The threat to close them is empty. If the generators failed to maintain the stations during the transitional period to cleaner electricity supply, the State Government has emergency powers that allow it to take over and run the assets.
But it wouldn't come to that. The politicians in Canberra have put together a CPRS that will give free pollution permits worth anything between $7 billion and $20 billion over 10 years, depending on whether the cap is reduced 5 per cent or somewhere up to 25 per cent following the eventual Kyoto Mark II agreement. Only a mug would give up the chance to get their hands on this cash flow.
The generators say they don't get the money unless the price of electricity rises. True. Macindoe said after the Government/Opposition deal was announced that the price of electricity would double in the next four to five years if the CPRS went ahead as planned. If that happens then the value of the free permits will more than double to $15 billion to $20 billion and the generators might then be worth $8 billion or more expressed as the present value of the stream of future earnings.
There are a number of scenarios that could bring this massive bonanza about, including bullying the Government into generous long-term fixed contracts and converting the brown-coal generators to natural gas, which would reduce carbon dioxide emissions by 75 per cent and allow the generators to sell all their free permits. Under the CPRS rules, they can buy unlimited supplies of cheap, dodgy carbon offsets from Indonesia and PNG to avoid using any of their free permits to actually produce electricity. In other words they will be able to sell their free permits by simply replicating, with minor variations, the multibillion-dollar rort by EU generators of the EU carbon trading system since its establishment.
The flawed CPRS should be replaced with a broad-based carbon tax. If it was set initially at $10 a tonne it would be hardly noticed, it would raise $5 billion a year and all the money could be spent on green infrastructure instead of the financial bubble if the CPRS goes ahead.