Australia’s Malcolm Turnbull shelves flagship energy policy

Malcolm Turnbull, Australia's prime minister, has shelved his government's flagship energy policy, threatened to break up power companies and dumped national emissions targets in a dramatic bid to stave off a leadership challenge from disgruntled conservatives within his own party.

The electricity market intervention follows a bruising debate over climate policy and price-gouging by energy companies that has erupted within the Liberal-National coalition.

Among other moves, Mr Turnbull has backtracked on plans to legislate emissions reduction targets that it had signed as part of the Paris Agreement on climate change, as he seeks to shore up his leadership.

“We are not going to propose legislation purely for the purpose of it being defeated,” said Mr Turnbull on Monday, with his coalition holding just a one-seat majority.

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He told reporters he enjoyed the confidence of his cabinet and the Liberal party.

The coalition had planned to pass the National Energy Guarantee in parliament within weeks to end a long-running war over energy and climate policy. The NEG was intended to bolster energy security, cut emissions and reduce prices, and was supported by industry.

But coalition rebels – including former prime minister Tony Abbott – threatened to vote against the legislation, saying it did not do enough to cut energy prices for consumers, and urged Mr Turnbull to put "pensioners before Paris".

Leadership challenge

The U-turn comes amid speculation about a leadership challenge from Peter Dutton, home affairs minister and a leading conservative, and follows poor performances by the government in recent byelections and a slump in opinion polls. A Fairfax/Ipsos survey on Monday showed the coalition trailing the Labor party by 45 per cent to 55 per cent on a two-party preferred basis.

Mr Turnbull downplayed any prospect of a leadership challenge, telling reporters that Mr Dutton had given him his “absolute support” at a leadership team meeting on Monday.

Australia has experienced multiple leadership coups over the past decade, with five prime ministers sworn into office since December 2007.

"The odds are Turnbull will be gone by the end of the week as the momentum against him may have gone too far," said Ian McAllister, a professor of politics at Australian National University, adding that the lack of credible alternatives was the only thing that could save him.

Mr Turnbull assumed the premiership in September 2015 by ousting Mr Abbott as Liberal leader, accusing him of bad economic management and poor polling. He delivered a shortlived bounce in polls but only narrowly won the 2016 election, which left his party with a one-seat majority in parliament and hobbled his policy agenda.

Mr Abbott has engaged in a guerrilla campaign ever since, attacking the prime minister for not doing enough to cut electricity bills or maintain coal power in Australia’s energy mix. In 2009, Mr Abbott ousted Mr Turnbull as Liberal leader over his support for an emissions trading scheme – underlining the toxic nature of Australia’s energy and climate debate.

"Turnbull hasn't managed to throw down the gauntlet to his internal critics or get enough runs on the board in terms of policies to secure his position," said Peter Chen, lecturer at University of Sydney.

Immigation policy

Mr Dutton is best known for overseeing Australia’s hardline immigration policy, which has seen asylum-seekers and refugees housed on offshore Pacific islands. The former policeman has previously expressed leadership ambitions and may view a challenge as the best way to hold on to his seat at an election, which is due early next year. He tweeted last week that he supported the prime minister and the government.

On Monday, Mr Turnbull also unveiled measures to cut power bills and tackle the market dominance of energy companies. These include enabling Australia’s competition watchdog to force the “functional separation” of power companies, to oblige operators to divest certain assets and keep coal power plants running in cases of market abuse. – Copyright The Financial Times Limited 2018