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In case you had forgotten, electricity prices were a really big deal in the last federal election campaign in 2013, albeit often disguised under the rubric of axe the tax. Then Coalition spokesmen quite deliberately and repeatedly conflated the term carbon tax with electricity tax.

Clearly, this conflation was deemed acceptable in the court of public opinion. The justification was that Labor’s carbon pricing mechanism specifically targeted the electricity sector rather than other key emission intensive sectors of the economy such as land-use and transport.

This time round, in the 2016 election campaign, electricity prices are much less prominent. The Coalition would have us believe that by axing the tax they have driven electricity prices down. The flow on effect from reduced household expenses is a rise in consumer confidence. And that, we are told, is a key stimulus in maintaining growth in face of strong economic headwinds, and one we shouldn’t risk by changing government.

Given the success of the Coalition strategy in the last election, Labor is understandably gun-shy on electricity prices. It also likely wants to avoid provoking further Coalition delight in spruiking one of their favourite epithets - Electicity Bill.

However, this is all a bit strange, because wholesale electricity prices have almost doubled over what they were at the equivalent stage of the last election cycle. Incredibly, they are 300% above what they were in the 2010 election.

Wholesale electricity prices in the 4 week period prior to the last four Australian federal elections. For the 2016 election cycle, the period is 23rd May - 20th June. For the previous three elections it is the 4 week period finishing on the election day. Prices are volume-weighted and differentiated by the region. Data from AEMO half-hour aggregated price and demand tables.

The current record wholesale electricity prices provoke a number of questions, not the least of which is if electricity prices are so important why is consumer confidence so buoyant? Perhaps the answer is that wholesale electricity prices really don’t matter that much. And if that is the case then shouldn’t we fess up to the idea axing the tax may have been largely immaterial to our economic outlook.

What’s happened to prices

The figure below shows the wholesale electricity prices for NSW since 2011, with the four week period May 23 through June 20 indicated in red.

Half-hour trading interval prices for NSW, from 2011 on. Red colours highlight the 4-week period 23 May - 20 June, with volume weighted prices in red boxes. The period of carbon pricing is shown in purple shading. Black boxes show the prices adjusted by removing the carbon prices assuming an emission intensity of 0.9 tonnes per MWhour. Units are $/MWhour. Numbers along the top indicate the number of intervals when prices exceeded $250/MWhour in grey for the calendar year, red for the 4-week period.

Prior to the start of carbon pricing period in July 2012, NSW wholesale prices averaged about $30-35/MWhr, reflecting subdued market conditions due to an ongoing decline in demand for grid supplied electricity. That decline started around 2009 and continued to 2015. During the carbon pricing years (mid 2012 - mid 2014) prices jumped by ~ $20 (per megawatt hour), but volatility remained very subdued as indicated by the spread in the half hour prices. Following the rescinding of the carbon pricing legislation, wholesale prices fell back to near 2011 to early 2012 levels, but only for a short period of time. Over the last year prices have risen relentlessly, and volatility has returned dramatically. Half hourly prices now regularly hit $300 per megawatt hour.

In NSW, at $101/MWhour for the last four weeks, prices are almost 250% higher than the same period last year and almost double the equivalent period in the carbon pricing years. As illustrated below, other states show comparable trends, highlighting the exceptional nature of current prices. With the exception of anomalous prices in SA in 2013, current prices are way above anything that has been experienced in recent times.

Volume-weighted wholesale prices in four mainland states for the 4 week period May 24 - June 21, for 2011 on. Data from AEOM half-hour aggregated price and demand tables. Why are prices so high?

