Modelling shows carbon targets achievable

A smart carbon policy could deliver savings to end users while simultaneously allowing Australian to meet 2030 targets, according to a report issued by the Energy Networks Association (ENA).

The ENA report features an analysis of alternate carbon policy options and says that a focus on outcomes rather than technology alternates could result in savings of $216 per year to customers and achieving economic savings of $900 million. Conducted by Jacobs, the modelling considered the impacts of three different policy settings aimed at achieving 26 to 28% emissions reduction on 2005 levels by 2030. These policy settings include:

• Business as usual — where the suite of current state and federal government renewable policies continues and major policy settings are adjusted to reach the abatement target.
• Technology neutral — where the current suite of policies is adjusted to become technology neutral and elements of a baseline and credit scheme are introduced.
• Carbon price mechanism — where all other policies are removed and replaced by a carbon price on all emissions.

ENA Chief Executive Officer John Bradley said the call for technology-neutral policy is not an attack on renewables.

“If markets are allowed to work, each technology finds its efficient role. Jacobs saw renewable generation reaching the 33,000 GWh target by 2020 in all scenarios examined and continuing to grow beyond 2020.

“If we have outcome-focused carbon policy, our power system is in a stronger position to support more renewable energy, while avoiding reliability and security risks for customers,” Bradley said.

The ENA also released Enabling Australia’s Cleaner Energy Transition, which includes proposed actions for the Australian Government in the review of carbon policy scheduled for 2017.

“We propose seven key steps for smarter carbon policy starting with securing enduring, nationally integrated measures with more consensus,” Bradley said.

“There is a pragmatic opportunity to allow carbon trading between electricity generators by building a ‘Baseline and Credit’ trading scheme on the existing Emissions Reduction Fund Safeguard Mechanism.

“If we can secure tangible progress with consensus today, we can review and tighten our carbon targets and refine emissions trading options over time,” he said.

Seven steps to a smarter carbon policy

ENA says the following steps will deliver the best results:

1. Pursue an enduring, stable and nationally integrated carbon policy framework based on consensus.
2. Introduce a ‘Baseline and Credit’ Scheme leveraging the current legislative architecture of the Emissions Reduction Fund Safeguard Mechanism.
3. Over time, consider options to increase economic efficiency by moving to a Carbon Price mechanism, with appropriate financial transfers and household support and without risking subsequent policy ‘churn’.
4. If governments maintain direct incentive programs, transition Commonwealth and state programs to focus on least cost abatement outcomes, which are scale neutral and technology neutral.
5. Continue to review Australia’s abatement targets (in the form of Intended Nationally Determined Contributions or INDCs), within the 5-yearly cycle proposed following the COP21 Agreement in Paris.
6. Incorporate an explicit, independent assessment of national energy market implications when developing jurisdiction initiatives on carbon and renewables policy.
7. Ongoing support for research, development and demonstration on a diverse range of low emission technologies.

Bradley welcomed the recent announcement by Australian energy ministers that they would commission an assessment of the impacts of diverse jurisdictional policies.

“Governments can achieve better integration of carbon policy if all their policies are focused on the same objective — carbon abatement.

“When it comes to meeting our emission targets, governments should ‘buy in bulk and save’. Policy fragmentation will cost customers hundreds of dollars per year without any benefit in reducing global warming,” he said.