Day 117: 'Hand in glove' with the US

An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.

Good morning and welcome to day 117.

Today in summary: ExxonMobil and BHP will announce a new gas field in Victoria, potentially preventing future shortages; the AEC says a reference price for power would be better for customers than a default market offer; and the government announces a funding increase for the AER and ACCC given their extra workload.

— Sophie

Today’s policy spin level: 💨💨💨


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  1. ExxonMobil and BHP will today announce a new gas field to be developed off the coast of Victoria, as Jemena opens the first part of its new gas pipeline in the Northern Territory, which will be the first to connect NT with Queensland. The SMH reports that ExxonMobil and BHP made a final investment decision yesterday on the Bass Strait gas project, and it aims to be producing by 2021, which would help Victoria avoid a projected major gas shortage in 2022.

  2. Retailer lobby group the Australian Energy Council has commissioned a report showing that most consumers would benefit more from a reference price than a default market offer. The report, by Oakley Greenwood, will be fully released tomorrow. The AEC says it shows that a DMO would see both bad and really good offers disappear from the market, meaning:

    “customers who are disengaged benefit slightly, at the expense of those who have engaged in the market”, while “a reference price aims to make it easier to switch to better offer, incentivising customers to engage in the market.”

    ABC

  3. The Morrison government says it will provide the Australian Energy Regulator with an extra A$23 million over five years, and the ACCC with A$28 million over seven years, to “help lower power prices and ensure customers get a fair deal”. The last funding boost the AER got was in July 2017, where it was allocated an extra A$67 million over four years; the ACCC warned in October that its budget was climbing in response to increased demands from federal government.

Geopolitics

In Poland, Environment Minister Melissa Price has told a UN summit that Australia is "committed to the Paris Agreement" and “must play its part”.

Negotiations are currently underway to create a rulebook for implementing the Paris commitments, and Australia has been criticised for “working ‘hand in glove’ with the United States to block progress”.

The Commentariat

In the AFR, John Roskam - executive director of the Institute of Public Affairs - writes that political crises in Britain, Europe and the US are because “on many issues the politicians and the public no longer agree with each other, and parties have no way of responding to this change”.

“Despite what Liberal and Labor politicians believe, energy and climate change policy doesn't lend itself to a managerialist fix either. The choice between lower carbon emissions and lower energy prices is ultimately determined according to the principle of what subjective value is to have priority.”

Three more things

  • Australia’s on track to miss its Paris target of a 26%-28% emissions cut by 1.1 billion tonnes of carbon emissions, according to consultants Ndevr Environmental. Ndevr produces data like the government’s NGGI quarterly reports but excludes land use data, which it says is unreliable. Managing director Matt Drum said:

    “If Labor come into government we can’t afford a policy vacuum. It’s looking grim. We need policy levers and we need them quickly.”

  • A new 10% royalty should apply to all Australian offshore gas projects, argue the authors of a new report from progressive think tank the McKell Institute. The tax would deliver an estimated A$2.8 billion a year to the government. The report’s authors say this would help fix the “broken” petroleum resources rent tax which is not delivering the government the returns it forecast. The report also calls for extractive companies to be forced to disclose all payments to all levels of government.

  • The International Energy Agency says the global oil market could move into deficit more quickly than expected next year as crude prices hover around US$60 per barrel. In November, the IEA expected the market to remain in surplus in 2019, however it now expects a deficit by the second quarter based on OPEC’s agreement with Russia and other producers to cut output from January and Canada’s decision to cut supply.