In fact, across the eastern states prices are now averaging higher than at any time since the height of the Millennium Drought in 2007. Then drought conditions affected the supply from hydro stations and from some thermal (coal) generation due to limited availability of cooling water. With demand then growing at around 2% each year, the drought tipped the balance between demand and supply, driving up prices dramatically. The breaking of the drought in 2009 coincided with a sustained decline in demand for electricity, at around 1% per year, though to 2015. Despite some power plant closures (notably Anglesea and Northern) and mothballing of others, the market has been in a state of considerable oversupply. Notwithstanding the impacts of carbon pricing, both prices and volatility have been remarkably low, especially in NSW and Victoria.

Since early 2016, rises in price arguably reflect a tightening of the demand-supply balance, as demand has begun to pick up.

While that is what might be expected in a market that is operating efficiently it is unlikely to be the full story, since there is still very substantial underutilised capacity. For example NSW black coal generation is still only operating at about 50% full capacity.

With such excess in relatively low cost generators, there is suspicion that the market is not operating particularly efficiently. This suggestion has been made recently in Queensland, and the AEMC has indeed flagged this issue with a request for rule change that is supported by both the regulator and the operator in their submissions (see Note 1).

Should electricity prices be part of the election agenda?

Clearly the question of price manipulation in our energy market is significant and speaks to existing market rules and the powers of the regulator. The question of market efficiency is crucial and should be addressed as part of a bipartisan approach to energy pricing.

The broader question, and one that will no doubt divide the key parties, relates to the causes and consequences of the current high electricity prices.

As alluded earlier, there would appear to be an incongruency in the Coalition position with regard to the current prices. However, it is important to note that the market prices have yet to flow through to domestic retail prices. The Coalition should be worried if and when they do. According to the logic of their own axe the tax mantra, any flow through of the wholesale price rises should stymie what it argues is a somewhat fragile consumer confidence. And along with that, so to the edifice it has built in its own attacks on Labor’s economic plans.

However, it is important to understand that even at $100 MWhour, wholesale prices are still less than 50% of the standing offer of most domestic retail contracts (see note 2). That there is fat in the system is indicated by the preparedness of most retailers to offer discounts of up to 30% on standing offers for such things as paying on time. Such sweeteners amount to more than the rise in wholesale price we have seen over the last year, and given the vertically integrated nature of the much of the industry, at least some of what is gained on the generation side can delivered by the retail side with little detriment to shareholder value.

For small generators without retail arms, and for new entrants, the wholesale price rises are a godsend. For the first time in a decade wholesale prices are approaching the cost of new generation build. With an ageing, emission intensive generation sector, there is a desperate need for new build. No matter what technology is contemplated nothing is viable at less than a long-term average of about $70-$80/MWhour.

So the current prices should be encouraging with regard to many of the challenges facing the industry. Providing current prices are reflective of an efficient market one would hope for bipartisan recognition that current prices are appropriate to the challenge at hand.

However it should also be acknowledged that such prices are not sufficient to encourage new build alone. We know that adding new capacity to the system without any withdrawal will collapse the price back to the marginal cost of coal-fired-power production of around $30/MWhour or lower. This is particularly the case for new-build renewables which have the paradoxical effect of lowering market clearing prices because of their negligible short run costs. The prospect of such a collapse in prices has an analogue in what we have seen in the recent Saudi-led onslaught against largely US-based unconventionals, and is a powerful disincentive for new investment.

Given a primary driver for new build is the necessity to reduce emissions, rational economists are unanimous that the most efficient mechanism to facilitate transition to a low emission generation portfolio is to appropriately price emissions.

While we suspect the Prime Minister really does know this, we also know he is bound by a party room that is still a long way away from abandoning ideology for rationality, on this issue at least.

So on this point we must acknowledge any chance for bipartisanship ends. In the meanwhile, the rest of us might contemplate whether market prices would actually be any higher if we still had a carbon price.

While I don’t know the answer, my suspicion is probably not.

Notes

[1] The request for the rule change was motivated by recent incidences of strategic late bidding by generators and purported manipulation of the market by withdrawing Queensland generation, seen by some as a market distortion accentuated by the current market structure of 5 minute dispatch intervals and the 30 minute trading intervals.

