States Could Go It Alone On Emissions: Jay Weatherill

Fairfax - Phillip Coorey

SA Premier Jay Weatherill says the states could go it alone on carbon. Alex Ellinghausen

South Australian premier Jay Weatherill says he will push the states to go it alone on climate change after the federal government caved to pressure from the right wing and rejected looking at a carbon scheme for the electricity sector.
Despite expert advice that an emissions intensity scheme on electricity generators was the lowest cost and most secure option to transition towards gas and renewable energy while meeting Australia's 2030 emissions reduction target, the government slammed the door on the option after a backlash from conservatives, as well as minster Christopher Pyne, who argued it could be seen as putting a price on carbon.
The Premiers and Prime Minister were to discuss the option at Friday's Council of Australian Governments meeting in Canberra on Friday.
The Australian Financial Review reported that Chief Scientist Alan Finkel, who in October was put in charge of the review into Australia's National Energy Market following the blackouts in SA, approved of an emissions intensity scheme for the electricity sector in a preliminary report to COAG. He had intended to advocate its consideration in a verbal briefing to Premiers, sources said.

In  a discussion paper to be put to COAG, it is understood he endorses the concept which is already supported by the Climate Change Authority, the CSIRO and the Australian Energy Market Commission, which is a COAG advisory body.
Mr Weatherill told ABC radio on Thursday that "in the absence of national leadership", he would be urging the states to team up and implement a nationally consistent scheme of their own.
More so given the experts say it would actually reduce power prices and increase energy security.
"It would clean up our energy system," said Mr Weatherill who will sound out his colleagues ahead of Friday's COAG meeting.
"Our first instinct is of course to seek a national scheme," he said. Mr Weatherill said preliminary advice showed a scheme could be established without federal government support.

An  emissions intensity scheme is not a carbon price or carbon tax in that it does not raise revenue by charging for emissions. Instead it would penalise generators who pollute above a baseline limit.
Cleaner emitters who stayed below the baseline would not pay anything and would receive free credits which they could to trade to bigger polluters.
The policy is similar to the Coalition's current direct action policy that has a "safeguards mechanism" designed to penalise emitters for exceeding limits. Polluters are currently paid from the budget to reduce emissions but this is considered unsustainable beyond 2020.
Experts said the government was now limited to high cost options in order to meet the 2030 targets. These were expanding the renewable energy target or to keep pouring money from the budget into direct action to pay polluters to reduce emissions.
Despite this, Mr Turnbull and his ministers insisted on Thursday the government was committed to low electricity prices.
Mr Turnbull said Mr Weatherill would be putting at risk jobs and business with his plan to go it alone.
"We believe that policies should be national," he said.
Treasurer Scott Morrison said: "We are not interested in a carbon tax. The Prime Minister has never supported a carbon tax. Whether it is an ETS or whatever you want to say. That was settled by the Coalition years ago".
"We are interested in engaging in the engineering of ensuring that our electricity costs, pressures on those are reduced and ensuring we have the sufficient supply, whether it is gas or other important areas that will ensure that energy prices have the cost pressures on them reduced."
The backflip came just 36 hours after Energy Minster Josh Frydenberg released on Monday the terms of reference for a review of climate policy for the decade beyond 2020.
This was promised by Tony Abbott in 2015. On Thursday, Mr Morrison dismissed it as "a very low level, housekeeping review".
The terms of reference opened the door to the purchase of cheap international permits to help meet Australia's 2030 emissions reduction target but made no provision for an emissions trading scheme or a carbon tax. But Mr Frydenberg left open the prospect of an emissions intensity scheme for the electricity industry which produces one-third of the nation's carbon emissions.
"We know that there's been a large number of bodies that have recommended an emissions intensity scheme, which is effectively a baseline and credit scheme. We'll look at that," he said in an interview.
Following the backlash and a cabinet meeting on Tuesday afternoon, Mr Frydenberg said:
"The government will not introduce an emissions intensity scheme, which is a form of trading scheme that operates within the electricity generation sector."

