Peter Dutton needs a plan that goes beyond the electricity sector

Opposition Leader Peter Dutton’s announcement to roll back Australia’s 2030 emissions targets has caused confusion and concern on several fronts and sparked intense political debate about our path to a zero-emissions future.

Over the weekend, Dutton claimed that Labour’s commitment to renewable energy was responsible for soaring electricity prices in recent years. His comments sparked a rebuke from Foreign Minister Penny Wong, who described the claims as “extremely absurd.” Meanwhile, Dutton’s suggestion to change energy policy if the Coalition wins government has caused consternation in the business community.

In all this, several issues require clarification. First, Dutton’s claim that renewables are responsible for electricity price increases is simply wrong.

But more broadly, the debate is missing a key point: the electricity sector is not the only cause of Australia’s greenhouse gas problem. If Australia is to achieve net zero emissions by 2050, the Coalition must implement an economy-wide decarbonization plan.

What caused the increase in electricity prices?

There is a lot to explain in the current energy debate, so I will start with electricity prices. Amid voter concerns about cost of living pressures, Dutton said at the weekend that “the government’s renewables-only approach will continue to drive up energy prices”, adding that Labor had “failed to take gas and power into account nuclear.”

Firstly, let’s be clear that Labor’s policy actually includes gas and nuclear. She rejected nuclear power as a viable option and said gas played an important role in the transition to renewable energy.

Labor has indeed set a target of 82% renewable energy in our electricity mix by 2030. It is true that electricity prices have increased significantly in recent years. But these two things are not significantly related.

The sharp increases in energy prices in 2022 and 2023 were largely the result of the war in Ukraine and related sanctions on Russian energy exports. Additionally, flooding along Australia’s eastern coast in 2021 and 2022 has hampered coal production, which has also pushed up electricity prices.

It is worth noting that this year we can expect electricity prices to drop by up to 7%, which is influenced by various factors, including: decline in wholesale electricity prices. Australia’s energy regulator says prices in 2022 were an “extreme peak”, suggesting price declines are likely to continue.

But will Australia’s clean energy transition drive up prices in the future? A 2021 report from the Grattan Institute suggests the answer is no. Compared to inaction on climate change, it has shown that Australia can make significant progress towards a net-zero emissions electricity system without compromising affordability or reliability.

Investors are nervous

The Australian business community, including the coal and gas sector, has urged the Coalition not to abandon Australia’s 2030 emissions targets, fearing it would trigger a wave of investment uncertainty.

While the 2030 target is significant, what is more important to investors is the policies that underpin it. Australian companies invest based on several key employment policies:

The industry needs policy certainty. Dutton spent a lot of time talking about the 2030 goals and nuclear energy. But the really important question for investment is: what does it plan to do with the four policies above?

Electricity isn’t the only game in town

Dutton says it remains committed to the 2050 net zero emissions target that Australia has signed up to under the Paris Treaty. The coalition intends to publish its full climate policy before the next elections; hopefully this will include more than just a nuclear plan.

Trucks cannot be driven on nuclear power. Nuclear power won’t stop cows from belching and farting. You can’t run an ammonia plant based on nuclear energy. Emissions from these sectors – transport, agriculture and heavy industry – also need to be addressed. The Coalition has been largely silent on this issue so far.

Time plays a key role here. The electricity sector is the ‘low-hanging fruit’ of Australia’s decarbonisation efforts – in other words, switching to renewable energy sources is relatively easy and cheap. Removing emissions from other sectors will be more expensive and take longer.

For example, around five million Australian households are connected to gas. Converting them into electricity is an extremely time-consuming task.

Similarly, for Australia’s light passenger vehicles, the transition to a fully electric fleet will take decades. Other sectors, such as heavy industry, heavy transport and agriculture, continue to develop zero-emission technologies.

That’s why the 2030 target is so important. We should make cuts in electricity consumption now, while developing technologies that reduce emissions in other sectors. We cannot postpone all the hard work until after 2030.

The road lies ahead

Even if the Coalition wins power at the next election, and even if it manages to achieve its net zero target by 2050, kicking the can down the road will have consequences.

Less efforts to reduce emissions now mean greenhouse gases build up in the atmosphere. This worsens climate change Now. Slowing emissions reductions will impact all Australians – leading to more severe floods and fires, and more properties uninsurable.

That’s why this summer will be important politically. Cost of living pressures mean climate change has reportedly dropped down voters’ list of concerns. But if Australia faces a truly nasty summer of bushfires and floods, we could expect climate concerns to rise again.

And the Coalition will need a serious, economy-wide policy response if it wants to win office.