[2] Of course, the elephant in the room in electricity prices remains the distribution network. The cost we are paying for the poles and wires is unacceptably high, especially with the cost of capital tumbling across the world.

Disclosure

Mike Sandiford receives funding from the Australian Research Council for his geological research.

The Fat-tailed Dunnart is found in box gum grassy woodland. Damian Michael

There a many reasons to be unhappy about the state of the environment. But we’ve recently found some good news: a conservation program that works.

You probably haven’t heard of the Environmental Stewardship Program (ESP). It was a market-based agri-environment program that ran between 2007 and 2012, which funded farmers to conserve threatened ecosystems on their property. Land managers were given contracts for up to 15 years to deliver results.

Overall, 297 land managers will receive about A$152 million over roughly 18 years to implement their conservation management plans. The last of these contracts will end in 2027. No new funding rounds are expected.

There’s been a variety of market-based programs for conservation on farmland in Australia, but we don’t know what the total investment is to date. And we are not aware of scientific monitoring that demonstrates their impact.

Endangered ecosystems

The box gum grassy woodlands of eastern Australia are home to several hundred species of native birds, including the iconic superb and turquoise parrots, thousands of native plants (such as the chocolate lily that leaves a deliciously rich and sweet aroma in native pastures), and beautiful mammals like the squirrel glider.

Box gum grassy woodlands have been 95% to 99% cleared for wheat and sheep grazing and are listed as nationally critically endangered.

Box gum grassy woodland is found across eastern Australia. Author provided.

Under the ESP, more than 150 farmers from southern New South Wales to southeast Queensland have been funded to conserve the box gum grassy woodland ecosystem. This is one of the largest projects of its type in the world.

Farmers undertake controlled grazing by livestock in woodland remnants, replant native woodland, avoid firewood harvesting, cease bushrock removal, and control weeds and feral animals.

But we can’t know if a conservation program is working unless we monitor it. Fortunately, soon after it started, the Australian National University was commissioned to design a monitoring program for the ESP. We have now been monitoring these efforts for six years - and the results are exciting.

Better for wildlife…

So far, the data show that the farmers are doing a good job and it is money very well spent.

To find out if the program is working, we have to compare managed (conserved) areas with “control patches” - patches where land owners haven’t done anything. This comparison shows that funded management patches have fewer environmental weeds, greater native plant species richness, more natural regeneration of native plants, smaller areas of erodible bare ground, and more species of woodland birds.

In the space of six years, the Australian government, in concert with Australian farmers (through modest investment), has generated significant, positive environmental changes on farms. In fact, the box gum project can set the bar for many other conservation programs.

…better for farmers

The positive impacts go beyond improvement of the environment, because there have been notable social benefits too.

Farmers are now highly motivated to deliver better environmental outcomes on their farms and showcase the integration of the multiple objectives of agricultural production and conservation.

The income stream they received also helped some survive the almost unprecedented hardships associated with the Millennium Drought in the mid- to late 2000s.

More generally, regular feedback and discussions between ANU field ecologists and landholders over the past six years has provided anecdotal evidence that farmers engaged in successful environmental programs suffer fewer problems with mental illness. This landholder goodwill and change in attitude towards land management is something that will far outweigh the 15-year investment in the program.

A model for conservation

Despite its success, the program has not been without detractors who see the policy and monitoring as over-engineered or boutique. This is primarily because its design, implementation, and monitoring standards are politically and bureaucratically inconvenient. They are not well suited to a reactive, short-term focused society.

In the case of monitoring, some considered it wasteful to establish and monitor control sites (areas where there has been no management). Yet without the controls, we couldn’t tell this positive story.

This is an exciting example of successful private-public land conservation and how it can be integrated with agricultural production (the primary land use of much of Australia’s land surface).

The long-term funding model is a more sensible approach than one-off payments, and provides a realistic timeframe to achieve results.