Links

• Capitulation on climate change ignores evidence and will come at a cost
• The Emissions Trading Scheme Should Not Have Gone Up In Smoke
• SA Premier Jay Weatherill says states could set up their own carbon pricing scheme — PM Malcolm Turnbull hits back

Finkel Review Criticises Climate Policy Chaos And Points To Need For Emissions Trading

The Guardian - Katharine Murphy

Exclusive: Report warns investment in electricity has stalled, and existing policies won't see Australian meet its Paris target

The Finkel review note advice from the Climate Change Authority that an emissions intensity scheme 'had the lowest impact on average residential electricity prices'. Photograph: Mick Tsikas/REUTERS

Australia's chief scientist, Alan Finkel, has said investment in the electricity sector has stalled because of "policy instability and uncertainty" – and he's warned that current federal climate policy settings will not allow Australia to meet its emissions reduction targets under the Paris agreement.
In a 58-page report that has been circulated before Friday's Council of Australian Governments meeting between the prime minister and the premiers, Finkel has also given implicit endorsement to an emissions intensity trading scheme for the electricity industry to help manage the transition to lower-emissions energy sources.
While there is no concrete recommendation to that effect, the report, obtained by Guardian Australia, references the evidence from energy regulators that such a scheme would integrate best "with the electricity market's pricing and risk management framework" and "had the lowest economic costs and the lowest impact on electricity prices".
Finkel also notes advice from the Climate Change Authority which says market mechanisms have the lowest average cost of abatement, and of the options modelled, an emissions intensity scheme "had the lowest impact on average residential electricity prices".
The positive commentary from the chief scientist cuts directly across political arguments the Turnbull government has made since dumping its nascent attempt to use the review of the Direct Action policy to explore an intensity trading scheme for electricity – equating carbon pricing with higher power prices for consumers.
The Finkel report was commissioned by the energy and environment minister, Josh Frydenberg, at the last meeting of state and federal energy ministers in the wake of the political controversy that erupted after South Australia endured a statewide blackout in September.
The Turnbull government has wanted to use the much-anticipated report as a springboard to wind back state-based renewable energy targets, which it says are making the electricity market less secure.
But while noting renewables present ongoing challenges to network stability, challenges that have to be carefully managed, Finkel has pointedly warned the federal government its current climate policy is inadequate as it stands.
He also makes the point that a lack of clarity at a federal level about policy and regulatory settings can also affect network security and prices for consumers.
Finkel's report says the relatively short time horizon of federal climate policy, coupled with the Abbott government's attack on the federal renewable energy target, has put investment in abeyance.
"There is evidence that investment in the electricity sector has stalled and investors have become less responsive to investment signals," the report says. "This is due to policy instability and uncertainty driven by numerous reviews into the renewable energy target and a lack of clarity about the policies to reduce emissions after 2020."
"Investment in renewable energy dropped by 52% between 2013 and 2014 and has not yet recovered to the level required to satisfy the RET [renewable energy target]."
Finkel says there is a pressing need for clarity in policy to unlock much-needed investment in the national electricity market, and he says if the clarity fails to materialise, electricity prices will rise for consumers, and energy security will become more of an issue.
"For businesses to take risks on the future and invest, they need to be confident that emissions reduction policies and the mechanisms to achieve them are consistent with Australia's international commitments and will not change drastically in the future."
"Because of the long-term nature of electricity sector investments, investment confidence depends strongly on long-term policy signals."
"The lack of predictability in the electricity sector creates uncertainty around which generation and network assets investors should either invest in or divest from."
"If businesses do not invest when needed, this will impact on the security and reliability of electricity supply."
He also says explicitly the current climate policy, which includes Direct Action, the RET, and the national energy productivity plan, will not guarantee Australia meets its Paris commitments. "While the electricity sector must play an important role in reducing emissions, current policy settings do not provide a clear pathway to the level of reduction required to meet Australia's Paris commitments," the report says.
Finkel says the RET is designed to achieve an increase in large-scale renewable energy generation to 2020 "but not beyond". "The policy also ends in 2030, meaning that projects commencing in 2020 will need to recover their capital costs over only a 10-year period."
He says the Direct Action policy has focused predominantly on land-sector abatement, with very few projects seeking to improve the efficiency of electricity consumption.
Finkel says the safeguard mechanism "is not calibrated to drive emissions reduction".
The Turnbull government on Monday flagged an emissions intensity trading scheme for the electricity sector as part of its scheduled review of its Direct Action climate policy.
But the overture was dumped when Frydenberg folded in the face of internal pressure – a decision which has been widely criticised as short sighted and counterproductive by business, the energy industry and climate groups.
Friday's Coag meeting will also hear a push from the South Australian government to revive emissions trading in the wake of the Turnbull government's decision to preemptively rule it out.
But the push from the premier, Jay Weatherill, appears unlikely to secure unanimous support from other state governments.
South Australia has been leading the charge on an emissions trading scheme for the electricity sector for some months, but New South Wales rebuffed the push on Thursday. The Labor governments in Victoria and Queensland have also backed away from carbon pricing in favour of beefing up their state renewables policies.
Before Friday's talks, Malcolm Turnbull continued efforts to equate carbon pricing with higher electricity prices, and he revived previous criticism of the South Australian government's positive disposition to renewable energy.
"What South Australia is doing is putting at risk the jobs of South Australians, the prospects of South Australian business. Jay Weatherill's approach to energy has been condemned by the business community in South Australia, they're appalled," Turnbull told 3AW on Thursday.
"Major industrial centres – Whyalla, mines, Nyrstar mine and so forth – have had to close down because they don't get reliable power," he said. "The South Australian Labor government has delivered an absolute double whammy of not being able to keep the lights on and having the most expensive electricity in Australia."
But the Labor leader, Bill Shorten, blasted Turnbull for his conduct over the course of the week. "Malcolm Turnbull is demonstrating that he is under pressure, that he is lashing out, and that now he is making terrible decisions about the future of climate change and what governments can do about it," Shorten said.
"Malcolm Turnbull has been muted on taking proper action on climate change. He has been gagged from talking about the solutions we need to tackle harmful carbon pollution."
"This week has become the sickest joke of climate change policy since Malcolm Turnbull got elected."

