Environment minister says he won’t back-end load target as some in his party demand

This article is more than 2 years old

This article is more than 2 years old

Josh Frydenberg has told his state and territory counterparts the emissions reduction trajectory in the national energy guarantee will be steady over 10 years, not back-end loaded as some of his conservative party room opponents have demanded.

Frydenberg, the federal energy minister, was clear during a phone hook-up on Friday that Canberra wanted least-cost abatement in the electricity sector, and that meant implementing a linear emissions reduction trajectory between 2020 and 2030, according to sources familiar with the conversation.

• Sign up to receive the top stories in Australia every day at noon

Guardian Australia understands that the Australian Capital Territory’s energy minister, Shane Rattenbury, raised concerns during the call about the low ambition of the Neg target, which is a 26% reduction on 2005 levels by 2030, and Frydenberg was pressed to be explicit about the proposed trajectory of emissions reduction – although the tone of the call was said to be constructive overall.



After the hook-up Rattenbury, who is a Greens member, continued to express concerns the Labor states have raised over many months about the “woefully inadequate emissions reduction target” in the scheme.



“I am concerned that this process will be jeopardised by the Coalition’s refusal to negotiate on issues that are critical to achieving energy reforms in the interests of all Australians,” he said late on Friday.

He said he was yet to see evidence that the national energy guarantee would reduce power costs. “It’s more likely that this is a smoke-and-mirrors cost-shift from electricity to other sectors, such as transport and agriculture, that will likely see Australians paying more overall.”

“This intransigence on part of the commonwealth suggests the Coalition doesn’t even want an outcome on electricity reform, and would rather discard some of the good proposals the Energy Security Board has put forward on national energy laws.”

Friday’s phone hook-up was convened to allow ministers to be briefed on the final design principles of the Neg by the architects of the scheme, the Energy Security Board (ESB), before a critical meeting of the energy council of Coag in August.

Special visas for white South African farmers on agenda for Liberal council meeting Read more

The 10 August meeting will either make or break the Neg. Any single state or territory has the power to veto the policy. The Neg would impose reliability and emissions reduction obligations on energy retailers and some large energy users by 2020.

The ESB has now circulated updated advice about technical elements of the scheme, and Frydenberg has also circulated an updated discussion paper setting out how the emissions reduction obligation will work.

The text of the emissions paper, seen by Guardian Australia, doesn’t specify whether the emissions reduction trajectory will be linear or the “hockey stick” proposal being championed by the head of the Coalition’s backbench committee on environment and energy, Craig Kelly.

The “hockey stick” trajectory means emissions reduction would be largely deferred to the second half of the decade between 2020 and 2030.

Frydenberg will need to take legislation giving effect to the electricity target through the Coalition party room for approval in the event the states agree to the guarantee in August, and Kelly signalled he could cross the floor if Frydenberg implemented a linear emissions reduction trajectory in a recent podcast interview with Guardian Australia.

Electricity comparison websites may inflate prices, energy adviser says Read more

The commonwealth’s paper also keeps open the idea that participants in the energy market would be able to purchase offsets, like carbon credits, to help them meet their emissions reduction requirements under the scheme, but the government is now floating a cap.

The paper says capping the amount of offsets that can be used under the scheme “could preserve the investment signal provided by the guarantee, as the market would have certainty about the minimum level of emissions reduction the electricity sector would contribute to meeting the annual electricity emissions targets”.

The new paper also restates a commitment to exempting emission-intensive trade-exposed customers entirely from the obligation to reduce emissions.

A separate paper from the ESB has signalled that the first 50,000MWh of any market customer’s load will be exempt from the emissions reduction requirement “as an additional measure to support retail market competition”.

The exemption means that small players in the energy market will be exempt from the emissions reduction obligation for some or all of their load. “This measure will help smaller market customers meet the emissions reduction requirement, while not having a material impact on overall coverage.”

The ESB recognises that the exemption might encourage participants in the national electricity market to split into smaller entities “to gain the benefit of this exemption and avoid responsibility for meeting the electricity emissions target” – and it flags a new anti-avoidance regime to address the risks.

Bruce Mountain, head of the Victorian Energy Policy Centre, said the policy was emerging as more Frankenstein’s monster than a light hand.

Brenda the Civil Disobedience Penguin visits the cat-proof fence! | First Dog on the Moon Read more

“The growing predominance of low-emission sources in Australia’s electricity production brings challenges that need to be dealt with, but the ESB’s approach is without precedent; there are much simpler ways to deal with these challenges using the existing mechanisms,” Mountain said.

“Complexity has a cost, and customers are forced to bear it. The complex approach the ESB is proposing is unnecessary and easily avoidable.”

Guardian Australia foreshadowed earlier on Friday there have been tensions behind the scenes in working groups collaborating with the ESB about the treatment of large energy users in the scheme.

The chief executive of the AiGroup, Innes Willox, said after Friday’s phone hook-up there were issues to be ironed out. “One issue that will be important to resolve is whether an opt-out from the reliability obligation for large energy users, as currently proposed, should be replaced with an opt-in arrangement.”

“Either way the outcome needs to support a competitive market for electricity where the long-term interests of energy users are met.”

Despite the concerns, Willox said the Neg remained the best hope of settling Australia’s decade-long climate and energy wars. “We will do our part to get an outcome in August that delivers what we need on price, reliability and emissions.”

“Industry, electricity suppliers, and the wider community all have a stake in the success of the national energy guarantee and in ending a decade of policy uncertainty.”