Energy policy in Australia is currently the topic du jour. And rightly so.
No other policy, not taxation, immigration, or industrial relations, has such far-reaching effects on the economy. The cost of energy feeds into every single economic activity. Be it household budgets, manufacturing, mining, data centres, farming, construction, or the services industry. There is literally no good or service in the Australian economy that is unaffected by the price of energy.
The Coalition has just announced its new energy policy which, in basic terms, prioritises energy affordability, economic competitiveness, and grid reliability over emissions targets. It is essentially an economy-first, ‘no Australian left poorer’ energy policy.
Importantly, such a policy does not reject climate action. Rather, it reframes the approach, favouring technology pathways without forced transitions. It is pro-economic, not anti-climate. It is policy viewed through an economic lens, not a moral one.
Labor's energy policy is vastly different
The distinction between this and the current energy policy is stark. The Labor way is to set emissions reduction targets, then set policy around that. It’s a climate first policy, economics second. It’s an approach that turns economics on its head: announce a target, often for political or symbolic reasons (62% - 70% emissions reduction by 2035, net-zero by 2050), then retrofit a policy to meet the target. The risks of this target-first approach include:
- rising implementation costs due to rushed decisions and aggressive timelines.
- reliability problems because of the backwards policy.
- increasing energy costs putting households and industry under pressure.
- narrower technology options, with speed of rollout prioritised over efficiency or least cost. And little allowance is made for future technology gains.
Meanwhile, an economics-first approach would begin by assessing future energy requirements, available technology, and what supply can be built, in what time, and at what cost. It would consider future technology pathways, cost-benefit analyses, financing, and transition approaches. Policy is then built according to economics and engineering, and targets would then be set consistent with what’s feasible. Any target would be a policy output, not an input.
What Australia should do
As the Coalition rolls out its new energy policy, we look at what a ‘no Australian left poorer’ policy would prioritise.
To avoid energy poverty, on-demand energy must stay on-line until an adequate replacement can be built. That means not retiring coal too early or suppressing gas supply. Otherwise, the cost of energy will spike. And there must be no bias towards any technology or ideology in energy supply. A balanced system should be considered including renewables, gas, hydro, coal, and nuclear (which would require lifting the ban). Diversification leading to lowest cost and reliable outcomes is what matters.
Energy supply is key to leaving no Australians worse off, and what is emerging is a need for large amounts of new supply. Energy demand in Australia is rising fast due to AI and data centres, expanding electrification, critical minerals and rare earths mining, and population growth. We need to be implementing not just an energy transition, but energy addition. It’s not inconceivable that electricity demand could double by 2050, which means that the retirement of existing energy sources could be far too premature.
A ‘no Australian left poorer’ policy doesn’t reject emissions reduction. It re-prioritises in order: affordable energy, economic competitiveness, grid stability, and then emissions reduction within the constraints of the above. It is a policy with emphasis on technology, lowest-cost pathways, and private investment, without forced market interventions and transitions. It avoids unrealistic targets while maintaining emissions reduction ambitions.
And importantly, a policy driven system would break the cycle of subsidies, or at least substantially ease them. We have seen a target-driven system become a sequence of expensive subsidies to paper over the gaps that emerge with ambition-first policy.
It begins with government subsidies to encourage and accelerate renewables investment to meet targets, including underwriting returns for investors. Without forced acceleration, a transition would be market driven and subsidies free. Next, the government subsidises coal plants to keep them running for longer because the rollout of renewables plus storage is not ready. So the taxpayer, is in effect, subsidising both the acceleration of the transition, and the consequences of that acceleration – in this case, a lack of coal plant maintenance.
Next in the queue for subsidies are households that need assistance to absorb rising costs due to the need for renewable energy backup, storage, and extensive transmission. Finally, heavy energy-intensive industry requires assistance to keep afloat and prevented from going offshore. It’s a veritable merry-go-round of subsidies holding the system together.
A ‘no Australian left poorer’ policy aims to secure a stronger economy. It would manage a changing grid without destabilising it, avoid cost blowouts and energy poverty, and keep manufacturing in Australia. It wouldn’t place emissions reduction above all else, jeopardise Australia’s competitive advantage in natural resources, or profess to fix the climate when simple mathematics says it can’t.
Australia’s continuing prosperity is underpinned by reliable and affordable energy. Energy is the economy. Get the energy policy wrong, and you get the economy wrong. Yes, climate goals are important, but they should be an outworking of responsible energy policy. Economic activity must come first.
Tony Dillon is a freelance writer and former actuary. This article is general information and does not consider the circumstances of any investor.