While the government has ruled out an emissions intensity scheme (EIS) for the power sector, the continued operation of the federal Renewable Energy Target (RET) – and state renewable targets – is forecast to continue to drive the transformation of the generation sector in support of Australia’s 2030 emissions target.
Despite this, the exclusion of new regulation for the power sector from the climate policy review is likely to increase the obligation for other sectors to deliver large scale reductions to meet Australia’s emissions 2030 target, with the government’s remaining policy levers now limited to extending the Emissions Reduction Fund (ERF), tightening the Safeguard Mechanism, and improving energy and vehicle efficiency.
Of these policies, modelling indicates that new vehicle efficiency standards are expected to have a moderate impact in reducing national emissions, while any top-up to the ERF is expected to be limited in its fiscal scope. This will position the Safeguard Mechanism as a critical policy cog for the government, with large industrial facilities likely to be relied upon to deliver at least 350 million tonnes greenhouse gas abatement for Australia to meet its 2030 commitment.
Assuming achievable adjustments to remaining policy levers, analysis indicates this task may be achieved via a modest decline in baselines under the safeguard mechanism, of as little as 1 per cent growing under various policy conditions, with the use of domestic and/or international offsets able to provide industry with a ‘least cost’ compliance pathway.
In this update, we analyse how Australia can meet it’s 2030 target without an EIS, presenting scenarios for the design of Australia’s remaining policy levers and the distribution of the emissions reduction task among other sectors of the economy.