The Australian government should be congratulated and encouraged to invest in more programs of this type. It has worked because it was designed specifically to link farmers, scientists and policy makers.

Billions of dollars are expended on the environment in Australia every year. Landscape recovery will span multiple governmental cycles and every dollar must be spent wisely. Programs like ESP give some guidance on how large-scale environmental programs can be more successful.

For further information on conservation programs like the Environmental Stewardship Program, see our new e-book

David Lindenmayer receives funding from the Australian Government, the Australian Research Council, the Murray Local Land Services and the Riverina Local Land Services. David Lindenmayer is a member of the Canberra Ornithologists Group and Birdlife Australia.

Chloe Sato was employed by ANU under the National Environmental Research Program to complete research on the Environmental Stewardship Program. ANU received funding from the Australian Government Department of the Environment to conduct scientific monitoring for the Environmental Stewardship Program.

Dan Florance is an employee of ANU and ANU receives funding from the Australian Government Department of the Environment to conduct scientific monitoring for the Box Gum Grassy Woodlands Project of the Environmental Stewardship Program.

Emma Burns receives funding from the Australian Government through the National Collaborative Research Infrastructure Strategy. Emma is an employee of ANU and ANU receives funding from the Australian Government Department of the Environment to conduct scientific monitoring for the Box Gum Grassy Woodlands Project of the Environmental Stewardship Program.

University of Sydney study, conducted after two shark-related deaths, reveals overwhelming preference for non-lethal responses to attacks

Perth residents overwhelmingly prefer non-lethal responses to shark attacks, a new survey shows. Seventy-five per cent of those polled said they wanted money be spent on education and research rather than catching the shark, according to a survey published by the University of Sydney on Wednesday.

The survey was conducted between June 8 and 15, two days after university lecturer Doreen Collyer was fatally mauled by a great white shark while diving 1km off the Mindarie marina, in Perth’s northern suburbs, and five days after surfer Ben Gerring died in hospital from wounds also sustained in a great white attack.

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Leadership forum hears of ‘huge gap’ between experts’ advice on phasing carbon out of the economy and public willingness to go along with that advice

A group of business and academic leaders have bemoaned the “huge gap” between what experts say ought to be done to decarbonise Australia’s economy and the public’s willingness to accept such a policy.

They want Australia’s leaders to restart a conversation after the federal election about the need to transition the economy towards renewable and cleaner energy.

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In June 1997, astronauts on the Russian space station Mir faced disaster after the worst collision in the history of manned space flight.

Milder winters have contributed to a significant drop in greenhouse gas emissions across the EU over the past quarter of a century.

If you despair of Australia’s lacklustre climate policies, you might take heart from the Greens’ stated goal of limiting global warming to 1.5℃. But are the party’s own policies up to the job?

Shortly after announcing this target late last year, the Greens launched an ambitious renewables policy, promising to achieve 90% renewable electricity by 2030 and save money in the process.

But as wonderful as it sounds, even this plan is insufficient to meet a 1.5℃ target.

The arithmetic is simple. According to the Intergovernmental Panel on Climate Change (IPCC), to preserve a two-thirds chance of avoiding 1.5℃ warming, future carbon dioxide emissions must not exceed 200 billion tonnes. As annual global emissions are now around 40 billion tonnes, we will blow the budget within five years.

Now let’s suppose that the entire world achieves the Greens’ emissions reduction targets of 60-80% by 2030 (relative to 2000 levels), and 100% by 2040. Assuming a steady trajectory to 70% in 2030 and another steady move to full decarbonisation a decade later, that puts global CO₂ emissions by 2040 at more than 400 billion tonnes – far beyond the budget described above.

Idealism vs realism

Does it matter if the numbers don’t add up? After all, the rest of the world has exactly the same problem. If we want to avoid losing hope of averting dangerous climate change, surely wishful thinking and calls to action are better than no target at all?

