EXPERT REACTION: National Energy Guarantee endorsed by Coalition

Australia is anxiously awaiting the end of more than a decade of political argy-bargy that has seen a dysfunctional impasse in the alignment of climate and energy policy.  The NEG may be the fourth-best solution that's been put on the table during this period, but the nation can’t afford it to be derailed by the Coalition party room as has happened with the other three.

The NEG then needs to walk the COAG political minefield without being compromised as an effective decarbonisation measure – and in this process the perfect should not become the enemy of the good.

The mechanism itself first needs to be de-coupled from the ambition i.e. the politically-charged emissions reduction target needs to be set not in legislation, but by regulation so that it can easily be used as a knob to tune the level of ambition. Second, the states need to be able to set their own targets, but they need to agree to comply with the minimum 26 per cent target to avoid free-riding on the back of higher targets set by other states.

There is a renewable energy train coming down the tracks, which will ride right over the top of this dithering on climate and energy policy if we don’t act now.  The NEG can help guide and even accelerate the train towards our climate goal, and future policies such as an economy-wide carbon pricing mechanism can be laid right over the top of it.

It is a depressing fact of political life that the inadequate National Energy Guarantee is probably as good as this divided Coalition government can provide. It emphasises security of supply, one of the three objectives that should be achieved by an electricity policy. Its claim to reduce prices is less soundly based, and the assurance that the average household power bill will come down by $550 a year is just not credible. The NEG’s most serious deficiency is its failure to meet even our legal requirements under the Paris agreement to slow climate change. Since the government has no plan at all to reduce our greenhouse gas emissions from transport, agriculture or manufacturing, the lion’s share of our agreed reductions must come from electricity generation. The NEG’s target is totally inadequate. Modelling suggests that the current wave of investment in large-scale renewable energy generation will be stalled if the NEG is approved in its present form. The best way to give security of supply and lower prices would be to encourage more rapid development of large-scale solar and wind with storage. A new coal-fired power station would be financially irresponsible as well as being incompatible with our Paris obligations, which really require the rapid phasing out of existing fossil fuel generation.