Links

• South Australia says states could go it alone after Turnbull rules out carbon tax
• Emissions trading backflip a recipe for price rises, say business groups
• Malcolm Turnbull rules out carbon tax or emissions trading
• Josh Frydenberg backtracks on emissions trading comments
• Direct Action review: Coalition leaves carbon trading option open
• Direct Action review could bring changes to renewable targets, says PM
• Australia dubbed 'fossil of the day' after lobbying for coal mine at climate talks
• Josh Frydenberg plays down Climate Change Authority call for tougher emissions limits 

Government Killed Emissions Scheme Despite Knowing It Could Shave $15 Billion Off Electricity Bills

Fairfax - Adam Morton

The Turnbull government has been sitting on advice that an emissions intensity scheme - the carbon policy it put on the table only to rule out just 36 hours later - would save households and businesses up to $15 billion in electricity bills over a decade.
While Malcolm Turnbull has rejected this sort of scheme by claiming it would push up prices, analysis in an Australian Electricity Market Commission report handed to the government months ago finds it would actually cost consumers far less than other approaches, including doing nothing.

States consider carbon trading
South Australia suggests the states set up their own carbon intensity trading system, but Mike Baird is not so keen. Courtesy ABC News 24.

It finds that would still be the case even if the government boosted its climate target to a 50 per cent cut in emissions by 2030.
Depending on the level of electricity use and the target adopted, modelling by Danny Price of Frontier Economics found costs would be between $3.4 billion and $15 billion lower over the decade to 2030.  Costs would be $11.2 billion lower over this time assuming average electricity use and the existing climate target.
It suggests it would bring down the cost of cleaner gas-fired electricity and renewable energy, more than offsetting an increase in the cost of high-emissions coal power.
Environment and Energy Minister Josh Frydenberg flagged this sort of scheme for the electricity industry would be considered as part of a long-promised climate review, but was forced to backtrack after opposition from conservative government MPs opposed to any form of carbon pricing.
The modelling is part of a group reports on the future of energy to be discussed by the Prime Minister and state premiers ahead at a COAG meeting in Canberra on Friday.
They include a preliminary report into the future security of the electricity market by chief scientist Alan Finkel, which warns that Australia has no clear path to meeting the 2030 emissions target taken to the Paris climate deal under existing policies.

