Climate Institute says regulations to phase out coal-fired generators and subsidies to encourage clean energy are needed

This article is more than 4 years old

This article is more than 4 years old

Australia faces significant economic disruption in 2030 to meet the Paris climate goals unless action is quickly taken, according to a new analysis.

The analysis, for the Climate Institute, recommends implementing a carbon price and regulations to phase out coal-fired generators, and additional subsidies to encourage clean energy investment.

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It comes as both major parties are promising post-election reviews to determine the details of their policies in a bid to avoid the kind of bitter battle over power prices that paralysed recent climate policy debates.



The analysis finds that whichever party wins government will need to impose some form of relatively low carbon price, as well as regulations and subsidies to force a change to clean electricity generation.

A “modest” carbon price of about $17/tonne in 2020, rising to $40/tonne in 2030, would come close to meeting the Turnbull government’s target of reducing emissions by 26% to 28% of 2005 levels by 2030. However, it would do almost nothing to shift to clean electricity generation.

There would need to be a huge disruption in the market and economic activity in 2030 to suddenly accelerate emission reductions enough to reach the Paris goal of zero net emissions by mid century.

In order to reach that goal using a carbon price alone, the price would need to start at $70/tonne and rise to $100/tonne, which, the report concludes, is politically unlikely.

If coal-fired generators were also phased out after a 45-year lifespan and some kind of subsidy offered – like the current renewable energy target to achieve 50% zero emissions generation by 2030 – then the necessary emission reductions could be achieved without a sudden economic shock. Adding energy efficiency policies to the mix would significantly lower the impact on power prices.

Labor has promised an emissions trading scheme as part of the climate policy it will take to an election but will not announce the details. It is expected to hold a post-election inquiry into the electricity industry and the phase-out of coal-fired generators if it wins office.

The Coalition will review its Direct Action climate policy next year and there is a widespread expectation in the business sector that it will have to tighten the baselines on its so-called safeguards mechanism in a way that could eventually turn it into a baseline and credit-style emissions trading scheme.

The report argues that these reviews are critical because if changes aren’t made now, it becomes almost impossible to reach net zero emissions by mid century – as is necessary to meet the global goal of keeping temperature rises within 2C.

“The next 18 months are pivotal to our climate and energy future, whoever wins the election,” said the Climate Institute’s executive director, John Connor.

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“Our research shows that a policy package that actively supports both clean energy investment and the orderly replacement of our ageing coal-fired power stations can better manage a timely transition to a cleaner energy supply.

“A baseline and credit, or emissions trading scheme alone, will not be strong or reliable enough to drive the change.”

The report found retail power prices would gradually rise between 2020 and 2030 under the recommended scenarios but there is a high degree of uncertainty around the forecasts.

The Climate Institute modelling was commissioned from Jacobs and was part-funded by a cross section of the electricity industry, including GE, AGL and Hydro Tasmania.

The independent Climate Change Authority is undertaking similar modelling for the government.