Alan Finkel warns investment has stalled over climate policy uncertainty

Australia’s chief scientist, Alan Finkel, has tried to stay out of the fresh political row over emissions trading but says his review of the energy market will continue to analyse all the options to ensure future security of power supply and compliance with climate obligations.

Finkel’s comments follow a briefing he gave on Friday to the prime minister and state and territory leaders about his preliminary report about the state of Australia’s energy market. He warned that investment had stalled because of national policy uncertainty, and concluded current federal climate policy settings would not allow Australia to meet its emissions reduction targets under the Paris agreement.

The Finkel report has generated fresh embarrassment for the Turnbull government because it implicitly endorses an emissions intensity trading scheme for the electricity industry to help manage the necessary transition from high-emission energy sources to lower-emission technologies at least cost to households.

The energy and environment minister, Josh Frydenberg, signalled at the start of this week a review of the government’s Direct Action policy would consider whether an intensity scheme for electricity was an option – but the signal stirred a hornets’ nest inside the Coalition.

After a brief but noisy outbreak by backbench conservatives declaring the Coalition was, and would remain, fundamentally opposed to carbon pricing, Frydenberg folded, saying the government would not contemplate either a carbon tax or carbon trading. His declaration pre-empted the findings of both the independent Finkel review and his own Direct Action review.

The South Australian premier, Jay Weatherill, who supports an emissions intensity scheme for the electricity market, used the opportunity of Friday’s Coag meeting in Canberra to publicly rebuke the prime minister for preemptively killing off the debate.

With Turnbull sitting at the table beside him at the post-Coag press conference, Weatherill quoted the prime minister’s comments when he took office that leaders should conduct policy debates that were evidence-based.

“That’s simply all we’re asking for here. This is complex public policy. It is easy to scare people,” Weatherill said Friday.

“But fundamentally I believe in the intelligence of the Australian community to actually grapple with these complex public policy issues and come up with good solutions.”

Turnbull was also peppered with questions from journalists about the government’s backdown at the Coag press conference on Friday.

The prime minister was asked about a number of credible studies that have found an intensity trading scheme would allow Australia to conform with our international emissions reduction commitments with the least impact on household power bills, including a study this week which found power bills could be $200 a year less than under the government’s existing policy.

The prime minister, in essence, dismissed the findings of a study that had been signed off by the CSIRO – which mirrors analysis from the Climate Change Authority and the Australian Energy Market Commission – claiming there were other studies available with different conclusions.

Turnbull said he was committed to reducing power prices.

Asked whether he would change his mind if the Finkel review and the Direct Action review produced yet more credible evidence that an emissions intensity scheme would produce abatement at least cost to households, Turnbull said emissions trading schemes increase the cost of electricity to households and businesses.

“We want to put downward pressure on, do all we can – and, of course, we have limited means to do so – but do all we can to ensure that this constant rise in the cost of energy for Australian households and Australian businesses that is so damaging to our international competitiveness, stops,” the prime minister said.

Finkel told Guardian Australia in an interview on Friday he would not comment on the political row but he said was pressing forward with the task he had been given by Frydenberg and the energy minister’s council. “My commitment is to thoroughly analyse all the options,” he said.

The chief scientist noted there was now “broad willingness for change” across the energy sector when it came to climate policy and energy regulation, and “the potential for change is huge”.

“The enthusiasm we’ve come across for constructive change is a wonderful thing to see,” he said.

Finkel said he expected through the course of the review that alternatives to an emissions intensity scheme may be brought forward by people making submissions to his inquiry, which will deliver a final report in 2017.

He said his review would make a priority of analysing why power prices had risen substantially in recent years.