CLYDE RUSSELL: Industry digs in its heels over Australia’s gas and coal price cap plan

Launceston — The Australian government's plans to cap the price of natural gas and thermal coal for domestic consumers has provoked predictable howls of protest from the industry and warnings of dire consequences.

If the answer is that Australians are entitled to cheaper energy prices than what global buyers are prepared to pay, the question is then how best to achieve this outcome, while still allowing coal miners and gas producers the ability to run profitable companies that can invest for the long term. The domestic market for natural gas is small compared to the volume of LNG exports, but it's seen as a key fuel for some industries such as glassmaking and as a fuel for generating electricity during peak demand.Australia still generates about 50% of its electricity from thermal coal, though this share is shrinking rapidly as the country installs renewables such as solar, wind and battery storage.

It's to be expected that the gas industry, through its lobby group the Australian Petroleum Production and Exploration Association , will fight to protect profits and the long-term viability of the industry. This inconvenient fact weakens Appea's claim that the price cap will lead to lower investment and a drop in supply, as the industry itself was prepared to invest about $200bn in the past decade to make Australia a leading LNG exporter.

Targeted subsidies may have been a better solution and easier to implement, and possibly more effective given it's likely that the price cap will take some time to filter through to actual wholesale electricity prices, which tend to be negotiated and contracted months in advance.

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