Jun 16, 2011 - 5:40pm

Between 2010 and 2030, the Renewable Energy Target (RET) will increase the share of Australia’s electricity coming from renewable energy to 20 per cent and drive thousands of jobs and investments worth tens of billions of dollars in regional areas.

There has been some criticism of the RET because of the effect it has on household electricity bills. In fact, the impact of the RET on bills is relatively small. For example, in NSW, the RET accounts for around four per cent of household electricity costs, which equates to around $1.20 per week for the average Sydney household.

While the RET is a relatively low-cost and highly effective mechanism for deploying renewable energy, the impact on bills is substantially higher than it needs to be. This is because the legislation includes an exemption to some of Australia’s largest polluting trade-exposed industries, meaning they do not have to pay for the full costs of the scheme. This means that rather than being shared across all energy users, the cost of the RET is being paid in full by households and those businesses that are not eligible for an exemption. 

This policy brief assesses the impact of exempting big polluting companies from the full cost of the RET on electricity bills. It provides some important lessons for the current carbon price debate, particularly the cost to households from overly generous subsidies to polluting companies.