Albanese, Bowen and co are matching their manic thinking on climate change with a seemingly bottomless taxpayer-funded financial commitment unrivalled outside of wartime, writes Nick Cater.
Chris Bowen is promising to drive us to our destination, but refuses to tell us how much it’s going to cost.
He talks at length about targets, timelines, and technologies.
He is less forthcoming, however, when it comes to the size of the bill.
Financing his titanic project will have an exceptionally large impact on our economy.
It will constrain the state’s capacity to pay for other services and absorb precious capital that could be invested more profitably elsewhere.
Credible modelling estimates that the energy transition will run into many trillions of dollars over the coming decades.
Its success or (more likely) failure will shape the economic path for future generations.
Will they live in a wealthy, mid-sized, advanced economy, enjoying global influence beyond its size?
Or, will they be trapped in a shrinking economy, sliding down the ladder, as Australia joins new-world nations like South Africa or Argentina—rich in natural resources but limited by institutional constraints and history?
Because the truth is simple: the government does not yet know what this unprecedented transformation of the economy will cost, let alone whether it will succeed.
In the scheme of things, the latest price tag of $42bn on the Snowy pumped hydro scheme will be chump change.
Yet the independent estimate published this week by energy executive Ted Woodley and economist Bruce Mountain is worth lingering over, since it is emblematic of the scant attention paid to the cost of projects so far.
Woodley and Mountain’s estimate is 21 times larger than Malcolm Turnbull’s original 2017 estimate.
Even if we allow for inflation of 30 per cent over the past nine years, the cost is several times more than the original budget.
We can only assume the original estimates were outsourced to Pollyanna, the irrepressibly optimistic, freckle-faced heroine of Eleanor H. Porter’s eponymously titled novel.
It’s what happens when prime ministerial advisors resign themselves to the demeaning reality that the only acceptable response to their boss’s questions is yes.
After all, as Pollyanna explained, there is always something to be glad about “if you just keep hunting long enough to find it”.
Renewable energy cost blowouts are partly explained by, the iron rule attributed to Danish economist Bent Flyvbjerg, which dictates that the benefits of infrastructure megaprojects are routinely overestimated.
Optimism bias is especially acute on government projects where political, rather than financial, rewards are sought.
Yet in his much-quoted 2003 paper, Flyvbjerg’s calculations of average cost overruns are comparatively modest: 45 per cent for rail, 34 per cent for bridges and tunnels and 20 per cent for road projects.
The under-budgeting of Snowy Hydro is of a different order, compelling us to ask what gives?
Energy Minister Chris Bowen has made little serious attempt to set a budget.
Neither the Prime Minister nor the mainstream media has applied any pressure on him to do so.
Labor’s 2022 net-zero climate policy relied on now discredited Reputex modelling.
It claimed building an 82 per cent carbon-free grid by 2030 would cost $76 billion, of which $24 billion would be government-financed.
A mere four years later, few would dispute two facts.
Reducing emissions to anywhere near the original target is impossible.
The government will spend far more than $24 billion just trying.
By 2030, capital investment in the grid alone will reach hundreds of billions, depriving the economy of resources that could yield greater returns elsewhere.
That is, if the returns one values most are economic growth and jobs, rather than the applause from the domestic green lobby and the pampered band of international bureaucrats who register as delegates at climate change conferences.
Yet climate and energy have been granted immunity from the established best-practice policy process to which a cost-benefit analysis is central.
It is explicitly designed to avoid the embarrassing position Bowen now finds himself in: committing excessive government revenue to a project that has little, if any, chance of achieving the desired outcome.
Governments, as we know, are inveterate wasters of other people’s money.
They habitually respond to policy failures not by scrapping projects, as the private sector would, but by spending more money.
In the minds of bureaucrats, policies fail not because they are ill-conceived, but because they’re underfunded.
Governments are especially prone to the sunk-cost fallacy: if they don’t fund budget overruns, they believe previously committed money has been wasted.
That error will ensure projects like Snowy Hydro stay alive, even if costs double again. Given current performance, that possibility is far from remote.
In effect, Turnbull wrote a blank cheque that the Albanese administration enthusiastically decided to honour.
The net-zero project as a whole represents an incalculable unfunded government liability.
It is hard to point to an equivalent bottomless financial commitment by an Australian government outside of wartime.
Nobody expected a cost-benefit analysis from Robert Menzies before he declared war on Hitler’s Germany.
Nor did anyone demand assurance that the military exercise would succeed. In an existential crisis, different rules apply.
This offers an insight into Labor’s current thinking and the extent to which sober judgment has been pushed aside by the climate mania that has gripped the developed world for the last two decades.
Albanese and Bowen are acting as if a warming planet presents an imminent prospect of extinction.
The threat falls in the same category as German and Japanese expansionism in the early 1940s.
Just as sending Australian forces into battle was a moral imperative back then, Australia must now throw everything it has into a total war against climate change.
Some 13 years after Australia’s 27th Prime Minister led Labor to one of its worst electoral defeats, the party still abides by the Rudd doctrine, articulated in Kevin Rudd’s undergraduate-style 2007 essay in The Monthly : “Climate Change: The Great Moral Challenge of Our Generation”.
A decade after the Paris Agreement was adopted by the UN-backed cabal known as the Conference of the Parties (COP), the world has grown cold toward the net-zero emissions pledge for 2050.
The dreamy idea of a great energy transition that runs on a rigorous timetable has collided with hard reality.
As the distinguished Sky News Australia commentator Chris Uhlmann is fond of pointing out, 91 per cent of Australia’s energy requirements are supplied by fossil fuels.
The Albanese government will eventually be forced to back away, too.
Its climate policy is no longer the electoral meal ticket it once was.
The Prime Minister is not averse to walking away from unpopular policy. Labor’s 2030 commitment to 82 per cent clean electricity has already been dropped from the party’s draft policy platform.
There is no telling how much irreparable economic damage will be inflicted while the government looks for a face-saving way out of this policy omni-shambles.
In the meantime, we are stuck with the fiscal version of the late Graham Richardson’s political philosophy, summed up by the title of his lively memoir, ‘Whatever it Takes’.
Nick Cater is a senior fellow at Menzies Research Centre and a regular contributor to Sky News Australia
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