The Free Market Can’t Lead a Clean Energy Transition

Decarbonization won’t be achieved through market-led solutions. It’s only by democratizing the economy and resisting privatization that a meaningful and sustainable transition to green energy can be won.

Installation of solar panels onto the rooftop of a residential property in Sydney, Australia. (Brendon Thorne / Bloomberg via Getty Images)

The climate crisis has raised the need for large-scale, broad-ranging, and publicly led economic transformation. By necessity, this will be a multilayered project demanding political reform to get the fossil fuel lobby out of politics and to reverse the privatization of energy production and distribution. And as proposals for a Just Transition or a Green New Deal adapted to Australia make clear, decarbonizing the economy must be directly linked with lifting living standards and creating good jobs.

The success of these projects, however, will rise and fall on the extent to which they place power in the hands of everyday people and, ultimately, democratize the economy. Although this seems like a massive task, a number of union- and community-backed cooperatives are already taking up the challenge. By addressing the needs of working-class and marginalized Australians in ecologically friendly ways, cooperatives can fill gaps left by the failure of the market. And by incorporating democratic ownership and management structures, they can both avoid co-option and offer tangible proof that a fairer, decarbonized economy is possible.

Privatization Was a Climate Disaster

Last week, Canadian asset manager Brookfield and Australian tech billionaire Michael Cannon-Brookes made an $8 billion bid to buy fossil fuel company AGL. If successful, it will mean that Brookfield — which recently acquired Victoria’s electricity grid — will own a substantial chunk of what was once the publicly owned State Electricity Commission (SEC) of Victoria. What’s less well known is that prior to being privatized in 1992, the SEC was already planning for the climate crisis they knew was coming.

In 1989, the SEC published a greenhouse effect discussion paper proposing nine priority reforms including promoting energy efficiency and the use of renewable energy. Other priorities included informing the public about the greenhouse effect and supporting further scientific research. The paper even anticipated events such as the disastrous 2014 Hazelwood open cut fire and the 2019–20 bushfires, noting that “the likelihood of bushfires or open-cut fires would be likely to change with the greenhouse climactic scenario.”

Surprisingly, given Victoria’s very high reliance on gas, it also anticipated the need for policies that would discourage and “conveniently replace” domestic gas-powered cooking. In the mid-1980s, the SEC had just completed building the Loy Yang power stations A and B. Nevertheless, as a public institution, it recognized that new legislation would mean balancing its responsibility to reduce greenhouse emissions with the possibility of reduced energy sales. The SEC’s approach stands in stark contrast to that taken by AGL, which currently owns Loy Yang and recently announced it plans to keep Loy Yang A open as late as 2045.

After holding public seminars, the SEC called for comments to be submitted by mail, with feedback to be integrated into a final paper released in 1992. That same year, Liberal leader Jeff Kennett became premier of Victoria and quickly began breaking up and selling off the SEC. In the process, thousands of well-paying technical jobs were lost. Regional areas were particularly hard hit as engineers tasked with maintaining the state’s power grid were sacked.

The SEC’s plans to mitigate and prepare for climate crisis were, unsurprisingly, shelved by its new corporate owners. It’s just one example of how privatization helped set Australia’s response to the climate crisis back by decades.

Market-Driven Disaster

Last year, the Australia Institute released a report that found that privatized companies like AusNet have been investing less in Australia’s energy grid, even as the climate crisis worsens. Through interviews with frontline electricians, the report also found that Australia’s energy grid is not prepared for increasingly severe fires and storms. This is in part because retail electricity companies have been spending money on marketing and sales instead of electricians and engineers.

From 1996 to 2016 the number of sales workers in the electricity industry increased by 400 percent. Meanwhile, as the report outlines, in just five years between 2011 and 2016, the number of electricians and related specialists employed declined by 19 percent, an equivalent of 1,650 jobs. Michael Wright, assistant national secretary of the Electrical Trades Union described the shift, noting that

over the past 15 years, high-vis maintenance and transmission workers have been replaced by telemarketers, spin-doctors and banking spivs. This has done nothing for network reliability, but has left us unprepared for the challenge of extreme weather and the incorporation of renewables to our energy supply.

Working-class and rural communities are suffering the consequences of the market’s failure today. Many regional communities have recently experienced lengthy power outages after fires, storms, and floods. In 2021, for example, a storm left residents of the Latrobe Valley, a region that produces approximately 85 percent of Victoria’s energy without power. As Wendy Farmer, a Latrobe Valley resident who became involved in environmental activism after Hazelwood mine fire told Jacobin,

Areas in the Latrobe Valley — some of them within ten minutes of the old Hazelwood power plant, or fifteen minutes from other power stations — went without electricity for several weeks, which seems pretty ironic when we produce Victoria’s Energy.

The bushfires of 2019–20 also caused significant damage to 32 percent of New South Wales (NSW)’s energy network footprint. Once again, by allowing private companies to bill consumers for the costs of repairing fire damage to the grid, the Australian Energy Regulator ensured that households would bear the burden. This is despite the fact that many are already struggling to meet rising costs. According to Essential Energy, 20 percent of customers in NSW receive more than one disconnection notice per annum.