But there is a growing group of energy experts, environmentalists and conservation scientists who are worried by the environmental movement’s failure to process the full implications of the climate challenge.

Take the Greens’ promise to achieve 90% renewable electricity by 2030. There are several major economies – Switzerland, Norway, Sweden, France – that already have near-zero-emission electricity. But all of them use large amounts of hydroelectricity, nuclear power, or both.

Rather than follow the only proven path to clean electricity, the Greens propose that Australia should emulate Germany’s Energiewende policy.

While Energiewende has expanded renewable energy, it has failed to cut emissions. True, the emissions intensity of German electricity is about 40% lower than Australia’s. But both Germany’s total greenhouse emissions and the carbon intensity of its electricity have plateaued, despite record investments in renewable energy. German emissions intensity remains an order of magnitude higher than those of the nuclear/hydro countries such as Switzerland and France.

Germany’s problem is that it has had to back up its intermittent wind and solar generation with fossil fuels. The Greens promise that canny Australian engineers will succeed where Germans have failed, by using “pumped hydro” power storage power storage and concentrated solar thermal energy.

However, the jury is still out on these technologies – and even ClimateWorks, whose modelling the Greens uses, acknowledges that “large investments in Research and Design are needed to improve the performance of existing low-carbon technologies to required levels”.

Spain’s 20-megawatt Gemasolar power plant shows that solar thermal and storage can supply baseload power. But it would take around 100 Gemasolars to replace a typical major coal-fired power station, and bigger solar thermal plants, such as Ivanpah, the world’s largest, have not produced the expected output. While it would be foolhardy to write off solar thermal, it’s also mightily brave to bet the climate on it.

Making up the shortfall

Is an all-renewables future possible in Australia? Of course. But it won’t come fast, cheaply or without significant environmental impacts. The most authoritative “100% renewables study” so far was released in 2013 by the Australian Energy Market Operator (AEMO). Although the Greens requested this report, they didn’t like its conclusions: that an all-renewable grid would need baseload power from geothermal (not yet a scalable technology) and bioenergy (which has a range of knock-on environmental impacts).

Part of the problem with the Greens' approach is that it made many of its energy choices long before climate change was a major issue. The party emerged as a political force through campaigns against nuclear technologies and the Franklin River dam. It has always backed wind and solar (which now provide around 2% of global energy), but has opposed the world’s two largest sources of low-carbon energy: hydroelectrcity (6.8%) and nuclear (now 4.4%).

Am I suggesting that the Greens embrace nuclear power? While that is unlikely given their deeply held political commitments, it is not unreasonable to ask for an end to the anti-nuclear fearmongering. The Greens’ national policy platform demands the closure of the OPAL reactor south of Sydney, which produces radioisotopes for cancer detection and treatment. Without such reactors, life-saving nuclear medicine would become impossible.

The Greens are right that nuclear cannot compete on cost with coal, and if we only wanted to halve our emissions then gas and renewables would be the logical choice. But if our goal is zero-carbon electricity, and given the uncertainty about the pace of innovation in other low-carbon technologies, it is worth heeding the advice of South Australia’s nuclear Royal Commission that “action is taken now to plan for [nuclear’s] potential implementation”.

Of course the Greens are right that wind and solar must make a much larger contribution to our future energy mix. But to hope that we can avoid dangerous warming without drawing on every available tool is to put ideology before arithmetic.

Truly radical climate action means we shouldn’t unconditionally rule out any promising technology – from carbon capture and storage to low-methane genetically modified crops.

Rather than accept the Intergovernmental Panel on Climate Change’s (IPCC) findings about carbon budget overshoot and the consequent need for “negative emissions” technologies such as carbon capture and storage, Green politicians promote alternative research outlining all-renewable paths to global decarbonisation. Such studies assume both unprecedented technological progress, and extreme global inequality in energy use (for example by assuming that Indians will be content to use 84% less energy than Australians).

