The Australian Energy Market Commission (AEMC) today provided advice to the COAG Energy Council that analyses the impacts and characteristics of mechanisms to reduce emissions in the electricity sector in line with Australia’s Paris accord commitments.
The report is in response to a request from energy ministers for advice on the alternatives that could be applied to the wholesale electricity generation sector to help achieve Australia’s 2030 emissions reduction target.
The AEMC examined the potential impacts of three mechanisms on prices to consumers, costs to the economy and power system security:
- market-based, emissions intensity target (EIT): a mechanism requiring generators with emissions intensity above a nominated target to buy credits and allowing those with emissions below the target to create and sell credits
- Large-scale Renewable Energy Target (LRET): extending the existing LRET arrangements
- government-regulated regulatory closure (REG): a regulatory mechanism whereby government determines when to close fossil-fuelled generators
Frontier Economics (Asia-Pacific) prepared a report for the AEMC on the theory and design of alternative options for reducing emissions in the electricity sector and to model the impacts of these alternatives.
Our analysis shows the emissions intensity target delivers the best outcomes for consumers in terms of lower prices, better power system security and certainty of meeting the emissions target.
Frontier Economics regularly advises clients regarding energy and climate change, as well as other infrastructure sectors, including transport and water.