Electricity Sector Won't Bear Brunt Of Paris Emissions Reduction, Energy Analyst Warns

The Guardian - Katharine Murphy

RepuTex says the national energy guarantee leaves shortfall of close to 500m tonnes of carbon pollution

Parts of the economy other than electricity will bear the brunt of Australia’s emissions reduction effort under the Paris agreement, RepuTex says. Photograph: Dave Hunt/AAP

A leading energy market analyst has warned that parts of the economy other than electricity will bear the brunt of Australia’s emissions reduction effort under the Paris agreement – a development that will inevitably drive up the costs of abatement for high-emitting energy, materials and industrial companies.
The warning comes as Tony Abbott has escalated his efforts to scuttle the national energy guarantee despite failing during the last parliamentary sitting fortnight to trip up Malcolm Turnbull and Josh Frydenberg before a critical meeting of state energy ministers in August.
Abbott declared on Tuesday night that Australia should pull out of the Paris agreement, despite being the prime minister who signed Australia up to the agreement before being deposed from the Liberal leadership by Malcolm Turnbull in 2015.
When he signed Australia up to the Paris agreement in 2015, Abbott said there was a “definite commitment” to reduce emissions by 26% “but we believe under the policies that we’ve got, with the circumstances that we think will apply, that we can go up to 28%”.

On Tuesday night, the former prime minister told a climate sceptics group his government would have never signed up to the treaty had it known Donald Trump would pull the US out.
“Absent America, my government would not have signed up to the Paris treaty, certainly not with the current target,” Abbott said. “Knowing what we know now, we would not have made the Paris agreement. But if we wouldn’t have done it, had we known; we shouldn’t be in it, now that we do.”
While Trump has signalled his intention to withdraw, the US cannot actually pull out until November 2020, which is close to the time of the next presidential election.
Abbott has been positioning this week to attempt to make the Neg a leadership flashpoint, suggesting on 2GB it was possible he could return to lead the Liberal party if drafted, noting “let’s just see how things work out”.
He also used an interview with News Corp before his speech to declare the Liberal party had come full circle on climate change, and was now “back to where we were in late 2009, with Malcolm Turnbull trying to do a deal with the Labor party on emissions reduction”.
Abbott unseated Turnbull from the party leadership in 2009 using his support for emissions trading as a trigger. The former prime minister also declared climate and energy policy was “not a circle you can square with the Labor party … it is a fight that has to be won”.
Abbott is attempting to rally the party base and exploit divisions within the government on the Neg with his various forays. The policy divides the National party and some Liberal conservatives, including Abbott, have held out the possibility of crossing the floor.
But his efforts to stir dissent have been met internally by a show of force.
Turnbull has declared it is time to move on from the hyper-partisanship of the decade-long climate and energy wars, and a number of Liberals and Nationals have also rallied publicly in support of the policy.
Privately, there is considerable frustration from many government MPs about Abbott’s behaviour.
With Abbott again on the warpath, the respected advisory firm RepuTex has issued new guidance saying the Neg, if implemented, will only deliver 10% of the national emissions reduction effort.
The firm says the emissions reduction target for electricity under the Neg of 26% on 2005 levels by 2030 translates to cutting national emissions by 10%, leaving a shortfall across the rest of the economy of close to 500m tonnes of carbon pollution.
The government is yet to spell out any roadmap for emissions reduction in the rest of the economy.
RepuTex says, assuming emissions will need to be reduced across the economy to conform with the Paris agreement, that will double the price of carbon to $35 per tonne by 2030 “with industry – notably high-emitting energy, materials and industrial companies – bearing the brunt of the higher abatement cost”.
“With the electricity sector locked into the Neg, other sectors – particularly large energy, materials and industrials facilities – will be called on to fill the gap to 2030”, the firm’s executive director, Hugh Grossman, says.
“As this occurs, we expect carbon contract prices to rise to $35/t in 2030 – more than double current levels – behind the need for more expensive abatement from industry.”
Grossman says abatement is cheaper in the electricity sector than elsewhere in the economy: “Abatement is far more expensive for large energy, materials and industrials facilities.”
He says the firm’s advice to clients is prices will increase considerably from 2020 “in line with the need for more expensive abatement to be triggered, and greater demand for offset buying”.
“This will lead to a higher sustained price path over time, with industry expected to contribute around half of all emissions reductions to 2030”.
While consumers are beginning to see a reduction in their energy costs due to a recent fall in wholesale prices, the latest Guardian Essential poll also shows the Turnbull government has not yet convinced voters the Neg will lower power prices.
The latest fortnightly survey of 1,030 voters shows only 15% think the Neg will help reduce energy bills, 22% think it will increase them and 38% believe it will make no difference.

Links

• Turnbull quashes Abbott’s bid to give party room a say on energy guarantee
• Turnbull's national energy guarantee could have 'no meaningful emission reduction'
• Energy market commission says electricity grid increasingly unstable
• Electricity retailers could defer emissions reductions under Coalition plan
• Malcolm Turnbull convinces party to unite on energy policy
• Coalition balks on Finkel target but will unveil energy and emissions policy
• Tony Abbott warns against 'unconscionable' renewable target
• Tony Abbott warns against low emissions target ahead of Finkel review