RET compromise to deepen Australia’s reliance on ERF

Published 09:23 on May 8, 2015  /  Last updated at 09:26 on May 8, 2015  /  Asia Pacific, Australia  /  No Comments

The government and the opposition Labor party on Friday reached a compromise on the Renewable Energy Target (RET) that observers say will make it marginally easier to meet Australia’s emission goal for 2020, but in the long run leaves the nation even more dependent on the controversial Emissions Reduction Fund to meet future targets.

The government and the opposition Labor party on Friday reached a compromise on the Renewable Energy Target (RET) that observers say will make it marginally easier to meet Australia’s emission goal for 2020, but in the long run leaves the nation even more dependent on the controversial Emissions Reduction Fund to meet future targets.

After a year of negotiations, the government and Labor agreed on a target stipulating that Australia must generate 33,000 GWh of electricity from renewable sources in 2020.

The compromise deal is almost a quarter below the 41,000 GWh approved by parliament in 2009, but higher than the 25,500 GWh proposed last year after a government-appointed panel led by climate change denier Dick Warburton reviewed the target.

The Warburton review sparked a crisis in Australia’s renewable energy industry, which saw investments shrink by nearly 90% in 2014.

“This is a pleasing development and clearly indicates that the end is in sight,” Kane Thornton, chief executive of the Clean Energy Council said of Friday’s deal.

EMISSIONS

Ironically, the deal means it will be slightly easier than anticipated for Australia to meet its 2020 target of cutting greenhouse gas emissions to 5% below 2000 levels.

The government recently estimated that in order to meet the target, it would need to cut 236 million tonnes of CO2 by 2020. However, that was based on the Warburton review’s proposal of fixing the RET target at 25,500 GWh.

Depending on how the renewable target for each individual year is adjusted after Friday’s compromise, sources say the deal is likely to shave some 15 million tonnes of CO2 from the 236 million estimate.

But in the 2020s, Australia’s CO2 emissions are set to be around 7-8 million tonnes higher each year compared to if it had kept the original RET from 2009.

“The decreased RET means you have to make emission reductions elsewhere,” Martijn Wilder, a climate change expert with Baker & McKenzie, told Carbon Pulse.

At the moment, Australia does not have many policies in place to drive emission cuts beyond the Emissions Reduction Fund, which recently spent a quarter of its A$2.55 billion ($2 bln) budget buying 47 million tonnes worth of cuts.

The problem with the ERF, according to critics, is that as soon as the low-hanging fruits have been picked it becomes a very expensive mechanism to cut emissions, and it leaves the responsibility of paying for carbon cuts solely with the government rather than with the emitters.

SAFEGUARD MECHANISM

The ace up the government’s sleeve may be the safeguard mechanism, a complimentary tool to the ERF seeking to ensure that emission reductions achieved through the fund aren’t offset by increases elsewhere in the economy. It is due to be finalised later this year and enter into force on July 1, 2016.

The safeguard mechanism will set emission baselines for facilities that emit more than 100,000 tonnes of CO2 per year, and force those who exceed those baselines to make up for it, for example through buying offsets.

Environment Minister Greg Hunt has said the ERF and the safeguards will drive emission cuts in Australia for decades.

But in the draft safeguard rules released in March, there was little indication the government intends the safeguards to bite.

The 140 facilities covered would be given baselines equal to their highest level of emissions during the past five years, and numerous exemptions and special rules were proposed that would allow emissions to increase in the future without penalty for emitters.

“It will be very difficult for the government to meet an ambitious INDC unless it implements an effective safeguards mechanism,” Wilder said.

“At the very minimum they need to turn it into a baseline and crediting scheme. But no one knows if they are going to do that.”

FRUSTRATION

The government is currently consulting on the safeguards, and a wide range of players, from lobbyists at the Australian Industry Group to green NGOs, have written submissions pointing out the weaknesses in the government’s draft, but confidence that the government wants an effective scheme is low.

Friday’s RET compromise coincided with Maurice Newman, Abbott’s chief business advisor, publishing a commentary in The Australian newspaper, where he argued that the UN is using climate change as a ruse to create a new world order.

For many in Australia’s carbon industry, the reduced RET was just one more sign that the government is not serious about reducing greenhouse gas emissions.

The reported compromise is at best a band aid, but no solution to the challenge of modernising and cleaning up Australia’s old, inefficient and dirty power sector,” said John Connor, CEO of the Climate Institute.

“The debate about climate policy shouldn’t be about what crumbs we can offer to the clean energy industry till 2020. The spotlight must now be on the deeper challenge of modernising and decarbonising our energy sector so Australia can help in the international effort to avoid two degrees warming.”

And even as they agreed in principle with Labor a compromise deal on the RET, the government went back on a previous promise that it would wait four years until the RET is to be reviewed again, insisting instead to scrutinise it every two years.

“That means the next RET review will start in seven months time! This is outrageous! You’ve seen the chaos and uncertainty that has resulted from review after review after review,” the Australian Solar Council said in a statement.

By Stian Reklev – stian@carbon-pulse.com