Economics
The impasse in environmental legislation
The Greens and the Coalition are reverting to the same destructive political tactics that delayed action on climate change for twenty years.
The government’s Environment Protection and Biodiversity Conservation (EPBC) Act is stuck in the Senate. To pass it needs the support of either the Coalition or the Greens.
Justine Bell-James of the University of Queensland, writing in The Conversation – Labor’s environmental law overhaul: a little progress and a lot of compromise – explains the need for legislation to update the EPBC Act. The 25-year-old law has failed to stem biodiversity decline or to prevent land clearing, and it has allowed projects, including many green energy projects, to languish as they wait a long time for approval. Key aspects of the updated Act are the provision of regulatory clarity in national standards and processes to ensure that projects are rapidly approved or rejected.
The ABC’s Jake Evans explains the political sticking points in the draft legislation: understandably objections from the Greens and the opposition are from different directions. Karen Barlow explains and summarizes other issues in her Saturday Paper article Watt’s race to environment law reform. She explains:
All parties agree the current laws are broken, but it is hard to find a satisfied voice on the package Watt designed to replace the nature laws that cover the assessment and approvals of green projects and large housing developments, as well as more controversial land clearing, mining and forestry.
The Business Council of Australia sees the government’s proposed reforms as an opportunity to fix a broken system, but it seeks changes “to make sure it works for the economy and the environment”. The Australian Conservation Foundation wants to see the Act updated, but it believes the Act does not adequately address deforestation or the impact of developments on climate change. It seeks to see that final authority for project approval should rest with the proposed Environmental Protection Authority rather than with the minister.
The attraction of a process that removes discretion from the minister is understandable, but it is never going to appeal to the established parties, who seek to see their stamp on important decisions when they are in office. The ABC’s Peter de Kruijff has a post explaining the draft Act’s proposed division of authority between the EPA and the minister: New environment laws could help or harm nature depending on the minister.
In the drafting stage of such legislation business lobbies typically take a strong public stance, calling for the most favourable outcomes for corporations. That’s an important aspect of lobbying, because organizations like the BCA must be seen to be taking up the case for their members. But the strongest desire of businesses is to see a clear and functioning regulatory system, which will allow them to plan investments with confidence, without the fear of long delays (often culminating in knockbacks), conflicting regulations and capricious decisions.
Those considerations are particularly relevant for the EPBC legislation, because if passed it should speed up project approval, bringing forward the time when projects can start producing revenue. At any reasonable cost of capital there is a big difference between the net present value of a project that can be completed in one year in comparison with one that takes two or three years for completion.
Politically the situation has echoes of the 2009 standoff, when in the Senate the Greens and the Coalition (which had just replaced Turnbull with Abbott) combined to defeat the Rudd government’s carbon reduction bill.
That 2009 analogy is apt, because the Coalition has dug in to a hard position of opposition to the bill, disappointing Graham Samuel, on whose 2020 recommendations to the then Coalition government the bill is drafted.
If there is anyone left in the Liberal Party with a cool head they would be urging the Coalition to negotiate with the government in good faith, realizing that they may not get everything they want, but that an EPBC Act that goes some way to aligning with their policies is better for the nation than a continuation of the old legislation. They must surely be feeling under great pressure from business lobbies to do a deal with the government.
But the pressure on the opposition leadership, particularly on Sussan Ley and the Liberals, is coming from a different direction. It comes from those, disproportionately in the National Party, who want to revert to an opposition tactic of disempowering the government by thwarting its reforms, not with a view to improving them in line with their ideology, but with a view to paralysing the nation’s economic progress so as to discredit the Labor government.
When one considers the government’s huge majority, the Coalition’s demographic decline, its loss of support in urban electorates, and the pressure from businesses to get on with the job of building houses and investing in new energy sources, that tactic would be electorally disastrous. But such political logic does not hold when the Coalition is being drawn into a hard-right political bubble, disproportionately based in Queensland, out of touch with the wider Australian electorate and with economic reality.
As for the Greens, in spite of the consequences of their 2009 standoff, and their unexpectedly poor showing in this year’s election, they have still not learned that successful political reform takes the form of small ratcheting steps. They may believe they are more enlightened than the Coalition, but they seem to share with the Coalition the same dysfunctional belief that there is some unavoidable trade-off between economic prosperity and environmental protection.
Electricity prices – the story so far
Electricity prices are elevated, but anyone who claims renewable energy has driven the rise is either uninformed or is deliberately lying.
One of those things that “everybody knows” is that electricity prices have shot up through the roof, particularly since Labor was elected. And many, particularly those with a partisan bias, believe that electricity prices have risen because of Labor’s renewable energy policy.
In fact the story of electricity prices is simpler and it has nothing to do with renewable energy. After staying pretty well unchanged in real (CPI inflation-adjusted terms) over an almost 30-year period from 1980 to 2009, electricity prices almost doubled in a short period, and while they have fluctuated, they have remained around that level since.