Embracing science

Of course, this is not to say that the two major Australian parties, with their underwhelming climate ambitions, are any better. Yet so successfully have the Greens cast themselves as the party of climate science that it’s easy to forget how radically they dissent from a scientific worldview in their responses to climate change.

Former NASA climatologist James Hansen, often dubbed the father of climate awareness, has branded green opposition to nuclear power as a major obstacle to solving the climate problem. In response, he was pilloried and branded a “denier”.

The idea that greedy polluters are the only barrier to an all-renewable future presents climate action as a simple moral choice. Unfortunately, caring for the planet is not so easy. Effective mitigation requires tough choices among imperfect options.

To be effective, we environmentalists must examine our own biases as carefully as we do those of our opponents. And we must do more than accept climate science; we must also use science in our search for solutions.

Jonathan Symons is a former Greens campaign manager in the federal division of Melbourne. He will be a participant in the Breakthrough Institute's 2016 annual dialogue.

Exclusive: Solar Citizens says since the 2012-13 financial year, rooftop solar owners have saved about $1bn on their household bills each year

Australian households and small businesses have invested more than $1bn a year in rooftop solar over the past five years, spending a total of almost $8bn since 2007, new calculations show.

In its latest State of Solar report, Solar Citizens – which campaigns for, and represents the interests of, solar owners – has for the first time estimated Australian’s out-of-pocket investment in rooftop solar, how much money it has saved consumers, and how much carbon it has abated.

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Galaxy polling finds only 17% of voters think the Coalition has a credible climate plan and only 20% think Labor does

Support for strong action on climate change is at its highest level since 2008, with much sought after uncommitted voters showing the strongest support, according to Galaxy polling commissioned by the Climate Institute.

Despite that, voters were dissatisfied with both Labor and Coalition policies, with only 17% saying the Coalition had a credible climate plan and only 20% saying Labor did.

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‘Historic’ agreement between the state’s largest utility company and environmental groups follows safety debates over proximity to seismic faults

California’s last nuclear power plant will close by 2025 under an accord announced Tuesday, ending three decades of safety debates that helped fuel the national anti-nuclear power movement.

The state’s largest utility, Pacific Gas & Electric Co (PG&E), and environmental groups reached an agreement to replace production at Diablo Canyon nuclear plant with solar power and other energy sources that do not produce climate-changing greenhouse gases.

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Justin Schmidt sampled the stinging power of ants, bees and wasps. His reviews – from ‘blinding, fierce’ to ‘hot and smoky’ – have now been published in their entirety

Ever wondered what it’s like to be stung by an artistic wasp? (This being an actual insect species of the order Hymenoptera, as opposed to a Turner-nominated waspish type with a vendetta.) “Pure, then messy, then corrosive,” according to entomologist Justin Schmidt, otherwise known as the King of Sting. “Love and marriage followed by divorce.” Or what about something with a little more bite? Like the sting of the fierce black polybia wasp, which apparently feels like “a ritual gone wrong, Satanic. The gas lamp in the old church explodes in your face when you light it.”

Now that summer is sort of here, and wasps are blithely buzzing around the nation’s Coke cans (or San Pellegrino, if you want to be posh about your pop), check out the Schmidt Sting Pain Index, the exquisite life’s work (and pain) of a biologist at Southwest Biological Institute and the University of Arizona who appears to be a cross between Steve Irwin and Jilly Goolden. As in he likes to stick his hand into a hornet’s nest and then sample the venom as though as it were a glass of classic vintage barolo.

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London mayor has told TfL to develop system of alerts and signs to increase awareness of air quality blackspots, BusinessGreen reports

Roadside signposts and online alerts could be used to inform Londoners of air pollution hotspots and periods of poor air quality, under proposals announced today by the capital’s new Mayor Sadiq Kahn.

