Energy transition: Labor’s green industry policy mugged by reality

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Continuing to apply the Productivity Commission’s traditional intellectual rigour will test the mettle of its incoming chair Danielle Wood.

says that the focus of Labor’s green energy industry policy, which will form part of the May 2024 budget, will be the four priority areas of refining and processing critical minerals, manufacturing of generation and storage technologies including batteries, producing renewable hydrogen and its derivatives such as ammonia, and becoming a leading producer of green iron ore, steel and alumina.

However, Labor’s industry policy ambition conflates Australia’s renewable energy superpower destiny with government intervention to resurrect Australia’s “sovereign” manufacturing capabilities in a geopolitically disrupted, post-COVID world of supply chain risk. As the International Monetary Fund advised last week, expanding the de facto cap-and-trade safeguard mechanism to more industrial emitters would be a more effective climate policy than Labor’s “regressive” tax breaks on electric vehicles – or, one might add, virtual or actual bans on lower-carbon or zero-carbon gas-fired and nuclear power.

This followed the Productivity Commission’s warning in July that Labor’s plan to subsidise battery manufacturing and green hydrogen could backfire by costing taxpayers more than any economic benefits, and would impose costs on industries that have a genuine comparative advantage – lessons from Australia’s protectionist past that were repeated and underlined by both the commission’s outgoing chair

 

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