By contrast, the Victorian SEC and other publicly owned power companies provided secure jobs for a workforce responsible for maintaining energy infrastructure. If the SEC had been able to implement the response it outlined in 1989, these electricians could have been preparing the grid for potentially increased pressures as the climate changes.

Market Failure

As the scale of the climate crisis became undeniable in the first decades of the twenty-first century, fossil fuel companies changed their response. Instead of denying the issue, they ran marketing campaigns that attempted to shift responsibility for change onto individuals, for example, by popularizing the notion of a carbon footprint. In addition to being woefully inadequate, the reality is that many market-based measures are out of reach to low-income households.

While one in four Australian households have installed solar panels, the approximately one-third of Australians in rental homes are often unable to change gas appliances provided by landlords. In addition to consuming gas, this leaves renters exposed to indoor air pollution. Australian local and state governments are lagging behind major US cities that have banned gas connections for new buildings, a policy that potentially benefits at least some renters. Governments have made some incentives available to install energy-saving devices like heat pumps and solar panels — but they are only useful for homeowners. After all, why would a renter invest in their landlord’s property?

This also means that savings associated with installing green technology go to the already well-off. Australian researcher Saul Griffith, estimates that households that can afford solar panels, energy-efficient electric appliances, and electric vehicles will stand to save $5,000 a year by 2030. By contrast, as energy prices rise — especially following extreme weather events — renters will be disproportionately burdened.

Perhaps most gallingly, the free market itself often undermines the environmentally sound choices it is supposed to offer. This was the case last year when the multinational fossil fuel company Shell bought the supposedly green energy retailer, Powershop.

At the same time, polluting corporations have worked to block political change. In the 2020–21 financial year alone, fossil fuel companies gave hundreds of thousands of dollars worth of political donations to the Liberal, Labor, and National Parties. The Australian Democracy Network has described the industry’s influence on Australian politics as an example of “state capture.” Even candidates supported by the Climate 200 movement — a campaign backed by billionaire Michael Cannon-Brookes to support climate-ambitious independents — have ruled out refusing donations connected to the fossil fuel industry.

Taking Power Back

At present, only the Australian Greens have unambiguously backed a Green New Deal and proposed a ban on fossil fuel donations for all political parties. Yet, as frustrating as the political impasse is, there are promising signs that union- and community-led initiatives may help strengthen real alternatives to the market.

The Australian Manufacturing Workers’ Union has spearheaded the Hunter Jobs Alliance, which aims to transition away from fossil fuels by fighting for public investment in well-paid, green jobs. The Electrical Trades Union has raised the alarm that Australia’s privatized grid won’t be able to cope with extreme weather resulting from the climate crisis.

Community-based campaigns have also made some headway. A recent Australian Democracy Network report highlighted that some of the only constraints on extractive industries’ influence on Australia have come from the campaigns defending Aboriginal land rights and workers’ rights.

Across Australia, indigenous communities are fighting to protect their land, water, and sacred sites from fossil fuel projects, including fracking. Despite often bearing the brunt of the damage caused by extractive industries, some indigenous communities also experience energy poverty. Original Power formed recently to address this problem. It is an indigenous-led organization the aims to achieve strengthen Aboriginal self-determination by supporting community-led renewable energy projects, including in Borroloola, a town in the Northern Territory that is still reliant on aging diesel generators.

CoPower, a union-backed collective that retails green energy, is another example of an initiative that seeks to address market failure and build democratic power over the economy. As a collective, CoPower is helping to democratize energy supply and demand, for example by empowering its members in participatory budgeting. Like the SEC before it, CoPower is also inviting members to contribute feedback to discussion papers, such as on how it might provide energy to customers that are still reliant on gas appliances.

CoPower recently welcomed an influx of new customers following the sale of Powershop to Shell. Following this, the cooperative released a discussion paper outlining plans to sell gas particularly to low-income and renting households, while supporting a just transition in the LaTrobe Valley.

As Godfrey Moase, the chair of CoPower explained, the goal is to “take money out of gas and put it towards subsidizing products for workers and renters.” The paper proposed distributing revenue toward programs that will help low-income households transition away from gas by subsidizing products from another worker-owned cooperative, Earthworker. Earthworker provides transition jobs in the brown coal producing Latrobe Valley, manufacturing appliances including energy-efficient heat pumps and solar hot water systems. If CoPower’s plans go ahead, these subsidized appliances will help lower-income people break away from reliance on gas, while reinvesting profits in the community and in further green energy initiatives.

Community-based energy projects could also help communities to become more resilient to disasters like the 2018-2019 bushfires, where towns further East of the Latrobe Valley were left without power and communications while surrounded by fire. Community- and union-backed cooperatives could make all the difference. As Wendy Farmer noted,

You know, you hear there’s a disaster somewhere, that community’s used to it. They’re resilient. No, give them the tools to be resilient. Don’t just tell them they’re resilient.