Making the switch to clean energy Media Release

Aug 03, 2007 - 5:31am

New economic modelling on the future of Australia’s electricity sector shows immediate action on emissions trading, backed up by a clean energy target and comprehensive energy efficiency policies offer the most economically and environmentally effective way of reducing greenhouse pollution.

“This research highlights that it would be reckless to delay action, or only take half measures, because of the risk it would pose to the Australian economy.” said Chief Executive of The Climate Institute, John Connor.

The modelling by McLennan Magasanik Associates (MMA) - one of Australia’s leading electricity sector modellers - was commissioned by The Climate Institute and has been released today ahead of the report of the Prime Minister’s Emissions Trading Task Group due later this week.

The research maps a series of scenarios from a soft start to emissions trading through to more comprehensive policies including energy efficiency and clean energy targets, with each scenario achieving an 80% reduction in emissions from the electricity sector by 2050.

It shows that we will need a national energy efficiency plan, a clean energy target and an emissions trading scheme in place from 2010 if we are to protect both the economy and the planet.

“We’ve based the 80% target on the scientific consensus that developed nations such as Australia will need to cut emissions by 60-90% by 2050 if we are to avoid dangerous climate change impacts.  Accounting for 30% of Australia’s overall greenhouse pollution, our electricity sector needs to make a decisive switch to clean energy but it should be backed up with an economy wide approach that links into international carbon markets like the $36 billion Kyoto market.”

“Making significant cuts to greenhouse pollution from our electricity sector is affordable and achievable if we act now with a realistic carbon emissions trading scheme, a market based clean energy target and comprehensive energy efficiency policies.”

“What this new research shows is that all new electricity can and must be sourced from clean energy and that Australia must lead and not lag the world in cutting energy waste.”

“Making the switch to clean energy and cutting our greenhouse pollution can place Australia in a leadership role for global efforts to protect the planet but also position Australia at the leading edge of the booming global clean energy market already worth $75 billion in 2005.”

SUMMARY OF KEY RESULTS

A mix of policies - emissions trading, market based clean energy targets and energy efficiency policies - is the most cost effective policy response to reducing greenhouse pollution from the electricity sector. This mix will:

  • reduce carbon price increases by around a third and electricity price increases by around 20% over the first two decades of action.
  • reduce resource costs in the industry by $13.4 billion by 2050.
  • reduce additional household weekly expenditure between 2010 and 2030 by around 50% (to just an additional 0.3% of weekly spend at that time – around $3-4 per week extra in 2010-2020 but a near zero relative increase in 2050).

A wait and see scenario with a soft start to carbon pricing does not significantly reduce emissions in the short-term, leads to higher carbon prices and electricity prices over the medium to long-term, and does not promote the deployment of clean energy over the next decade.  This delayed approach would:

  • only reduce emissions by 11 million tonnes in 2020 and results in continued short-term emissions growth of plus 8% on today’s levels.  
  • make carbon prices jump sharply to more than six times the level of the previous decade when full emissions trading is introduced in the 2020. This rapid price increase risks significant shocks to the industry and wider economy.
  • mean carbon prices around 20% higher in the 2020s, 60% higher in the 2030s and 90% higher in the 2040s, compared to more decisive early action.
  • mean electricity prices are lower in the next decade, but then jump nearly 75% in the 2020s and are around 10% higher than if more decisive early action had been taken.
  • create a long-term increased cost to the industry of 15-28% (up to $4 billion) higher than introducing an emissions trading scheme backed by additional measures.

Cost effective energy efficiency programs are critical to cutting the cost of reducing emissions:

  • The inclusion of even a moderate energy efficiency program with an emissions trading scheme reduces the electricity sectors’ cost of achieving the emission reduction target by nearly 50% or about $12 billion.

The range of energy technologies currently available or expected to be available in the coming decades in the electricity sector can achieve 80% reductions in emissions by 2050:

  • In the short term, renewable energy sources – in particular wind and bio energy could account for 18-25% of national generation by 2020 and gas-fired generation 24-27% by 2020.
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