A move to “technology neutral” carbon policy could save a typical residential electricity customer $234 per year while still meeting Australia‘s emission reduction targets.
Speaking at Australian Domestic Gas Outlook 2016, Energy Networks Association (ENA) CEO John Bradley released analysis from a forthcoming Jacobs report on carbon abatement policy options and the outcomes for consumers.
“Australia’s carbon policy is at a crossroads and the next Federal Government will determine how efficiently we meet the 2030 carbon abatement commitments from Paris,“ Mr Bradley said.
“Governments can save the Australian economy over $600 million and electricity customers $234 per year by allowing all low emission technologies to play their role in meeting current targets.
”Left as they are, Australia’s abatement programs will see residential electricity bills 15 per cent higher than they need to be to achieve our emission reduction targets.”
The Jacobs analysis compared a Business as Usual scenario (where current state and federal policies continue to focus on renewables) with a Level Playing Field scenario (using a Low Emission Target and subsidies based on abatement not technology) and an Explicit Carbon Price scenario.
“Our current policy settings squeeze out low emission fuels like gas that can have one-quarter to one-sixth the carbon intensity of mains electricity,“ Mr Bradley said.
“The analysis shows, if policies focus on least cost abatement, Australia will still see a surge in renewable generation, but will also make efficient use of high quality gas resources and save customers more than $2500 by 2030.”
Mr Bradley said the savings from technology neutral policy settings could be enough to offset an increase in the abatement target from 26-28 per cent below 2005 levels by 2030, to 45 per cent.
“Jacobs analysis shows a typical residential electricity bill in 2030 would be lower under a 45 per cent target scenario with a Level Playing Field, than under the smaller 26-28 per cent abatement target with our current, inefficient policy mix.
“The lowest residential electricity bills were achieved with a Level Playing Field, where the Renewable Energy Target evolves to a low emissions target and today’s Safeguard Mechanism becomes a ‘baseline and credit’ scheme allowing some trading.”
Mr Bradley said the Jacobs analysis indicated an explicit carbon price delivered the lowest cost to the Australian economy, with savings of up to $8.2 billion under a 45 per cent target, when compared to current policy settings.
However, in this scenario, residential electricity bills were higher and the household financial outcome would depend on how any offsetting payments were made from scheme revenue.
“Australian energy ministers rightly recognise the need for better integration of carbon and energy policy,” Mr Bradley said.
“Australia can achieve its current and future carbon targets efficiently and minimise the impacts on electricity customers, but this will require a level playing field from government policy.”