On 26 October 2021, the Prime Minister and Federal Minister for Industry, Energy and Emissions Reduction jointly released Australia’s Long Term Emissions Reduction Plan (Plan), a Commonwealth Government whole-of-economy plan to achieve net zero emissions by 2050.
While this is a welcome move, is it a game-changer in Australia’s emissions policy? What will it mean for renewables investment in Australia?
The Plan is built on the following five key principles:
The Plan’s release comes amidst significant commentary on Australia’s commitment to action on emissions and against the backdrop of a global move towards decarbonisation by business and government. It also comes after the recent issuance of the AR6 IPCC report.
Yes and no.
The concept of having an emissions target and policies intended to support that target is not new. The Commonwealth Government has had various emission reduction policies in place over the last decade. For example:
What is new at a Commonwealth level is the introduction of a target for net zero emissions by 2050. While this does not tighten the current 2030 Federal Government target (see above), it sets a further waypoint in the future at 2050 and brings the Commonwealth more into line with:
Investment in renewable projects in Australia is influenced by a number of factors, ranging from power prices, grid connection issues and the regulatory regime to the rise of environmental, social and corporate governance (ESG) considerations.
In terms of policy settings, one of the key Commonwealth Government schemes has been the Renewable Energy Target (RET), which set a target of 33,000 GWh of additional large-scale renewable generation (down from 41,000GWh) by 2020 and which target remains the same from 2020 to 2030. The industry’s view at present appears to be that, unless the target is increased to drive demand for large-scale renewable energy certificates, the RET will no longer be a significant catalyst for investment in large-scale renewables.
Consistent with the Commonwealth’s focus on direct investment in renewable technology in accordance with the TIR and its recent funding injections into the Australian Renewable Energy Agency (ARENA) in support of this, the Plan does not appear to contemplate increasing the RET.
States and territories appear unlikely to change their policies and emission target ambitions as a result of the Plan. Indeed, we would expect the states and territories to continue taking the lead in policy initiatives to drive the uptake and development of renewables. For example:
The Plan’s assumptions around technology and lack of detail and modelling have been criticised and would seem to only add to the policy’s uncertainty. Unfortunately, uncertainty is the enemy of investment and this bane of the sector seems set to continue.
The transition from fossil fuels to renewable energy is increasingly being led by businesses (encouraged by investor and community expectations) and is only increasing in pace. Policy settings which do not recognise this transition risk jeopardising the economic upside for Australia from the move towards renewables (not to mention the obvious environmental benefits).
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