Londoners should be much better informed when air pollution reaches dangerous levels in the UK capital, Kahn said, announcing he has directed Transport for London (TfL) to “urgently” develop a package of public alerts and signs aimed at increasing awareness of poor air quality in the city.

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Total greenhouse gas emissions fell by 24% between 1990 and 2014 but road transport emissions rose by 17%, European Environment Agency data shows

Road transport has bucked a downward trend in European greenhouse gas emissions, growing by 17% between 1990 and 2014, at the same time that emissions from other sectors fell by almost a quarter.

Cars, vans and lorries reported the biggest absolute increase of any sector in CO2 emissions over the last 25 years, growing by 124 megatonnes (Mt), European Environment Agency (EEA) data published on Tuesday shows.

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Environment and energy minister of small island state, one of the countries most at risk of global warming impacts, says ‘no time to waste’ on Paris deal

Rich countries must ratify the climate change agreement reached in Paris last December, one of the world’s most at-risk nations has warned.

Thoriq Ibrahim, environment and energy minister of the Maldives, told the Guardian that there was “no time to waste”, in ratifying the agreement that was reached more than six months ago, and that it should be a matter of urgency for industrialised countries.

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British astronaut Tim Peake describes his dramatic journey home to Earth from the International Space Station.

Tim Peake says he would go back into space "in a heartbeat" after his six-month mission to the space station.

Iceland's fishing minister says the country would "never join the European Union" because the industry is thriving outside the bloc.

Residents in the Ukip stronghold of Clacton-on-Sea are rightly proud of their clean beaches, fresh air and wildlife. Would they still vote leave if they knew the things they love about their town are thanks to EU membership?

Audrey James and and Mary Chivers, skirts hitched and shoes off, are paddling with their grandchildren by the pier at Clacton-on-Sea. A huge offshore windfarm spins in the distance and all around them are clean beaches, clear water and protected nature reserves.

But Groyne 41, the name of the beach on the “Essex sunshine coast” where they are picnicking, is the exception, having failed to meet tough new EU water quality tests last year possibly because of the many seagulls living below the pier.

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Off-grid communities such as those in sub-Saharan Africa can pay thousands of times as much as the rest of us for their energy. Designer Jim Reeves has developed a simple, low-cost gear-train and generator that uses a descending weight to power a perpetual light source. Children can do their homework and study, families and friends can eat together and interact after dark adding new dimensions and possibilities to their lives

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The Great Barrier Reef has become a major issue in the federal election campaign, with the stakes raised by the most severe bleaching ever documented and suggestions that the next few years will be our last chance to avert major damage to this World Heritage-listed icon.

Last week, Prime Minister Malcolm Turnbull and federal environment minister Greg Hunt announced a further commitment of up to A$1 billion over ten years, from an existing A$10 billion “special account” administered by the Clean Energy Finance Corporation.

Turnbull said that this new Reef Fund will provide loans to finance more energy- and water-efficient irrigation systems on farms, as well as improved pesticide and fertiliser application systems. He also raised the possibility of the fund being used to finance solar panels on farms, saying:

The Reef Fund will support clean energy projects in the Reef catchment. It will finance solar panels and other renewable energy substitutes on farms as well as more energy efficient equipment in agriculture, local government and tourism.

The government says that this financing will be on top of A$461 million already pledged for the Great Barrier Reef, currently planned to be spent on incentive programs to help farmers move to more “water quality friendly” management practices as has been happening over the past seven years.

Labor, for its part, has pledged A$500 million over five years – including A$123 million as a continuation of an existing Coalition pledge – to be split between scientific research, pollution reduction and restoration projects, and reef management.

Is this enough money?

We already have relatively robust estimates of the funds needed to bring the reef’s water quality into line with the government’s official water quality guidelines set by Great Barrier Reef Marine Park Authority in 2010. Unfortunately, we also know it will cost much more than either major party has pledged so far.

