Category: Articles

I’m a fan of Hunt’s. He’s a smart bloke who has done great work to pursue this issue from the outset. And, unlike pretty much anyone else in his party other than Malcolm Turnbull, he actually gives a rat’s about environmental issues.

But come off it Greg – a member of the Howard Government talking about accountability under the Westminster system?  Are you kidding?

There’s a more perverse logic at work, though, than the usual political hypocrisy (and the now well-worn cliché about Garrett — who apparently used to be a rockstar — struggling in politics. Because what we need is more party hacks).

The crazy logic of the pursuit of Garrett is that he must take responsibility for the actions of everyone who has received Government funding, no matter how irresponsible they are in their own actions or their oversight of those for whom they’re responsible.

To take up Greg Hunt’s point about Westminster accountability, in the days when such principles meant something, a program like the insulation program would have been implemented by bureaucrats. That is, Government employees would have fanned out across the country, entering homes, climbing into ceilings and installing the stuff. It would have been done with remorseless bureaucratic efficiency, house by house, street by street.

Fortunately, Governments don’t work that way any more. There are no standing armies of road builders or PMG workers or engineers. Programs are outsourced so that the private sector can do them, ostensibly more efficiently, certainly for lower cost.

Somehow, though, Garrett is apparently responsible just as if an army of his bureaucrats were crawling through ceilings across the land. We’ve changed how we build infrastructure, but the political and media rhetoric is of another age. Responsibility has been transferred to the private sector, but not the political risk.

This is another symptom of the great Australian conviction that governments are responsible for making their lives risk-free, that if something, somewhere goes wrong, regardless of whose fault it actually is, the Government is to blame. Done your money in a too-good-to-be-true investment scheme?  Blame the regulator and the bank that lent you money.  Mortgaged yourself to the hilt only to discover interest rates are going up? Blame the Government. Kids overweight?  Blame the Government and the advertisers.

Kevin Rudd has been a beneficiary of this obsessive belief in the power of governments to negate risk, because he ruthlessly exploited it to make the Howard Government look out of touch with voters’ concerns. Now it has returned to bite him, and hard.

Perhaps we should apply the foil insulation logic to every Government program. What about road accidents? Roads might have been designed to the highest safety standards, but people still die on them. Ministers responsible for roads should resign. Health ministers should resign whenever there’s a medical error in a taxpayer-funded hospital. To say nothing of Defence Ministers, who should resign whenever there’s a death in the ADF. Because you can always argue that somehow, a responsible Minister could have done something that might have prevented deaths from occurring.

The four deaths that have occurred are all tragedies and have been or are being investigated by the appropriate OH&S authorities in Queensland and NSW. These men died at work, like over 100 other workplace fatalities every year. In the foil insulation logic, bank executives should resign for approving property loans for sites where construction workers are killed.

What’s ironic is that the Coalition’s “direct action” climate plan is foil insulation on a massive scale, with $10b for private sector activities for energy efficiency, carbon sequestration and renewable energy. Presumably Climate Action Minister Greg Hunt would resign if a farmer died while spreading taxpayer-subsidised black carbon, or a worker was killed during the construction of a new gas-fired power station built with government handouts, or a sparky fell from a roof installing new solar panels funded by a government program.

But our programs would be better managed, the Coalition would maintain. Undoubtedly, especially with the cuts in public service numbers Barnaby Joyce wants.

While we focus on four deaths – each as tragic and unnecessary as any other workplace death – the absolute debacle of the Environment Department’s Green Loans program has been lost from sight. This is a program where the Department knew the risks associated with massive government subsidization of a small-scale industry, poorly designed the program and then exacerbated things by what looks at the very least like blatant favouritism to one provider over others. Garrett should be under the hammer on that, not foil insulation.

It’s a textbook case of what happens when Governments start pumping money into new industries without the disciplines of the market place present.

Which of course is exactly what the Coalition wants to do, on a $10b scale.

All three programs point to serious shortcomings in the ability of the federal Environment Department to manage large-scale public policy roll-outs — for which it historically has had little responsibility.

Another issue seems to have been a catastrophic failure on behalf of the department to forecast demand. All three schemes in question have been wildly popular: so popular in fact that they quickly soaked up all the available contractors in their industries. Financed by government incentives, this massive new demand then began to suck in fly-by-night contractors and opportunists keen for a piece of the action. Unskilled, untrained workers were employed in their thousands, many of them students and young people looking for holiday work or some extra cash. The results have been tragic.

Why the Environment Department got its forecasts so wrong is somewhat of a mystery. An elementary grasp of economics and public administration should have been all that was required to realise that consumers respond to incentives. Just look at the Australian housing market, which has proved itself highly sensitive to government incentives like the First Home Owners Grant. It should have been obvious that injecting hundreds of millions into previously small industries would cause major structural dislocations.

This was exactly what happened with Garrett’s $8,000 solar rebate last year, which proved so popular with householders that it eventually ran $850 million over budget. Garrett had to pull the plug three weeks early, with only 24 hours notice. In this week’s Senate Estimates testimony, it emerged that some solar contractors have still not been paid by the Environment Department.

The multi-billion dollar insulation roll-out proved equally popular. Created as part of the Government’s economic stimulus package, the program was specifically designed to quickly shovel billions of dollars out of Treasury coffers in order to combat the global financial crisis. Speed was of the essence: an Environment Department media release from early 2009 proudly announces that Garrett was “fast-tracking” the insulation scheme. Little thought appears to have been given to whether the Australian home insulation industry had the capacity or the workforce to deliver such a massive program.

