayek, “true but imperfect knowledge, even if it leaves much undetermined and unpredictable, to a pretence of exact knowledge that is likely to be false”.