Labor renewable energy plan `will cost economy $1.5bn'

Australian
19/03/2008 Page: 8

LABOR'S plan to dramatically increase the mandatory levels of renewable energy will cost the economy $1.5 billion and drive up power bills by 6 per cent. According to new economic analysis from the gas industry, Labor's Mandatory Renewable Energy Target of 20 per cent by 2020 is unnecessary and will crowd out cheaper ways to cut greenhouse emissions, making electricity more expensive.

The analysis conducted by consultants CRA International for the Australian Petroleum Production and Exploration Association claims an emissions trading scheme due to start in 2010 could on its own deliver the same greenhouse gas cuts, but at a lower cost. This contradicts an economic analysis released last year by the renewable energy industry that claimed the MRET will stimulate growth and jobs and make electricity cheaper by creating an oversupply in the national energy market.

The Mandatory Renewable Energy Target promised by Labor during last year's federal election campaign has been criticised as populist and inefficient by the gas industry and major emitters, who argue it will quickly become redundant as emissions trading becomes fully operational. In the interim report released last month by the Government's key climate change adviser, Ross Garnaut, he warned that the MRET would drive most abatement cuts in the early years of an emissions trading scheme. He is still to report on the interaction between the two systems.

Professor Garnaut will release a discussion paper on key design principles for a trading scheme tomorrow, ahead of the Government's green paper in July and the release of draft legislation in December. Treasury modelling on the full economic cost of different levels of abatement is also expected to be released in July. Climate Minister Penny Wong is already working to fold existing state renewable energy schemes into the national target, and a working group will report to the Council of Australian Governments meeting next week.

Department of Climate Change officials have been meeting power industry representatives in a push to map out a strategy to prevent price volatility and supply instability from the big shift to renewables. APPEA chief executive Belinda Robinson agreed there was a need for a range of strategies to complement a national carbon trading scheme, including accelerated development of clean energy technologies.

She said the mandatory targets threatened to undermine the Government's commitment to ensuring the lowest-cost greenhouse abatement for the economy. Opposition environment spokesman Greg Hunt said the report endorsed the Coalition's call for a clean energy target that included gas and other technologies. We need all the low emissions measures to be on the table." he said.