The graph below shows that big picture, but if we want to consider what’s been driving that doubling and recent fluctuations, the story becomes a little more complicated.
The big rise that kicked off in 2009 corresponded with privatization, under the ill-advised National Electricity “reforms”, designed by a bunch of economists who wouldn’t have known the difference between a transformer and a capacitor, but who were fully conversant with those abstract Economics 1 supply and demand curves. The extent that price rises were driven by privatization is disputable, but only a Hayekian zealot would deny that privatization has led to unnecessary cost and price increases.
Then in 2012 there was a bump in prices when the Gillard government introduced a carbon price. That bump is evident on the graph, and prices fell in 2014 once the Abbott government, opposed to market approaches to public policy, removed the carbon price. But prices soon rose again, peaking in 2018.
The next bump was in 2023, just after Labor was elected. The Coalition still refers to this as a broken Labor promise, even though journalists can find no record of Labor having promised that Russia would not invade Ukraine. It was rash for Labor to have made a promise that could be blown apart by global events.
As can be seen on the graph household consumers (but not other users) were protected from this rise by a set of Commonwealth and state rebates (the blue line), which are now expiring. But even without the rebates, prices are about the same as their 2018 peak.
There is a degree of political canniness in the government’s timing in withdrawing the rebate. Many people – including journalists who should know better – conflate the price of electricity with people’s electricity bills. As people receive their bills for spring and early summer the bill shock may be softened or even eliminated by their lower use of electricity.
The bigger story, that gets little airing, is that at the wholesale level prices are falling, as reported by the Australian Energy Market Operator in its Q3 2025 Quarterly Energy Dynamics Report. To quote from that report:
In Q3 2025, wholesale electricity prices across the NEM [National Electricity Market] averaged $87/MWh, down 27 percent from Q3 2024 and 38 percent from Q2 2025. Lower price volatility and higher renewable output offset the impact of increased operational demand, resulting in average prices of $109/MWh in July and $97/MWh in August. Seasonally lower demand and warmer sunnier weather conditions pushed September prices further down to $53/MWh.
These are wholesale prices. If it weren’t for the cuts taken by the (mainly private) owners of the network (poles, wires and transformers) and by the commission agents called “retailers”, you would be paying 8.7 cents per kWh (perhaps 10 cents after GST) for your electricity, down from 11.9 cents last year and 14.0 cents in the winter quarter, rather than the 25 to 35 cents you are paying in your bills.
There are two, or even three, reasons why these wholesale price reductions, resulting from more renewable energy in the mix, are not flowing through to retail prices.
The main one is that wholesale charges are only one part of your bill. The pie chart below, taken from the ACCC December 2024 Inquiry into the National Electricity Market shows the breakup of retail prices. Much of your payment goes to the owners of the network, who, as natural monopolies, are allowed an unjustified generous profit margin to cover their cost of capital. The Reserve Bank’s rises in interest rates over 2022 and 2024 would have contributed to price rises, and it is now too early to see any effect of the 2025 interest rate falls, because there is a lag in the price regulation.
The other big component is called “retail”, which is payment to the companies, many of which are subsidiaries of the big energy companies, who buy electricity at fluctuating wholesale prices and sell it to consumers at fixed prices, generally with some time-of-day charging blocks. For this they take 16 cents in the dollar, 6 cents of which according to ACCC is profit, even though they have virtually no capital equipment. The ACCC reports that retailers’ costs and their profits haves increased significantly in the last two to three years.
This function, of smoothing out people’s charges, used to be done by the state-owned electricity utilities, without the hoopla of advertising, but in the name of “competition” the job had to be handed over to the private sector. Just a few days Choice granted these money-leeching “retailers” a Shonky Award. That award is well-earned by companies that have been able to rip-off the public, who have been led by lying politicians to believe that renewable energy is responsible for high prices.
If the government had the gumption to admit that some privatizations were terrible economic mistakes, it would re-nationalize the electricity network and close down the “retailers”, leaving only the generation end to the private sector.
Where your electricity payment goes – the network owners
The second reason retail prices have not fallen is that the Australian Energy Regulator sets prices for what is known as the Default Market Offer – essentially a retail price cap – only once a year, to apply for twelve months from July 1. The government would be hoping that because wholesale prices are falling, and should continue to fall if more renewable energy and batteries can be brought on stream, next year’s Default Market Offer and the following year’s will be down on this year’s. Convenient in a pre-election period.
The third reason many people are not enjoying price reductions, covered at length in the ACCC report, is that they are not shopping around for the best bargains. The ACCC report reveals the benefits to consumers who shop around, and the costs to those who don’t. For example customers who are on flat rate offers that are two or more years old pay 17 percent more than those on newer offers. The inference from the ACCC is that anyone who doesn’t shop around is a mug for allowing themselves to be charged a loyalty tax.
