Seven steps to smarter carbon policy

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As the Australian Parliament reconvenes, it’s timely to reassess the scope for Australia to establish a clear, enduring path to efficiently meet its current and future carbon targets.

This week, the Energy Networks Association (ENA) released a final report by Jacobs analysing alternate options for carbon policy in Australia. The analysis has informed ENA’s publication, Enabling Australia’s Cleaner Energy Transition[1], which proposes seven steps to smarter carbon policy.

The Jacobs analysis[2] evaluated three different policy settings for achieving the current Australian abatement target (26 to 28% below 2005 levels by 2030)[3]:

  • Business as Usual – where the suite of current State and Federal government policies continues and major policy settings are adjusted to reach specific abatement targets.
  • 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 policies are removed and replaced by a carbon price on all emissions.

The results from the analysis demonstrate that the 2030 target could be met in any of the three scenarios, with the main difference being in the cost to achieve it:

  • The lowest residential electricity bills are achieved with Technology Neutral policy, with bills averaging $216 per year less over the 2020 to 2030 decade, compared to the Business as Usual setting.
  • Economic savings of $900 million could be achieved over the period under a Technology Neutral approach and up to $1.5 billion in savings could be achieved in the Carbon Price Mechanism scenario.

[1] Energy Networks Association (August, 2016) Enabling Australia’s Cleaner Energy Transition, available from

[2] Jacobs (22 August, 2016) Australia’s Climate Policy Options – Modelling of Alternate Policy Scenarios, available from

[3] The Jacobs report also assesses a higher target of 45% below 2005 levels by 2030.

carbon policy
Importantly, Technology Neutral policy settings are not an attack on renewables. In all scenarios, the Renewable Energy Target of 33,000 GWh is met by 2020. Renewable generation output grows to reach at least 74,000 GWh by 2030, as shown in Figure 2 below.

Figure 2: Impact of policy mechanisms on NEM generation mix in 2030.

Figure 2: Impact of policy mechanisms on NEM generation mix in 2030.

If markets are allowed to work, each technology finds its efficient role and the power system is in a stronger position to support more renewable energy, while avoiding reliability and security risks for customers.

There are seven proposed steps for smarter carbon policy for governments to consider in the forthcoming review of carbon policy scheduled for 2017. The most immediate focus must be on securing enduring, nationally-integrated measures with more consensus.


Towards a Baseline and Credit Scheme

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. Through the tightening of an ‘average intensity’ baseline, electricity generation emissions could be progressively reduced to achieve a 26-28% reduction in CO2-e emissions by 2030. For instance, the Jacobs analysis found that an average emissions intensity of 0.8 tonnes (CO2e) per MWh would need to reduce by approximately 3% per year from 2020 for the electricity sector to reach the abatement target.

The ENA welcomed recent announcements by Australian energy ministers focused on integrating carbon and energy policy and assessing the impacts of diverse jurisdictional policies. The Jacobs analysis suggests policy ‘fragmentation’ could cost Australian customers hundreds of dollars per year without any benefit in reducing global warming.

The Jacobs analysis also finds that higher abatement targets are achievable. If Australia can secure tangible progress with consensus today, we can review and tighten our carbon targets and refine emissions trading options over time.

The Jacobs analysis and consultation on the proposed policy measures will inform development of the forthcoming Electricity Network Transformation Roadmap by the ENA and CSIRO. ENA is seeking feedback on the policy measures identified in Enabling Australia’s Cleaner Energy Transition by Friday 30 September 2016.

Contact details are available in the policy options paper.

John Bradley is CEO of the Energy Networks Association.  


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