Greens move on energy poverty

What?
You mean the Greens have poorly constructed policy that conflicts with other poorly constructed Greens policy?
Well I never.

Felix said :

I’m afraid that believing there is a direct relationship between pricing and usage is naive – real world experience indicates that the relatiomnship is uneven and imperfect and there is a raft of other factors that impact elasticity. So it just isn’t ‘simple as that’.

You’d better let the Greens know that, you’ve just revealed that carbon pricing is useless.

Either that or my statement was intended to be taken in context of the debate about pricing as an isolated factor, and you’re just being pedantic.

I’ve had it pointed out to me that the Greens’ policy paper is quite clear on this:

8. reviewing ActewAGL tariff structures to provide a clear price incentive to reduce energy use

Skidbladnir said :

All you’ll achieve is an increase to that segment’s purchasing power somewhat and gradually increase market demand without increasing overall supply.

Start paying a subsidy, then to sustain the effectiveess of the subsidy you’re forced to start increasing that subsidy due to the fact you altered the market equilibrium by introduced the subsidy (without atcually encouraging efficient consumption), and getting rid of it becomes less of an option.

In reading this, I am reminded of how the First Home Owners Grant impacted property prices.

Felix said :

Surely the ‘way around it’ is to offer some degree of subsidy to the poor, as Rattendbury is suggesting. I believe this has been discussed in many places – for that matter, I think even Ross Garnaut has suggested that you should use some of the money collected from a carbon tax and/or CPRS-style-scheme to provide some level of relief for lower income people.

In short, I don’t think it’s a cake at all – rather an area that requires some common sense economics applied to it.

Great. Felix is anti-cake now.

May I ask what the dollar value of the Energy Concession Rebate is? It’s all well and good to claim it was only raised by 3%, but what is the total percentage of the rebate worth to the average energy bill?

A pretty rational and unoffensive debate this one. Would that it were always so…

A key aspect missing from the debate is that the rapid increases are not entirely the result of the feed-in tariff. In fact the majority of the increase is instead due to the incredible amount of work that has to be done to upgrade the network infrastructure to cope with the peak demand being shifted from around dinner time to the middle of the day in warmer months. This is almost entirely down to availability of cheaper air conditioning systems. It may be that most of them only get such serious use on weekends, but the network has to be built to cope with the peaks, regardless of their frequency.

When I worked for the air and energy team in Brisbane City Council in 2002, the authorities were just becoming seriously concerned about how fragile the grid was when it came to coping with rapidly escalating summer peak loads. It was even starting to fall over.

It is most unfortunate that the FIT is coming into strength at the same time as this vital network upgrade, because it is very easy as a result for the entire cost increase to be blamed on the FIT.

There is one very simple reality here – PV on your roof generates the greatest energy rate at precisely when it is most needed, and if not for the rapid roll-out of domestic PV thanks to the FIT, we would need a lot more work done to the grid and new generation capacity (= new gas-powered generator plant) – and that would cost a lot more.

Regrettably, our semi-corporatised energy provider ACTEW-AGL has an interest in generating more and more energy and selling it, and bugger the greenhouse impact, so they are never going to give you a clear explanation on this. They are more than happy to let the FIT take the hit.

Back OT, the energy consumption of the poorest households is largely inelastic, as said in #5, and the subsidy is about recognising and compensating somewhat for the increase for those most affected. As Felix said in #3, the entire approach proposed for a carbon tax is premised on making sure those least able to cope with such rapid shifts are helped through a transition period, while sheeting the costs home to the polluters who’ve been getting off scot free for so long.

Where the ALP came undone with the CPRS proposal was that they were convinced by those same polluters to promise absurd subsidies to them too. That’s why a carbon tax will be a whole lot easier to ‘sell’ because it will be a whole lot harder to conceal such industry subsidies in a much simpler system – even journalists will be able to understand it.