This is where Garrett’s protestations that the blame must rest with shoddy contractors runs aground. Almost as soon as the stimulus measure was announced, a sudden boom began to sweep the industry. And soon after that, accidents started to happen. Houses burnt down. Contractors died.

For instance, in November alone two young Queensland installers died as a result of shoddy work practices. One particularly distressing death occurred outside Rockhampton, where 16-year-old Rueben Barnes died after being electrocuted while installing foil insulation.

But electrocution is just one of the risks faced by untrained subcontractors looking for extra cash. Reports have reached newmatilda.com of endemic unreported workplace accidents, like contractors falling through ceilings because they weren’t standing on roof beams. On 24 November, a man died of heatstroke while installing insulation in Western Sydney. As the Sydney Morning Herald reported at the time, “the man had been employed by a subcontractor as a casual worker and … he was not adequately qualified to install insulation”.

It has since emerged that Master Electricians had warned the Environment Department of these risks well before November. In October, the CEO of the Master Electricians, Malcolm Richards, called for an end to the insulation rebate because of the electrocution and fire risk. It now seems as though hundreds and perhaps even thousands of homes may be “live” — in other words: potential death-traps. The Federal Government will now pay to inspect more than 48,000 homes to check for problems, potentially costing as much as $50 million.

And yet despite the warnings, Garrett acted cautiously and incrementally. Last year, he worked to introduce mandatory training requirements for insulation installers. After the electrocution deaths last November, he banned the use of metal staples (which you would have thought posed an obvious risk). But it has taken until now for the Environment Minister to decisively end the program.

Despite a terrible week, the Government is so far standing by its troubled Environment Minister. Senior front-benchers, including Chris Bowen and Julia Gillard, have been given the task of publicly defending Garrett. Labor’s strategists have clearly decided that Garrett remains an asset, rather than a liability, but his accident-prone performance in the job must also have disappointed those who touted the former rock star as a future leader.

In some respects, of course, Garrett is not to blame. Clearly, his department has shown itself woefully incapable of carrying out the ambitious new responsibilities given to it under Rudd. But in politics, what matters is what happens on your watch, no matter whether you personally knew about it. Garrett has taken a significant hit in this scandal. Another scandal before the election could finish his ministerial career.

With modern economies geared to their rivets on just-in-time supply of copious amounts of affordable oil, society surely ignores this risk issue at its massive peril.

But that is what BP, Exxon, Saudi Aramco and many other institutions of the hydrocarbon era would have us do. And theirs is the perceived wisdom. I do not know of a single company, outside the taskforce group, where peak oil is on the agenda as a serious risk issue. As for government, Whitehall’s official line is typical, as things stand: there is 40 years of oil supply, no need to worry, and certainly no crisis. To be fair, that view may be in the process of changing, in the light of recent events in the energy markets.

The taskforce report is the second such. The first, published during the financial crisis in October 2008, charted global production capacity coming onstream, factored in depletion, and found that overall global production would peak in 2013, and then fall rapidly while demand continued to rise. The taskforce worried that things could be worse even than this early peak in oil production, if other risks we are concerned about kick in: more giant-oilfield production collapsing in the manner of Mexico, flaws emerging in reserves estimates in Opec countries, and so on.

In 2009 came the recession, and a steep fall in global demand for oil. This has helped, in the narrow sense of that word. It may have bought us two more years. The new report projects production dropping in 2015, though the risks that it could be earlier remain.

The CEOs and chairmen of the taskforce companies have a simple message for government. This monster threat is very likely to descend on the next government in office, in their first term, and the nation needs to act now.

The stakes are arguably higher than with the financial crisis. The taskforce’s worst-case fear is that premature peak oil will involve not just global energy crisis, but potentially energy famine for some oil importing nations – including the UK.

During the financial crash the world went within weeks from a received wisdom that investment banks had squeezed risk out of complex derivatives, to a spiralling doubt, to a tipping point of disbelief and panic. With peak oil, officials around the world, corporate and governmental, would experience exactly the same collapse of confidence in their cosy cultural assumptions. A second giant industry would have been found to have its asset assessment systemically and ruinously wrong. The net impact would be that oil-producing nations would begin to husband their own resources: keeping exports back for use in their own oil-hungry multi-hundred-billion dollar-and-rouble infrastructure programmes.

This is a scenario that could lead to food delivery lorries failing to reach Tesco in time for Friday-night shopping.

The lessons from the financial crash ought to be stark. The prevailing culture mocked the disbelievers, ahead of the crash. Gillian Tett, capital markets editor at the FT, saw the crisis coming because she was a trained anthropologist and knew how to recognise a cult when she saw one. She was accused of scaremongering from the stage of the World Economic Forum. The pattern is the same this time. BP, in particular, has a tendency to mock the concept of peak oil and its advocates.

Meanwhile, as with the climate crisis, there is a general desperation to believe the comforting narrative ahead of the uncomfortable one. This is why it is so important that companies who understand risk speak out, as the taskforce companies have. It is why governments – who must lead in matters of national security – should listen to the uncomfortable arguments and, given the stakes, buy insurance against them.

History is going to judge us all on how we manage the risk of premature peak oil. And soon.

• Jeremy Leggettis the chairman of Solarcentury and SolarAid, and the convenor of the UK industry taskforce on peak oil and energy