One estimate (on which I worked) puts the cost at between A$5 billion and A$10 billion over ten years. These amounts are far in excess of the current spending trajectory, based on what has already been spent: just under half a billion dollars on farming and water-quality management, as outlined above.

This funding has achieved some limited success in reducing pollution on the Great Barrier Reef. But it is now clear that much more funding and regulation will be needed to meet the required water quality guidelines.

How much money have the parties pledged?

Financial commitments, both in government budgets and election pledges, are difficult to assess accurately. Funding can be committed across several budgets, and it is important to distinguish between no-strings funding and loan financing.

Here is a breakdown of what the three leading parties are promising to deliver.

The Coalition will spend A$450 million over 6 years (from various programs including Reef Trust and Reef Plan) or about A$350 million over 5 years (from this July) plus the new A$1 billion loan facility, which will be portioned out over 10 years.

Labor has made a A$500-million, five-year commitment, albeit contingent on maintaining A$123 million of funding previously pledged by the Coalition, with A$377 million representing newly pledged funds.

Labor’s half-billion-dollar total can be broken down into A$377 million of direct, on-ground spending plus other current ongoing budget funding. The other roughly A$130 million is designated for research and organisational management.

The Greens have pledged A$500 million in new funding, to be spent on improved farming practices and other land restoration projects, plus a A$1.2-billion loan facility to help farmers transition to low-pollution farming methods. Both schemes would be administered over five years.

The Greens have also promised to retain A$370 in existing funding for water-quality projects, which it says brings its total financial plan for the reef to more than A$2 billion.

The Greens have also promised to use the law to protect the reef, by using the powers of the GBR Marine Park Act of 1975 to regulate polluting activities in the reef’s nearby river catchments. Tightening these regulations could help to reduce pollution faster, potentially reducing the amount of money needed to hit the reef’s pollution targets.

The Queensland government has also allocated A$90 million to spend on direct water quality improvement measures over the next few years. It will also use its regulatory powers under the state’s Great Barrier Reef Protection Amendment Act of 2009 to improve the region’s farming practices.

Loans and profits

One large question hanging over the the Coalition and Greens' loan pledges is whether farmers will be keen to accept this financing, even at “low” interest rates. As many farmers are currently unwilling even to accept grant money to improve practices which provide them with little financial benefit, it is difficult to foresee a wide takeup of a loan facility.

Many environmentally beneficial changes to farm practice bring no net profit for the farmers themselves. Farming lobby group Canegrowers has questioned whether this is the best approach, arguing that the industry would rather receive dollar-matching grants than loans.

The Clean Energy Finance Corporation (CEFC) is currently providing loans via the major banks to allow farmers to invest in energy-efficient equipment, with interest rates discounted by up to 70 basis points relative to commercial rates. This would be the model that would most likely be followed for the new proposal.

Future loans doled out under the Coalition’s A$1 billion fund would need to remain within the CEFC’s broad investment mandate of funding projects and technologies that reduce greenhouse emissions. Thus, more efficient fertiliser use, higher-efficiency irrigation pumps, and low-till cropping would all fit the bill.

It is unclear, however, whether other farming improvements that could benefit the reef – such as gully stabilisation or repair – would be judged to come under the mandate of the CEFC loans, or whether they might be excluded.

Regardless, the proposed loan program will still not put nearly enough funds into what is a pressing issue, and a parallel system of focused grants for individual pollution-reduction projects would seem to us to be a sensible approach.

Without stronger regulation (which only the Greens are suggesting) and considerably more funding than any of the main parties is yet willing to provide – not to mention stronger action on emissions reductions throughout the economy – none of these policies promises a particularly rosy future for the Great Barrier Reef.

This article was co-written by David Rickards, Managing Director of Social Enterprise Finance Australia.

Jon Brodie receives research funding from the Australian and Queensland Governments, the UN, Bancroft Station Wines, Queensland NRM bodies such as the NQ Dry Tropics NRM Group.