Prime Minister Malcolm Turnbull has said the Coalition would not implement an emissions trading scheme. Photo: Alex Ellinghausen

While it makes no recommendations, the Finkel review cites the market commission, Australian Energy Market Operator and Climate Change Authority as all having found an emissions intensity scheme would have lower costs and less impact on energy security than other policies considered.
It comes in a week in which Mr Turnbull launched an aggressive attack on Labor over its support for emissions intensity trading as well as a 50 per cent renewable energy target.

Energy Minister Josh Frydenberg backtracked on making an emissions intensity scheme part of a government review. Photo: Andrew Meares

Interviewed on Melbourne radio station 3AW on Thursday, Mr Turnbull contrasted Labor's position with the Coalition's determination to keep prices down. He stressed that the government would not impose a carbon tax or an emissions trading scheme.
"I just want to be very, very clear that energy prices are too high already. We will do everything that we can to put downward pressure on energy prices," he said.

Illustration: Ron Tandberg 

Under all scenarios considered, the modelling in the commission report seen by Fairfax Media found an emissions intensity scheme was the cheapest option for consumers and business.
That remained the case if the emissions target was beefed up from a 28 per cent to a 50 per cent cut by 2030 compared with 2005 levels. Under the latter consumers and businesses would still pay $3.4 billion less than if no policy was introduced.
If demand for electricity was higher than average, the collective saving on electricity bills was estimated to be $15 billion.
An emissions intensity scheme sets a limit on how much a power station can freely emit for every unit of power generated. Cleaner generators that emitted less than the limit earn credits, and sell them to high-emitting generators above the baseline.
The limit would be gradually reduced. Proponents say it means coal would effectively subsidise cleaner power. They say the scheme would also encourage a greater range of types of cleaner power, which would increase competition and further reduce costs.
It would initially be likely to boost gas-fired power, which has about half the emissions of black coal generation, at the expense of the dirtiest coal plants. Modelling suggests it would supplying nearly a third of electricity by 2030.
Mr Frydenberg issued a statement late Thursday reiterating the government's opposition to any form of carbon pricing.
He said Labor's expanded renewable energy target would jack up power prices and put the nation's energy security at risk, while the Coaliton had triggered the largest reduction in electricity bills experienced by scrapping the Gillard government's carbon price scheme.
He said the government's 2017 review would be the "next step in our methodical approach to climate change policy".
The commission, which sets the rules for electricity and gas markets and has long supported an emissions intensity scheme, was asked to provide guidance to COAG ahead of next year's climate policy review.
The Finkel report was commissioned to give extra advice after the unprecedented statewide South Australian blackout in September. It says the energy system is undergoing its biggest transition since the 1890s as it shifts to lower-emissions energy, a change that cannot be reversed.
But it highlights the significant challenges faced in transforming the system to run on a growing mix of traditional baseload power, intermittent renewable energy, distributed rooftop solar power and battery storage.
It also warns against the ambitious state renewable energy targets set by Labor governments in Victoria (40 per cent by 2025) South Australia (50 per cent by 2025) and Queensland (50 per cent by 2030), saying they could increase costs and investment uncertainty.
COAG will also hear a push form South Australian Premier Jay Weatherill for a states-based emissions trading scheme, though it is unlikely to receive wide support.
Energy and business groups have called for a national bipartisan plan to help plan an orderly transition to cleaner energy, warning a failure to do so would increase both prices and the risk of blackouts.
Labor climate change spokesman Mark Butler told a press conference Mr Turnbull has turned energy policy into a shambles.
"A growing list of organisations and energy experts... have confirmed over the course of this week that this policy is the best way to drive down power prices and improve energy security," he said.
Climate Institute deputy chief executive Erwin Jackson said without a plan the government risked turning Australia into a third-world economy and was making a mistake "of Stalinist proportions".
Mr Price declined to comment.

Links

• Capitulation on climate ignores evidence and will come at a cost
• Government accused of forcing up power prices through climate backdown
• Household solar to power up to half Australia: CSIRO