Regulator says carbon price dumping reverses gains on emissions

The Australian Energy Regulator has dismissed claims by the Abbott government that the carbon price had no impact on emissions, saying that the Australian electricity market cut emissions by 10.3 per cent in the two years of the carbon price, but these gains have been eroded since the carbon price was dumped.

The AER, in its annual state of the energy market report, says the carbon price caused changes to the generation mix, meaning less coal was burned, and caused the emissions intensity of Australia’s electricity market to fall by 4.7 per cent from 0.903 tonnes of carbon dioxide equivalent emissions per megawatt hour (MWh) of electricity produced in 2011–12, to 0.861 tonnes in 2013–14.

This fall in emissions intensity, combined with lower demand, led to a 10.3 per cent fall in total emissions from electricity generation over the two years that carbon pricing was in place.

But since the Abbott government succeeded in repealing the carbon price in July, carbon emissions have steadily risen as coal-fired generators increased their market share.

The AER says it has jumped 3.2 million tonnes in just five months compared to the same period in 2013. This reflects both an increase in electricity demand (up 2.4 per cent) and a rise in emissions intensity (2.4 per cent) as coal-fired generation increased its market share.

Meanwhile, the AER repeated its view that the electricity market is experiencing structural shifts causes by falling demand, declining wholesale prices (despite the bidding patterns of some Queensland generators), a widening surplus of generation capacity and the impact of rooftop solar.

“Weakening demand is also removing the impetus for network expansions and flattening revenue requirements,” the AER notes.

“At the same time, there is a greater focus on demand response and small-scale local generation as viable alternatives to network investment to help meet energy demand.

“Pricing and metering reforms are also underway to help consumers make efficient use of their electrical appliances, especially at times of high demand. “