Day 15: 'Markets aren't shock jocks'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 15.
Today in summary: Wholesale energy prices are on the rise and some pundits blamed it on policy chaos; Labor promised to introduce a permanent gas export control trigger should gas prices go above a benchmark set by the ACCC; a UN official warned governments were not on track to meet the carbon reduction goals of the Paris agreement ahead of climate talks in Bangkok this week; and a new report said California was likely to have 100% carbon-free electricity by 2045, but transport could bring its emissions targets unstuck.
— Charis
Today’s policy spin level: 💨💨
Fund manager Alex Turnbull wasted no time going public on the big issues after his father officially resigned from parliament on Friday. Tweeting over the weekend, he pointed to spikes in spot wholesale energy prices, up around 25% since the Liberal leadership spill.
“Markets aren't shock jocks. Participants get paid to be right and fired if they are wrong. It is crystal clear what those with the right incentives think about what scrapping the NEG means - prices will rise.”
Federal Labor has unveiled its election policy on gas, promising market interventions linked to prices instead of just supply shortfalls. It proposes a “Domestic Gas Review Board” to decide when to pull the trigger on export controls, including when prices spike above a benchmark set by the ACCC. Labor also wants to give the ACCC new powers to monitor and crackdown on anti-competitive behaviour in the gas market. A “national interest test” would also apply to all new LNG export facilities or significant expansions of existing ones.
The latest round of climate talks gets underway in Bangkok this week, as diplomats from 190 nations work toward a year-end deadline for “rule book” for the 2015 Paris treaty. The rule book will set out how to implement, monitor and review carbon reduction measures. Patricia Espinosa, head of the Executive Secretary of the U.N. Framework Convention on Climate Change, said governments were not on track to meet a goal of the 2015 Paris agreement of capping temperatures well below 2 degrees Celsius before the end of the century, but the European heat wave and winter bushfires in Australia should give new impetus to the talks. Reuters | South China Morning Post
The US state of California last week approved a measure requiring all energy used in the state to be from renewable sources by 2045. California is doing a slightly better job at reducing carbon emissions than the rest of the nation, but a new report says transport emissions (accounting for a little over 40% of greenhouse gases in the state) continue to rise as Californians shun public transport in favour of their SUVs.
Geopolitics
Steel tariffs put in place by US President Donald Trump are starting to impact oil producers, according to an increasing number of US energy company chiefs. The 25% steel tariff is pushing up costs on drill pipe, the majority of which is imported for US oil and gas projects. US crude output is up nearly 20% since the start of the year. Forbes
The Commentariat
Incoming Environment Minister Melissa Price should set up a nationwide “climate-sharing” system as an efficient way of reducing carbon emissions, writes University of Adelaide environmental policy expert Mike Young. The system, similar to what’s in place for the Murray Darling Basin, would see the government issue shares to greenhouse gas emitting companies, based on recent emissions. Young says it would operate much like a carbon tax – but determined on the industry’s rather than the government’s assessment of the long-term cost of dealing with climate change.
Labor could put the Coalition in a sticky situation by backing the dropped National Energy Guarantee in the lead up to the next election, writes The Guardian’s Katherine Murphy.
“Imagine the talking points. After careful consideration, we have reached the sorry conclusion that our own policy (that we spent months telling you was critically important) is stupid? It sounds beyond parody.”
This is an introductory service while we’re building a comprehensive daily paid online publication, coming in early 2019.
We’re not here to take sides, simply to cut through the noise, and help you make sense of the emerging policy and market trends you need to be across. We call it pure intel. You can read more about us here.