Understanding the Clean Energy Future plan
- By Helen Craig -
- Jul 12, 2012
Name: Jane Simpson
Company: Ernst & Young
Role: Oceania Markets Manager, Climate Change and Sustainability Services
Length in role: 1.5 years in current role, but 7.5 years all up with Ernst & Young working in the climate change field
Loves: Beaches, shoes and all things potato (including hot potato, sweet potato, mashed potato, potato chips....!)
Hates: Unpacking after returning from holidays
Recommends: Visiting Australia - it’s worth the long flight!
Australia has launched its Clean Energy Future plan – can you explain what they are planning?
The Australian Government's Clean Energy Future package is intended to create incentives to reduce greenhouse gas emissions and to invest in clean energy through the creation of a price on carbon. Whilst the introduction of a carbon price is central to the package, a raft of other complementary measures are also included, such as grants, incentives programs and investment in renewable energy and clean technologies.
There are also initiatives focussed towards creating opportunities in the land sector to cut greenhouse emissions.
The Clean Energy Finance Corporation (CEFC) will be providing funding and investment to support green projects – what type of projects are included?
Half of the CEFC’s allocated funding will be directed towards renewable technologies, such as geothermal and wave energy and large scale solar power generation, with the other half directed more broadly towards low emissions technologies, for example, to low emissions co-generation technology. Projects in nuclear power generation, biofuels and carbon capture and storage (CCS) will be excluded.
The CEFC will be independent of the Government and be structured in a similar way to the UK’s Green Investment Bank - but with nearly twice as much available funding! It will not provide grants as such, but will be able to offer loans, loan guarantees, and equity investments in suitable projects. Any returns are promised to be reinvested.
What emissions reduction does the new legislation aim to achieve?
This is a tricky question and one that has been subject to much debate in Australia as the Government has yet to disclose greenhouse gas reduction information that is expected to be realised. In mid 2014, and just over a year before the transition to a flexible carbon pricing mechanism, the Government will announce the first five years of the trajectory under the flexible price period (out to 2019-20) where a pollution cap will be applied. Thereafter, the Government will announce a further year of the indicative trajectory before 1 July each year, to maintain five years of ‘known’ fixed yearly target. What we do know, is the Government has committed to a national emissions reduction target range of 5% of 2000 levels by 2020 and, if global action emerges we will commit to up to 15%-25%, depending on the scale of the actions. This will therefore, direct any emissions reduction action taken by Australia.
The Australian Government says that the investment in clean energy will drive around $100 billion in investment in the renewables sector by 2050 – how will this happen and what effect will this have?
Yes, the proposed suite of clean energy investment policies outlined, combined with Australia's existing Renewable Energy Target, are expected to drive more than $20 billion of public and private investment in large scale renewable power generation by 2020 and $100 billion by 2050 in Australia. These policies build on the basis that securing funding to develop and demonstrate innovative new, low pollution technologies, particularly in the early stages of R&D can be difficult. Up until now, many early stage renewable energy developers have been unable to match the public funding with private investment. Given the proposed magnitude of new funding and the focus of support on early stage developers, there is a clear path for these companies to advance with the technologies and deliver the required results.
This move is expected to broaden the country’s renewable energy portfolio to deliver on the carbon emission reduction plans and to contribute to building an Australian know-how base in the sector.
Our expectation is that the package will have the greatest impact on the deployment of onshore wind, which remains the lowest cost renewable energy technology. Other technologies such as solar, geothermal, wave and tidal and biomass still remain significantly up the cost curve and it remains to be seen whether the package improves the viability of these technologies to the extent where projects are being developed without significant government assistance
The new carbon price came into effect on July 1st, what is the long term plan for the pricing?
Around 60 per cent of Australia’s carbon pollution will be covered by the carbon price, including pollution
from electricity generation, stationary energy, some business transport, waste, industrial processes, and fugitive emissions.
The carbon price will be fixed for the first three years, starting at $23 AUD. After three years, it will transition to an emissions trading scheme where the price will be determined by the market. In this market based price phase, there is scope for linking to international carbon markets, including the European Union Emissions Trading Scheme.
What opportunities are there for European businesses and entrepreneurs to get involved in the Clean Energy Future plan?
While European businesses may not be able to participate directly in the scheme itself, those who are producing low carbon technologies may benefit as businesses are seek to identify and invest in abatement opportunities.
The CEFC will also offer European businesses with an interest in Australian renewable energy projects a potential source of funding. During the flexible price period, the use of international carbon credits to meet 50% of obligations could provide European businesses with another market where carbon units under the European Union Emissions Trading Scheme can be sold. Watch this space!