A recent meeting of Energy Ministers has delivered a welcome step forward in resolving one of Australia’s biggest economic challenges – how to ensure reliable and affordable electricity while putting Australia on a pathway to meeting its emission reduction targets.
Agreement between Federal, State and Territory governments on the way forward provides the nationally coordinated approach to climate and energy policy needed by energy consumers and producers alike.
In being given the go-ahead for detailed design of the National Energy Guarantee (NEG), the Energy Security Board needs to focus on how to reduce power prices by ensuring sufficient levels of lowest cost dispatchable energy supplies available 24/7.
Over the past decade, Australia has moved from having some of the lowest to some of the highest energy costs in the developed world.
Policies to address emissions and reliability should also be designed to reduce energy costs – not just limit price rises.
This is critical for Australia to restore its international comparative advantage of reliable, low cost energy.
As we move to this next stage of detailed design, the current Australian 2030 target of a 26-28 per cent reduction on 2005 emissions should be widely acknowledged as representing one of the largest per capita reductions among G20 nations.
In absolute terms, Australia’s target is comparable to that put forward by a range of other countries, including Japan, New Zealand, Canada and the United States.
Pressures to increase this target amount to pressures to impose additional costs on Australian households and industry and will risk jobs. They do not recognise the energy and resource-intensive nature of the Australian economy and the need to remain internationally competitive.
Requiring the electricity sector to meet more than its share of Australia’s emissions reduction target will also increase costs and impede economic efficiency. That’s why pursuing lowest-cost emissions reductions across the economy is important. Similarly, access to credible international offsets is vital to enabling least cost emissions reductions.
The MCA supports the Energy Security Board continuing its transparent approach to developing detailed rules which will contribute to the policy certainty needed for investment in low-emissions, affordable and reliable generation to meet Australia’s future energy needs as existing plant retires.
However, it is important to recognise that delivering investment certainty will require not just a stable policy mechanism, in the form of the NEG, but also stable, predictable and economically-affordable emission reduction goals.