To subsidise or not to subsidise?

That is the question that has garnered much public discussion in recent weeks and is something that has played on the mind of many in Parliament for a long time.

As a free-marketeer, I have always instinctively opposed unnessecary government intervention in markets. But now we must come to a landing about what to do with a market that has been so distorted that things have become out of hand.

In Australia today, the renewable energy sector has been the beneficiary of around $30 billion. This has seen Australia’s energy market transform from a low-cost high-reliability coal-based market to a high-cost low-reliability renewables market in many places (the exception being in my home state where low-cost baseload renewables have long been in play).

The question which with many have grappled is how to unpick the difficult situation we have now - where renewables are being subsidised which is driving up prices and then taxpayers are forking out further subsidies to help families and businesses deal with the higher costs.

The solution is simple: getting coal and renewables back onto the same footing and letting the genuine free market decide. Most are agreed that this is the desirable outcome. The question is how to get there.

In an ideal world, we would abolish all subsidies. Sadly, the reality is that with the ongoing subsidies, it is difficult to achieve such an outcome. In those circumstances, it is worth considering correcting the current situation by way of government support for cheap and reliable energy - be that through streamlined approvals, reducing the regulation burden or through hand-outs.

While the National Energy Guarantee will stop hand-outs from 2030, it doesn’t deal with the current mass taxpayer subsidies that are on the table that are, for instance, making a free-market company like AGL make investment decisions that are actually counter to what is in the national interest - so the taxpayer is effectively fueling these decisions that are leaving them worse off!

While this discussion continues, I remain open minded to a practical and reasonable solution that deals with the complexity of the situation but I believe it is absolutely vital that we put pensioners before Paris and prioritise affordability and reliability above international feel-good exercises.

About Eric

Eric Abetz has been a Liberal Senator for Tasmania since 1994 and has served in a range of Leadership, Ministerial and Shadow Ministerial roles.

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