There would be net economic benefits from supporting emissions trading with a low to medium level clean energy target, says economic modelling commissioned by the Renewable Energy Generators of Australia (REGA).
The two main advantages of a clean energy target are increased greenhouse gas abatement and the faster reduction in new technology costs resulting from accelerated "learning by doing", the report done for REGA says.
As a result of these factors, over 2007-2008 to 2049-50 a low or medium clean energy target would have a net economic benefit. But a high clean energy target or a medium renewables-only target could have a net economic cost, it acknowledges.
If the benefits of accelerated learning by doing are not taken into proper account then even low and moderate clean energy targets would appear to involve an economic cost, rather than delivering an economic benefit, it says.
Bulk of benefits after 2030
The report acknowledges the bulk of the benefits of a low emissions target occur after 2030.
"Costs may even be slightly higher with a clean energy target in the period up to 2030," it says.
"This is due to the high capital cost of low emission technologies and the generally higher cost of low emission generation, relative to other generation technologies displaced by this measure."
"However, after 2030, the cost of electricity supply reduces significantly … this occurs because the learning by doing induced by the clean energy target reduces the cost of further low emission capacity adopted after 2030."
And it says any initial increases in electricity supply costs associated with a combination of trading and a clean energy target would be very small.
"Putting these into context, they comprise less than 5% of total electricity generation costs in each year and less than 2% of total electricity supply costs to customers."
The modelling was carried out by McLennan Magasanik Associates (MMA). It models ten scenarios for 2010 to 2050 with varying carbon prices and clean energy targets. Low, medium and high clean energy targets were modelled, as well as a medium renewable energy only target.
Additional abatement
The report finds that over 2010 to 2030:
- a low clean energy target (about another 17,500GWh by 2020) produces an additional 218 million tonnes of abatement under a low carbon price ($6/t CO2e in 2010 rising to $28/t CO2e in 2030).
- the low clean energy target produces 219 million tonnes of abatement under a medium carbon price ($12/t CO2e in 2010 rising to $33/t CO2e in 2030).
- a medium clean energy target (about another 28,500GWh) produces an additional 323 million tonnes of abatement under a low carbon price regime and 340 million tonnes under a medium price.
- a high clean energy target (about another 33,000GWh) produces an additional 377 million tonnes of abatement under a low carbon price regime and 396 million tonnes under a high carbon price.
- a medium renewable energy only target produces additional abatement of 325 million tonnes under a low carbon price and 342 million tonnes under a moderate carbon price regime.
The REGA report comes just a week after the Prime Minister announced his government intended introducing a clean energy target scheme with a target of generating an additional 30,000GWh by 2020 (see separate story).
The proposed federal scheme would operate in the same manner as the federal Mandatory Renewable Energy Target (MRET) scheme, which rests on the creation and acquittal of tradeable renewable energy certificates.
REGA commissioned the modelling on behalf of members including TRUEnergy, AGL, Hydro Tasmania, Babcock and Brown and Petratherm.
Increasing Australia’s Low Emission Electricity Generation – An Analysis Of Emissions Trading And a Complementary Measure (Final Draft) (McLennan Magasanik Associates, October 2)
