"The existing Emissions Reduction Fund has delivered more abatement than many expected, but has not reached many parts of the Australian economy or advanced a successful long-term energy and climate transition. The King Review contains many refinements or extensions to existing policies and while there is complex work to do to implement some of the recommendations, overall they constitute important improvements."
Among the more notable recommendations:
- Compressed crediting for some activities, with strict risk management, is sensible to match up-front costs with sufficient revenue to make projects attractive.
- Crediting Safeguard Mechanism entities that reduce emissions intensity significantly below baseline is an important but complex evolutionary step. It may drive substantial transformation if there is equally substantial demand for abatement.
- A Goal Oriented Technology Co-Investment Program could be an extremely useful way of demonstrating and commercialising industry emissions reduction technologies that are currently more expensive.
- Continuing and expanding ARENA and the CEFC to support transition across all sectors and technology types makes great sense in principle, though matching remit to expertise and resources will be crucial.
- Several recommendations around energy efficiency in residential and commercial buildings were noted rather than accepted, in light of ongoing work with states and territories. While the specific tools recommended by the Review are not the only options, this area of the economy has huge potential for improved resilience, financial savings and economic recovery. Ambitious outcomes should be a high priority.
"These improved tools can work, along with other Federal, State and private initiatives in energy, industry, transport, land and beyond, to help achieve our climate goals. But they need at least two further elements to deliver.
"First, we need a clear long-term vision and strategy to help guide each new and improved mechanism. The Commonwealth is developing a long-term strategy and the states have already adopted long-term goals. Achieving net zero national emissions by 2050, while building Australian competitive advantage in a decarbonising world, is a helpful lens to ensure that activity across each of these mechanisms is coherent and well prioritised.
"Second, these mechanisms need adequate resources to deliver on the vision. Crediting below baselines will only deliver improvements to the extent that there is sufficient public and private demand for deep abatement. Technology co-investment will require substantial funding allocations, even leveraging an appropriate private contribution. The initial costs per tonne of carbon abated will naturally be high compared to today's lowest-cost opportunities – because the point is to address emissions beyond the scope of those low-hanging fruit, and to innovate to drive down long-term costs. ARENA and CEFC should continue and expand, but their financial resources need to match their remits.
"The next steps for the Federal Government are to flesh out these recommendations in close consultation with industry and affected stakeholders; to build consensus around a national Long Term Strategy; and to back in these measures through the next Budget and beyond. We look forward to working with them," Mr Willox said.
Media enquiries: Tony Melville – 0419 190 347