what would brumby say to a technology that has far less polluting factors than black coal.
Reversing brown coal myopiaROYCE MILLAR AND ADAM MORTON October 23, 2009
Digitally altered photograph. Photo: Simon Bosch POLLUTION is a curse of industrial society, but clean electricity would put an end to it. So said Sir John Monash, first chairman of the State Electricity Commission of Victoria, in 1924.
''Factories, industrial plants and workshops belching forth pollution through forests of chimney stacks are almost a thing of the past.''
Monash was only half right. Electricity did indeed help clean up the worst of his state's toxic emissions. What the Lieutenant-General didn't foresee was that his solution would also become the problem. The brown coal-fired electricity that accounts for more than 90 per cent of the state's power supply is now the ''acne''of contemporary industrial Australia.
Victoria's reliance on brown coal-fired electricity, and the private ownership of the state's electricity plants, has made it a special case in the debate on climate change under the Rudd Government's proposed emissions trading scheme.
The combination has presented the State Government with a bigger headache than its interstate counterparts as it grapples with the prospect of carbon pricing.
Still, Victoria's electricity industry has its champions. In recent months, Premier John Brumby has been chief among them. As revealed in The Age today, it appears that the Premier is playing a leading role in attempting to soften the blow of a reduction scheme on the state's coal-fired generators.
For some it is a fine example of Brumby's understanding of, and commitment to, this state's economy. To others, it is a premier doing the bidding of a greenhouse-addicted industry that remains stuck in the past.
When Kevin Rudd's erstwhile adviser Ross Garnaut tabled his plan for an emissions trading scheme early last year, Victoria's four big electricity generators were not happy.
Garnaut's view was that polluters had plenty of warning that the world was moving towards making them pay for carbon dioxide emissions.
Compensation would remove an incentive for them to change their ways. No pain, no gain.
The Rudd Government didn't agree. Its emissions trading green paper, released in July last year, proposed ''limited direct assistance'' to existing coal-fired generators. It did not say how much they would get.
Intense lobbying followed, as interest groups jockeyed for influence in shaping what many believe to be the biggest economic reform since the Hawke Government floated the dollar and opened up trade barriers in the 1980s.
Senior bureaucrats also pushed for more support for the generators. Roger Wilkins, a trusted Howard government adviser on emissions trading, who later reviewed Rudd's climate change policies, warned that a $30-to-$50 per tonne carbon price would wipe up to 70 per cent off the value of Victoria's power stations.
When the green paper became a white paper in December, limited assistance became a plan for free permits valued at nearly $4 billion.
Garnaut was aghast, but so were the generators. They argued that the package was billions short of the money needed to maintain a viable industry and allow for the orderly transition to cleaner energy production.
The Energy Supply Association of Australia said the compensation needed to top $10 billion. The National Generators Forum wanted more, estimating that $30 billion would be required to cover investment in new plants and refinance large debts over the next 20 years.
For many industry groups and unions, the release of the white paper and tabling of the legislation early this year marked the end of intense lobbying. ''Between the green and white paper I basically lived in Canberra,'' said one union leader this week.
In the Latrobe Valley, though, things were slightly different. If anything, the serious campaign from Victoria did not begin until after the tabling of the bill.
Burning Latrobe Valley brown coal emits about 30 per cent more carbon dioxide than black coal and, thus draws a 30 per cent higher carbon cost.
But private ownership was also a key factor behind Victoria continuing to press for a better deal when other states started to drop off.
The bulk of Australia's electricity generation remains in state hands. Victoria is an exception. The plants were sold for big returns by the Kennett Government in the late 1990s.
State-owned generators tend to have different priorities and face different pressures than those of their private cousins. The private owners carry big debt, and this year began to shout that refinancing under emissions trading was looming as a nightmare, and a threat to the industry. Some played the capital flight card; threatening to flee a carbon-regulated Australia, leaving decrepit power stations and blackouts in their wake.
As the year has progressed, the tempo and temperatures have risen. By last Friday, the Prime Minister was on the TV news dealing with industry claims that the lights would go out in Victoria.
The changes to the scheme since Garnaut's draft report is seen by observers as evidence of the the generators' enormous lobbying clout.
But insiders point out that the electricity generators nationally are not a cohesive lot, such as, say, the association representing the aluminium industry. The main representative bodies are the National Generators Forum and the Energy Supply Association of Australia, which both represent the private brown-coal generators, the more numerous black coal-fired stations and fledgling clean-power companies.
Both organisations have been active. The generators' forum at one point used lobbyists Government Relations Australia to argue its position. The supply association's chief, Brad Page, is a former federal bureaucrat and widely regarded as one of the industry's most telling, if measured, voices.
Individual generators have lobbied separately and on occasions banded together to push at state and federal levels. But not everyone thinks they have done enough. Bankers were frustrated with the generators' lack of traction in Canberra through the earlier development of the scheme.
''I'm never sure they have got their act together to lobby and win the same way other groups do,'' says one industry consultant.
No one doubts that the increased focus on Victorian generators this year has been in part due to the heavyweight influence of John Brumby.
The Premier got actively involved earlier this year, following approaches from the generators, industry groups and Energy Minister Peter Batchelor.
His campaign was aided by his former department secretary Terry Moran, who had moved to Canberra to run the Department of Prime Minister and Cabinet.
One senior federal insider acknowledges that Moran's ''familiarity'' with Victorian issues has helped get the Premier a better hearing.
After lobbying by Brumby and South Australian Premier Mike Rann, Rudd belatedly commissioned his own study of the private generators' claims by investment bank Morgan Stanley. The study is likely to provide the basis for a response to Victorians' claims for more compensation.
One senior industry insider says Brumby's lobbying should not be seen as him merely shoring up the bottom line of private companies that should be paying for their emissions. Instead, he says the Premier is motivated by defending the interests of a state built on cheap brown coal.
An industry consultant familiar with behind-the-scenes lobbying in Canberra says the Premier is doing more lobbying on behalf of the industry than even the industry knows, and is unconvinced by assurances from energy experts that there is no threat to energy supply.
''Brumby takes very seriously the risk that there could be plant closures,'' he says.''If you're the Premier and the lights go out, well your lights are going to go out pretty soon afterwards.''
It is not yet clear how successful Brumby has been, though the Government has made it clear it is open to negotiating with the Opposition, which wants an inflated compensation package.
But if the generators win more compensation as a result of Brumby's lobbying efforts, Ross Garnaut will no doubt conclude that he understated his concern about Kevin Rudd's white paper when he said in December: ''Never in the history of Australian public finance has so much been given without public policy purpose, by so many, to so few.''
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