Australia : May 15, 2008

New South Wales’ Premier Morris Iemma and Treasurer Michael Costa continue to push ahead on plans to privatize the NSW energy sector although such a move is being widely resisted especially by unions and environmental groups. The debate largely focuses on the alleged inability of the NSW government to continue to fund major infrastructure upgrades required by the state’s growing energy demands.

Proponents of privatization argue that private enterprises can more effectively meet the state’s energy needs. State-owned enterprises, they argue, are overly bureaucratic, inefficient and at the end of the day, produce power at a higher cost to the consumer. However, a report on the privatization of the UK energy industry co-authored by L’institute, the Department of Commerce, and the Birmingham Business School seems to challenge this argument. The report found that private enterprises needed to pay shareholder dividends whereas publicly-owned concerns could reinvest all profits back into the upkeep and improvement of the business. They concluded the observed energy prices in the UK are indeed significantly higher than they would have been had privatization not occurred.

Many argue that, in the long term, a privatized energy industry is intrinsically incapable of meeting the interconnected goals of energy security and environmental sustainability. While a growing number of scientists, politicians and industry leaders are warning of the need to reduce carbon emissions, it is argued that private industry will do more to protect their profits than the environment.

A more responsible approach to our energy needs and the environment is required and that may not be best served through privatization. As we trend towards more renewable energy sources with higher costs for the consumer, perhaps a more public approach is warranted.