The review of the Australian energy market presented on Friday to Prime Minister Malcolm Turnbull and the leaders of the states and territories is driven as much by politics as it is by policy. The report by Chief Scientist Alan Finkel might thus disappoint science and economics purists, but it has the potential to break an impasse that has for a decade shackled this nation's ability to respond effectively and efficiently to the existential threat of global warming caused by human activity, particularly through the burning of fossil fuels.
So, while much remains unclear because the government will need time to respond to the report and to seek cross-party support for any measures, Dr Finkel has provided a path out of a quagmire of vested interests and political opportunism.
The key to mitigating the risk is to put a price on carbon that reflects not only its energy generation benefits (which create private profits), but also the associated environmental costs (which lead to public losses). The most efficient and effective way to set such a price is via a market mechanism – a cap and trade system, for example. Then prime minister John Howard took such a policy to the 2007 election, as did the eventual victor, Kevin Rudd. But that bipartisanship unravelled in 2009 after then opposition leader Malcolm Turnbull lost a party room ballot by one vote to climate-sceptic coal champion Tony Abbott.
Read the Editorial in today’s Melbourne Age - “Chief Scientist's report paves way for end of climate plan war in Australia.”