Environment Essay

RET Issue

• Response from increasing level of carbon emissions, CO2 output per person at 19T in 2005

• International agreements, Kyoto agreement 1997, 30% reduction in emissions by 2012, pressure on Australia

• Renewable energy only accounted for 4% of all energy in 1990

RET Response

• Original agreement introduced in 2001 by then Howard government, target electricity production, account for 35% of all emissions

• Seek to produce an aditional 33,000 gwh of energy from renewable sources by 2020, however this has been extended to 2030

• Introduce ARENA, gov agency seeks to increase uptake of renewable energy in subsidies, $2.5bn to projects, overcome upfront capital

• Permit market acts as market based policy, discentive non-renewable energy.

• Energy wholesalers are granted a large scale generation certificate for every gigawatt hour produced

• 30% of energy sold by liable entity (energy retailor or carbon intensive industry) sourced from renewable source, if not charge shortfall cost of $65

• Creates a market-based incentive where supply is determined by energy wholesalers, demand by

RET Effectiveness

• Permit market is effective in creating market-based incentive, through increasing the MPC of production, evidenced by 9 billion invested in 2024 by private

• ARENA: , 51 major projects completed between 2020 and 2021, 5000 direct and indirect jobs created in same time, every dollar of ARENA funding unlocking $3.38 in private sector

• Share of renwable energy increased to 32.5%

• As a result of market based incentive, coal consumption between 2020-2021 decreased by 4%

• Emissions in March 2021 were under 500 million tonnes, with a 5% YoY reduction, meet international obligations

RET Critique

• Significant disparity between states in uptake, Tasmania 102% renewable vs QLD 20%, creates regional supply disparity

• Unable to offset supply side shocks, ie war in Ukraine leading to oil, $50 to $100, increase of electricity price 63% above inflation since 2015

Safeguard Mechanism Issue

• Other recent international agreements including the Paris climate agreement, where Aus agree to have a 26-28% reduction in emissions

• Issues with original safeguard mechanism, baselines not being enforced, emissions increasing by 4.3%

Safeguard Mechanism Response

• Sends price signal to Australia’s 215 largest polluters, which account for 28% of total emissions

• Involves setting emission limits for firms, decreasing by 4.9% yearly, reward firms below baselines with credits (ACCU)

Safeguard Mechanism Effectiveness

• Allowed for 27% reduction in emissions

• 4.9% reduction, reduce supply of ACCU, create tradeable market

• Through clearly defined ownership of emissions, a cost is able to be added.

Safeguard Mechanism Critique

• Firms in energy-intensive industries face greater competition from overseas, such as China, where due to laxed enviro regulation, produce at a lower cost, hence are less incentivised to purchase from domestic firms

• Increase inflationary pressures, an increase in cost of wholesale energy will be passed onto energy retailors then consumers, ACCUE increase from $15 to $30 tonne

• Enforcement of baseline remains low, able to increase baseline if increase in demand (doesnt constrain EG)

• Credits from overseas