Warnings from clean energy investors that the Albanese government’s proposed domestic price cap on coal will blunt the incentives for new renewable energy capacity is just one example of the perils of messing with market-determined price signals.
Politicians distrust price signals because they can upset voters. Yet suppressing price signals often leads to market distortions that makes things worse.
Put simply: a price cap on gas or coal would be a fossil fuel subsidy, working completely opposite to the decarbonisation objective. Domestic reservations are also fossil fuel subsidies. We call out Middle East countries who give their citizens cheap petrol, then do it too.
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