It’s the energy policy debate that has lumbered on for months without resolution. With a make-or-break meeting looming in August on the Turnbull government’s national energy guarantee, it’s time to ask, what is this policy, and is it worth the pain of trying to get it implemented?
What exactly is the Neg?
The national energy guarantee imposes two obligations on energy retailers: an obligation to supply sufficient quantities of “reliable” power to the market, and an obligation to reduce emissions over the decade between 2020 and 2030.
What is the purpose of the guarantee?
Australia had a carbon price. Tony Abbott called it a carbon “tax” and won an election on a promise of repealing it. That history means the Coalition can’t drive transformation in the energy market by legislating a carbon price, which is a conventional mechanism. The Turnbull government needed an alternative.
The government considered implementing a clean energy target, then dumped that idea. Then officials developed the national energy guarantee, which the government adopted.
The aim of the Neg is simple in political terms: craft a policy mechanism that a Coalition government can support, that also has some prospect of winning bipartisan agreement from the ALP. It’s an attempt to end a decade of partisan warfare.
In terms of the outcome in the real world: the Neg gives the energy market certainty. It sets a target for emissions reduction over a decade. It also tells the market, through the reliability obligation (even though that obligation now looks a lot like business as usual) that sufficient quantities of dispatchable power need to be available to ensure the lights stay on.
Is the Neg good for emissions/climate change? Spoiler alert: no
The policy as currently drafted isn’t good for emissions reduction. It’s actually the existing renewable energy target that does most of the heavy lifting.
The architects of the policy, the Energy Security Board, have confirmed that the emissions reduction delivered by the RET between now and 2020 will reduce pollution in the national electricity market by 24% on 2005 levels by 2020-21, which is the first year of the scheme.
The government’s target is a reduction of 26% on 2005 levels by 2030. What that means is the Neg will drive next to nothing by way of emissions reduction, and on worst case scenario, could stall a transformation that is being driven by the market deciding that renewable energy is the future.
There’s a problem with setting a weak target for the electricity sector. Reducing pollution in energy is cheaper than in sectors like transport, or agriculture. If Australia does less in electricity, it will then need to contemplate doing more in sectors where it is more expensive to take action – if the Turnbull government intends to comply with commitments it made under the Paris agreement.
While the federal target is very weak, the Neg doesn’t stop states pursuing more ambitious reduction through their own schemes.
Who is for and against the Neg?
When Labor implemented a carbon price during the Gillard government, most major business groups campaigned against it. After Abbott repealed Labor’s policy, the ensuing uncertainty has caused major problems in the energy sector – which has prompted a big turnaround in sentiment.
So the Neg is supported by most business groups, the major energy retailers, the National Farmers Federation, and big corporates like BHP, and supported with qualifications by the Clean Energy Council which represents many players in renewable energy.
The Neg is opposed by environment groups and by some elements of the renewables sector, including the Smart Energy Council, which represents the solar industry.
Will this policy happen?
It’s a bit too soon to say. There are two stages. The Neg requires agreement from all the participants in the national energy market. Any state or territory can torpedo it. The fate of the policy will be decided in early August at a meeting of the Coag energy council, unless the jurisdictions try and defer a decision, which is possible.
If the states agree, then there’s a second phase. The energy minister Josh Frydenberg will have to secure agreement from the Coalition party room to bring forward legislation to implement the emissions reduction target. Some opponents have already threatened to cross the floor. The government will then need Labor’s agreement to pass the necessary legislation, because key crossbenchers are unlikely to support the policy.
What happens if it falls apart?
We are back to square one – a situation Australian voters are, sadly, all too familiar with.