Graph of the Day: Why scrapping RET would blow the budget

Once the Federal Government finds a suitable candidate to conduct its review of the Renewable Energy Target, it’s going to be fascinating to see how the fossil fuel generators justify their calls to scrap or reduce the target, apart from the impact on their revenue and bonuses.

Here (in the graph below) is a strong argument against diluting or dumping the RET, produced by the Climate Institute. It looks at the extra costs that would be created by changing the renewables target.

The first column, assuming the government’s optimistic Direct Action abatement cost of $8/tonne, shows scrapping the RET – which has been the most effective abatement measure to date – would cost the government an extra $607 million, just to meet its 5 per cent target (which past RET reviewer the Climate Change Authority said was no longer a credible target).

Based on estimates by SKM, which puts the Direct Action abatement cost at $25 a tonnes, scrapping the RET would cost an extra $1.9 billion, while under the Climate Change Authority’s $33 a tonne Direct Action estimate, dumping the RET would cost $2.5 billion and even diluting it would still incur extra costs of $1 billion.

Only if the Direct Action scheme were opened up to international credits (i.e. the non-delivery of an invisible substance to someone that Tony Abbott can’t see), would the cost impact of blowing up the RET fall to a more modest $417 million.