Prime Minister Malcolm Turnbull’s decision to dump emission reduction targets from the National Energy Guarantee (NEG) has been criticised by the business groups, saying the move can destroy any sense of policy certainty.
The Business Council of Australia (BCA) and the Australian Industry Group both issued statements following the announcement on Monday, arguing that the decision could hamper long-term investment in the energy sector.
The prime minister announced on Monday that he could not carry forward NEG to the parliament because he lacked the requisite internal support to deliver it.
Turnbull said rather than legislating an emissions reduction target through the NEG, his government would keep energy prices down by implementing a number of recommendations from the ACCC’s report into electricity prices, and by pursuing some form of market intervention.
That included ordering the divestiture of assets or parts of an energy business (as a last resort), pursuing court enforceable undertakings (as currently used by the ACCC in other contexts), and enforcing greater fines and penalties.
The Business Council of Australia called the measure a “band-aid solution” that only addresses short-term affordability issues but could hamper long-term reliability and investments.
Jennifer Westacott, the chief executive of the BCA, said the government’s decision to dump emissions reduction targets from the NEG, and to propose price caps and other forms of intervention to keep prices down, would exacerbate sovereign risk.
“We support lower prices but this will not be achieved by ad hoc and extreme intervention in the electricity market which brings new risks, unintended consequences and has never worked before,” she said.
Innes Willox, the chief executive of the Australian Industry Group, said long-term investment certainty seemed “further away than ever,” and the potential for the forcible breakup of electricity businesses needed to be treated “with considerable caution.”
“The power of the threat of some intervention can be appropriate and effective as a last resort, as we saw with the Australian Domestic Gas Security Mechanism. On the other hand, forced divestiture would be a serious step that was specifically ruled out by the ACCC in their recent comprehensive report on improving electricity prices,” he said.