THE National Energy Guarantee has managed to avoid being killed off at a meeting today but it still doesn’t seem to have support from state and territory governments.

The NEG will be presented to the coalition party room on Tuesday for approval but state and territory governments declined to give Federal Minister Josh Frydenberg their unconditional support for the policy.

Mr Frydenberg said energy ministers had “moved one step closer” to implementing the NEG even though the Victorian Government has refused to back the policy unless changes are made.

Minsters have agreed to release draft legislation to implement the policy once the coalition party room approves it on Tuesday and it’s given the final sign-off during a phone conference afterwards with the states and territories.

The COAG decision was described as a “great step forward” by Energy Security Board chairwoman Kerry Schott, who helped design the policy. But others are seeing it differently.

A statement from Victorian Energy Minister Lily D’Ambrosio said the government had “withheld support” and moved to “postpone approval”.

The Victorian Government is making it clear that it won’t support the policy unless certain conditions are met.

These include:

• Emissions reduction targets can only be allowed to increase over time and never go backwards;

• Future targets will need to be set by regulation;

• The targets will need to be set every three years, three years in advance; and

• Establishment of a transparent registry, with access by regulators and governments to ensure the NEG is working in the best interests of consumers.

The Queensland Government released a similar statement saying it also had concerns about the emissions target not being adequate.

Environment groups welcomed the decision of states to hold back their approval.

“(Malcolm) Turnbull, (Mr) Frydenberg and their slick PR machine are spinning this as a win, but what we have actually witnessed is the states reject the NEG in its current form,” Greenpeace Australia Pacific campaigner Alix Foster Vander Elst said.

“The stage is now set for a showdown in the Coalition party room and the pressure is once again on the Prime Minister.

“(Mr) Turnbull can show that he takes climate change seriously or he can once again cave in to Luddites like Tony Abbott.”

The chief executive officer of the Australian Conservation Foundation said it was disappointing the Turnbull Government had so far refused to compromise on the target.

“We urge Coalition MPs to compromise and agree to the sensible changes proposed by Victoria, Queensland and the ACT when they consider the NEG at their party room meeting on Tuesday,” Kelly O’Shanassy said.

But Business Council chief executive Jennifer Westacott welcomed the progress made at today's meeting and said the nation could not afford any more delays.

“The business community commends the COAG Energy Council for agreeing to advance the guarantee, so we can put an end to a decade of dysfunctional debate over energy and climate change policy in Australia,” Ms Westacott said.

“Energy Ministers were constructive in their discussions today on the framework. For the first time in years a workable solution to our energy policy woes is within reach.”

All the states and territories, except Western Australia and Northern Territory, have to agree to the policy in order for it to go ahead as it requires state legislation to be passed.

The next step appears to be gaining approval from the coalition party room for a policy that addresses some of the state concerns, particularly around the emissions reduction target.

Mr Frydenberg will take the policy back to the states via a phone hook-up after the meeting and if there is agreement it will be voted on in parliament.

Some state governments had expressed concerns about whether the policy would be able to get approval from the coalition.

While Prime Minister Malcolm Turnbull has declared “it’s been endorsed by the party room already and will be endorsed again”, some backbenchers have rejected this.

Former prime minister Tony Abbott, Tony Pasin and Craig Kelly are among those concerned.

The NEG aims to deliver cheaper, more reliable power while lowering carbon emissions.

It would require retailers, such as gas, solar and wind farm owners, to sign contracts agreeing to supply a minimum amount of energy that could be available at all times.

The electricity sold to consumers must have an average emissions level that meets Australia’s carbon emissions reduction targets set as part of the Paris Agreement.

These would be agreed in legislation and reviewed every five years but states and territories can set their own more ambitious targets.

Ahead of today’s meeting the Liberal-government controlled states of Tasmania, South Australia and New South Wales had expressed support for the NEG.

But the Labor states of Queensland, ACT and Victoria had concerns.

Victoria released a list of demands including that it wanted emissions reduction targets set every 36 months, at least three years in advance, that “never go backwards” and are set by regulation rather than legislation, as the Federal Government is trying to do.

But Mr Frydenberg was quick to reject some of Victoria’s “11th-hour” demands. “We are certainly not going down the path of regulation,” he told reporters in Melbourne.

Meanwhile, Tasmania sees the NEG as a “once-in-a-generation opportunity” for the state to become Australia’s renewable battery. The government wants the state to be 100 per cent self-sufficient in renewable energy generation by 2022.

It believes the NEG could drive investment in the state’s wind and hydro projects if a second Bass Strait interconnector between Tasmania and the mainland is built.

WILL THIS BRING POWER BILLS DOWN?

The Energy Security Board has done modelling and found Australians could save $550 a year on power bills, with $150 of this coming from the NEG policy.

But others are sceptical — for seemingly contradictory reasons.

Former prime minister Tony Abbott said if there was 36 per cent renewable energy by 2030, as suggested by the modelling, this would drive prices higher.

“I think the modelling is fanciful to put it at its kindest,” he said. “It will not bring down power prices.”

Mr Abbott wants new investment in coal-fired power stations instead, something that experts believe will actually cost more to build than renewables like solar and wind power.

On the flip side, Opposition Leader Bill Shorten said the NEG’s aspirations for renewable energy was so low it would actually force the price of energy up.

“It’s going to strangle future investment in renewable energy and that will lead to higher prices because renewable energy is where we’re going to see cheap energy in the future,” he said.

BRINGING DOWN EMISSIONS

The main concern from environmental groups is that the policy doesn’t reduce emissions enough and will stifle investment in renewables.

At the moment the government has committed to a reduction of 26 to 28 per cent on 2005 levels by 2030.

But even without the NEG, the pre-existing Renewable Energy Target (RET) will likely reduce emissions by 24 per cent within three years, so there will be hardly any extra reduction in emissions in the nine years between 2021 and 2030.

The Climate Council did modelling that found the NEG would have practically no impact on increasing renewable energy generation and reducing emissions.

In addition to this, the modest reductions in the electricity sector, would mean other industries may have to work harder to reduce their emissions.

“Cutting emissions from other sectors, such as agriculture, mining, or manufacturing is far more expensive and is likely to be both politically and practically difficult,” IBISWorld senior industry analyst Jason Aravanis said.

“It could significantly increase costs in industries such as beef cattle farming, iron ore mining, and iron and steel forging among many others.”

If the NEG is followed, emissions reduction in the electricity sector would contribute just 5 per cent towards the total reduction needed in Australia, yet the industry contributes to 31 per cent of total emissions in the economy.

Former Greens leader Bob Brown wants the electricity sector to cut emissions by 75 per cent, not 26 per cent. Labor has suggested a target of 45 per cent.

The NEG will legislate a target of 26 per cent for the next 10 years, with a review in 2025 and any changes to apply from 2030.

Opponents want the target to be stated in regulation, which is easier to change than legislation. But a future government could still change the laws to cut emissions more in the future.

The Australian Conservation Foundation believes state and federal governments should reach a compromise to salvage the NEG.

Ms O’Shanassy said the Turnbull Government could address concerns by lifting the pollution target or by allowing it to be increased in the future.

“These changes would go some way to ensuring the NEG could be salvaged into something workable in the future,” she said.

“We are fast running out of time to make the pollution cuts needed to ensure we have a safe climate. A responsible government would recognise this and act.”

charis.chang@news.com.au | @charischang2