The people running the Latrobe Valley brown-coal power generators are probably feeling pretty good this morning as they enter the most crucial week of their lives.
They have Australia’s most persuasive negotiator on their side – the Shadow Minister for Resources and Energy, Ian Macfarlane – and as a result are on the brink of getting what they want: more free pollution permits.
Macfarlane is persuasive not because his gravelly voice has enthralled Climate Change Minister Penny Wong, but because he can turn Opposition Leader Malcolm Turnbull into Meg Lees, the woman who did the right thing and passed the GST and destroyed herself and the Australian Democrats at the same time.
We must bear in mind that the CPRS is apparently not designed to reduce greenhouse gases – it won’t do that – but to destroy the coalition and entrench Labor in government.
And today, with a nod of his head, Kevin Rudd can achieve that goal. He just has to agree to more compensation for the electricity industry and/or to extend the compensation beyond 2015.
In recent days the generators have been raising their lobbying to a fever pitch, warning that impairment charges on their balance sheets would put them in breach of debt covenants and force administrators to be appointed, which wouldn’t be good.
If reports out of Canberra this morning are correct, this is now the final sticking point in the negotiations between Wong and Macfarlane.
Rudd has already agreed to totally exempt agriculture (15 per cent of Australia’s emissions). All he has to do now is extend the free permit arrangements for five years so that the two big electricity polluters – Truenergy and International Power – don’t become technically insolvent immediately as a result of balance sheet impairment charges when the CPRS is passed, and – bingo! – Malcolm Turnbull and the coalition are both stuffed.
It’s possible that Penny Wong will hold to her line that “energy security” is not at risk (because even if Truenergy and International Power go broke, the banks will keep the generators going), but I doubt it. The political benefit of doing a deal today far outweighs the cost of more compensation.
Maybe Turnbull will decide that “unity trumps policy”, as one Liberal frontbencher put it to the SMH yesterday, and follow Tony Abbott down the path of pragmatism by walking away from a deal so he can campaign against emissions trading.
Or maybe he will triumphantly carry the day in both the Shadow Cabinet and the Party Room, brandishing his deal.
But neither of those things seems likely. Turnbull has clearly positioned himself as a believer and declared that he wouldn’t lead a party that didn’t want to do something about climate change. To switch now would be suicide.
And the National Party and a dozen or so Liberals led by Nick Minchin have declared themselves to be totally opposed to the CPRS – in any form, always.
So it looks like all the government has to do to bust up the coalition and destroy Turnbull is do a deal with Ian Macfarlane today.
Was the CPRS always designed to achieve such a glorious outcome?
It must have been, because it certainly won’t do anything about global warming, which is why the Greens and Nick Xenophon are opposing it, which is, in turn, why it even matters what the coalition decides.
This article first appeared on Business Spectator.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