That makes sense in terms of the pure economic model of competition, but that model generally does not take transaction costs into account. Shopping around takes time, and requires a certain level of analytical capacity. It does not seem fair that those who lack time to shop around, or who are bamboozled by their electricity choices, should pay a premium for electricity, effectively subsidizing retired engineers with spreadsheets.
In many markets there are benefits in shopping around. If the markets are sufficiently competitive those benefits are more likely to be in innovations, better quality and so on, rather than in price. But electricity is about as basic a commodity as we can imagine. We want it at 230 volts, 50 cycles, close to a power factor of 1. In fact the “retailers” have no option but to offer what’s in the wires, because they have nothing to do with the physical product.
It is reasonably straightforward to work out the government’s tactics on electricity prices. It has good reason to believe they have peaked in real terms, and should fall in future years, particularly in the years approaching what will probably be their next contestable election in 2031.
As for the National Party, its decision to abandon net zero seems to rest on the idea that “everybody knows” that renewable policies have driven up the price of electricity. To the extent that it has any logic, it rests on the post hoc ergo propter hoc fallacy, as stated by Senators Canavan and Cadell:
Since Australia committed to its net zero target, electricity and gas prices have increased by around 40 per cent.
That’s probably the best they can do to justify economic stupidity, but their policy stance has nothing to do with economics anyway. It’s a signal to climate deniers, anti-vaxxers, sovereign citizens, the chronically aggrieved, and others on the far right that the National Party is on their side.
First Nations electricity disconnections – a national disgrace
Imagine experiencing unexpected frequent electricity blackouts in the middle of a 40 degree summer because you are on a patronising prepaid electricity plan.
Most readers of these roundups probably pay their electricity bills quarterly, using direct debit systems. If the debit fails, perhaps because the debit card has expired, a polite reminder will give the customer time to pay.
The lights, the refrigerator and the air conditioner stay on.
If you are one of 65 000 Australians living in remote First Nations communities and using a prepayment system, your experience as an electricity customer will be quite different, explains Lauren Mellor on Radio National Breakfast: Prepaid electricity consumers sweltering under regular disconnections, report finds.
You have to go to a shop – which may be a long way from your community – to prepay for a certain amount of electricity. If you keep an eye on your usage on your electricity meter you may be able to top up your card before the power is switched off. But for many the first they know that their credit has expired is when the lights, refrigerator and air conditioner stop working. Tough if you have fresh food in the refrigerator, even tougher if, as is the case for many First Nations households, if you have insulin in the refrigerator. Maybe you will move to a neighbour’s house, adding to the problem of unhealthy overcrowding.
The report to which Lauren Mellor refers is “The right to power: keeping First Nations’ communities on prepayment connected”. She was one of the report’s main authors. For some odd reason it is available only through a hyperlink on a Renew Economy article by Anne Delaney: Most Australians wouldn’t tolerate power cuts nearly every week – why should First Nations?
The recommendations in that report are modest, as are the system improvements Mellor suggests on the radio interview. They’re about making the prepay system work better, and there is certainly plenty of room for technical improvement, such as giving customers a warning signal when their credit is running down (think of your car’s fuel warning light) and making special arrangements for those experiencing financial hardship.
But is that as far as we should go – making a few tweaks to a patronizing system? Surely we can do better. Even some poor “developing” countries are doing better jobs with rural electrification than we are doing. Australians deserve to be treated with more dignity than to be subject to the charity of electricity companies.
The anti-renewables movement
In rural Australia an angry anti-renewables movement has emerged. It’s hard to believe it’s home-grown.
Farmers have been among the first to embrace renewable energy, replacing windmill-driven reciprocating pumps with solar driven centrifugal pumps, and in remote locations providing their own solar power supplies, initially to supplement and later to replace diesel generating sets. The picture below is of an array of solar panels installed 40 years ago to drive a deepwell pump in a small outback station.
And it should be clear to all that farmers are first in line in bearing the consequences of climate change.
So it makes little sense that there has arisen a strong anti-renewable movement in parts of rural Australia. And it makes even less sense that National Party politicians have been drawn into this movement.
The ABC’s Jess Davis describes this movement in her post Dangerous anti-renewables rhetoric, bullying and intimidation creates growing chasm in rural communities, describing the anger and vitriol directed against farmers who have chosen to host renewable projects on their land.
Some of the anger may simply be a manifestation of jealousy, because some of the contracts are quite lucrative. But she also notes that the movement is supported by sophisticated social media campaigns, which seem to employ a different skillset than farmers bring to the land. In this regard it has echoes of the well-financed pre-election campaign against wind turbines on the Illawarra coast, which had strong evidence of support from similar movements in the USA, and which had hints of funding from fossil fuel oligarchs.
As ASIO warns, there are many people, some local and some foreign, who have an interest in fuelling social division in Australia, and the rural-urban split is one of the easiest to exploit.