No matter what ‘subsidy’ there is for anything you will always have those people who are thankful and use it wisely and those others who think ‘goody free stuff’ and take advantage of it.
How many people battle to pay electricity bills or go on plans while those who don’t give a ratz just go to Vinneys or Salvo’s and have it paid for them?
Admittedly you are only supposed to be able to have that done twice a year but those who do it regulary have it worked out so they never pay (or hardly ever) so do you think they care how much they use?

Subsidies and rebates need some hard work put in to them so they are benefitting the people who NEED them, not the people taking advantage of them.

Long term subsidies on a rival good (such as electricty) for a consumer segment really won’t help, unless they use that subsidy to buy more efficient appliances.
Does anyone really expect your Centrelink recipient to buy efficient when they can just buy more conspicuous consumption (ie: plasma tvs)?

All you’ll achieve is an increase to that segment’s purchasing power somewhat and gradually increase market demand without increasing overall supply.

Start paying a subsidy, then to sustain the effectiveess of the subsidy you’re forced to start increasing that subsidy due to the fact you altered the market equilibrium by introduced the subsidy (without atcually encouraging efficient consumption), and getting rid of it becomes less of an option.

I’m afraid that believing there is a direct relationship between pricing and usage is naive – real world experience indicates that the relatiomnship is uneven and imperfect and there is a raft of other factors that impact elasticity. So it just isn’t ‘simple as that’.

As to housbound’s observation about Greens policies, it’s worth a tiny bit of reasearch on this subject by checking the policies on their website. For example, the following principles are listed there under ‘Climate Change and Energy’:
7. the cost of reducing energy use and greenhouse emissions should be equitably distributed across the ACT community and Australia, and internationally
9. a “polluter-pays” strategy to encourage greenhouse gas reduction with appropriate assistance for those in need
Fairly broad, I’ll grant you, but these principles seem to me to address exactly the questions you raise.

Further complicating this is that poor people are likely to have older, smaller, less efficient heaters, in less well insulated homes. Thus using more power (if they can afford it).

Lin said :

Would you go wasting electricity or gas just because it suddenly became a bit cheaper? You’d still be conscious of that $200 bill that’s on its way and try to prevent it from being higher.

“Wasting” is a loaded word. If the price is lower then people will use more, simple as that. As johnboy says, applying a subsidy makes this just another form of income redistribution.

It seems the Greens are finally being forced to recognise their hardline policies may have (un)intended consequences.

A basic principle of pricing theory is that people will use less if they pay more. The only problem is that the welfare system is left to decide how it affects the poor as prices go up. It is this that the Greens have never really come to terms with – certainly not in the sense of the detailed policies a genuine politcal party would be forced to come up with (eg, when were the Greens asked in any election how they were going to simultaneously increase electricity prices and look after the poor at the same time, and how would it be costed in a policy climate that frowns on cross-subsidies?).

“Yes but if you’re giving people money for their power bills they’re going to use more so are we pricing carbon or redistributing capital in an arbitrary and counter productive way?”

They’re not suggesting to give it away for free. They’ll still be paying well over $1000. Would you go wasting electricity or gas just because it suddenly became a bit cheaper? You’d still be conscious of that $200 bill that’s on its way and try to prevent it from being higher.

And prices are also pushed up by things like the high feed-in tarrif for solar panels. Which is the poor(er) subsidising the rich.

Yes but if you’re giving people money for their power bills they’re going to use more so are we pricing carbon or redistributing capital in an arbitrary and counter productive way?

Surely the ‘way around it’ is to offer some degree of subsidy to the poor, as Rattendbury is suggesting. I believe this has been discussed in many places – for that matter, I think even Ross Garnaut has suggested that you should use some of the money collected from a carbon tax and/or CPRS-style-scheme to provide some level of relief for lower income people.

In short, I don’t think it’s a cake at all – rather an area that requires some common sense economics applied to it.

But effective energy pricing is going to screw the poor. There’s just no way around it.

This isn’t a cake you can have and eat.

Yeah, but I think social equity is also a major part of the Greens’ policy platform – and we’re only talking about low income people here.