A modest carbon price would ensure Australia meets its 2030 emission targets, but would fall far short of decarbonising the electricity sector by mid-century and fail to keep the nation within its carbon budget, according to Melbourne-based think-tank the Climate Institute.

Australia has one of the world’s most carbon-intensive economies, with coal’s share of electricity generation at 76.1% and rising.

Intense political fighting over the carbon pricing mechanism, which was repealed under former PM Tony Abbott, and the renewable energy target, which as been slashed by the sitting administration, have led to a sharp drop in clean energy investments in recent years.

A growing number of analysts eye a potential compromise between the Coalition and the Labor party in the form of evolving the Safeguard Mechanism into a baseline-and-crediting scheme, to provide investors with some more certainty.

But a modest carbon price alone would not take Australia where it needs to go, the Climate Institute said in a report released Friday.

“Our modelling found a modest carbon price rising to A$40 per tonne by 2030 would result in emission reductions similar to the government’s current national 2030 target of 26-28% below 2005 levels,” Climate Institute CEO John Connor said.

He added that barely any of Australia’s high-carbon power plants would be shut down as a result. Clean energy investment would drop by 60%, and the electricity sector would spend 98% of its 30-year carbon budget in the first ten years, meaning highly disruptive policies would be needed after 2030.

“More than 80% of the coal-fired generation fleet would have to be closed in less than five years, and new clean energy capacity would have to jump four-fold and keep rising. The impacts of such a disruptive shift would be felt across the economy.”

BUDGET

The report was based on setting a global carbon budget until 2050 that would cut GHG emissions sufficiently to make it likely the world can meet its target of limiting temperature growth to 1.5-2C. Australia’s “fair share” of that budget would be 8-9 billion tonnes of CO2e between 2013-2050.

Using a carbon price alone to stay within those limits would require the unlikely scenario of a carbon price of A$70 per tonne in 2020, rising to A$100 in 2030, the report said.

“Our research shows that a policy package that actively supports both clean energy investment and the orderly replacement of our aging coal-fired power stations can better manage a timely transition to a cleaner electricity supply. A baseline-and-credit or emissions trading scheme alone will not be strong or reliable enough to drive the change we need, when we need it,” Connor said.

COMPREHENSIVE PACKAGE

Instead, a comprehensive package of policies would be needed, the report said:

• A clean energy target of 50% by 2030 would drive installation of 2,500 MW of clean energy per year in the 2020s and reduce reliance on subsidies.
• A 45-year operating lifetime limit on existing coal plants would ensure all major facilities close by 2035, with an average 1,500 MW shut down annually.
• An additional 290 million offsets would be required for the sector to meet its target.

The policies would need to complemented by transition plans for coal communities and strategic energy efficiency programmes to minimise costs for energy users, the report said.

“The sooner we act, the better placed we are to manage the transition to net zero emissions. Over the next 12-18 months, policymakers need to lay the groundwork for emissions reductions towards a net zero emissions economy,” the report said.

By Stian Reklev – stian@carbon-pulse.com

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