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National Energy Guarantee: Why the ACT isn't convinced Malcolm Turnbull's plan will work

The ANU Energy Change Institute recently hosted a public forum on the Federl Government's climate and energy policy mechanism - the National Energy Guarantee (NEG).

The panel featured keynote speaker Mr Shane Rattenbury, ACT Minister for Climate Change and Sustainability, alongside expert panel members Professor Frank Jotzo (ANU), Dr Hugh Saddler (energy consultant) and Katharine Murphy (Guardian Australia).

Next week, the Federal Government will ask the states and territories to commit to the National Energy Guarantee (NEG), but the biggest concerns come from the smallest jurisdiction — the Australian Capital Territory.

By combining climate change policy and energy policy, the Turnbull Government believes the NEG can solve the vexing issues that have troubled Australian politics for more than a decade.

But the states and territories in the National Energy Market (all except Western Australia and the Northern Territory) need to agree.

The ACT Climate Change Minister Shane Rattenbury is the man in the middle.

"I think this is the great dilemma for the ACT: we think there are significant policy issues yet to be addressed, but we have to survive the politics of the coming few weeks of the NEG," he said.

"That is … the challenge that lies ahead of us."

The NEG would force energy retailers to guarantee a portion of their power comes from dispatchable sources to ensure reliability, combined with an emissions reductions target for the electricity sector of 26 per cent.

This would drive down electricity prices and provide investment certainty for the sector, according to its proponents.

Speaking at the Australian National University (ANU), Mr Rattenbury outlined the four hurdles that stand between the ACT Government and signing on to the NEG.

1. The ambition of the target
The NEG aims to reduce emissions in the electricity sector by 26 per cent by 2030 (based on the emissions levels in 2005).

Mr Rattenbury points to modelling by industry analysts that shows emissions would drop by 24 per under the status quo, meaning the complicated policy would only cut emissions by 2 per cent over 10 years.

That provides little incentive for the energy market to invest in new renewable energy power sources.

"I think this points to the folly of the NEG, which is it will stymie renewables and it will stymie cheaper power coming into the system," Mr Rattenbury said.

He's worried that will leave a gap in new power sources leading into 2030—2035, which is when several major coal-fired power stations are due to reach the end of their working lives.

"If they think there's a reliability problem now, they ain't seen nothing yet."

2. Meeting the Paris agreement obligations
In 2015, the Abbott government signed up to the Paris Climate Change Agreement, which compels Australia to reduce its greenhouse gas emissions by 26 per cent by 2030 (based on the emissions levels in 2005).

The Turnbull Government is aiming to have emissions from the electricity sector fall by the same proportion over the same period — 26 per cent by 2030.

Mr Rattenbury describes this as a "pro-rata" approach.

"That means if we're going to get to 26 per cent for the whole economy, agriculture must also cut by 26 per cent, transport sector must cut by 26 per cent, and the various other sectors."

"It is more expensive to do it in those sectors, it's less economically efficient."

His concerns have not been assuaged by Federal Energy Minister Josh Frydenberg.

"He sort of mutters these comments about, 'Oh, we've got plans for the other sectors,' but I don't see them," he said.

"I need something a little more than, 'trust me, I've got a plan,' to have confidence we're going to deliver in those sectors."

He's highly sceptical of the prospect of achieving equivalent emissions reductions in those sectors.

"Let's talk about political palatability of trying to get 26 per cent of emissions out of the agriculture sector," he said.

"If you think the National Party is arking up now, wait 'til we ask them to take 26 per cent of emissions out of the agriculture sector.

"Again, we ain't seen nothing yet."

As Mr Rattenbury was speaking at ANU, the former Nationals leader-turned-backbencher Barnaby Joyce was on Sky News being asked about precisely that.

"If we go down that path, then forget it. I'm out. See you later. Good-bye. Because that's just nutcase stuff," Mr Joyce said.

"I mean, we are just sick of all these caveats being placed on us by green groups."

3. Target locked in for a decade
The NEG would lock in the 26 per cent target for emissions reduction for the electricity sector for 10 years, from 2020 to 2030.

Mr Rattenbury wants more flexibility in the system, given his concerns that the 26 per cent target is too low.

The compromise offered has been to review the target after five years, but Mr Rattenbury describes that as a "false olive branch", given that provision had originally been included, then taken out, and is now being offered once again.

He questions the logic of locking in a 26 per cent target for the electricity sector when the overall national target of 26 per cent could change.

"It seems highly unlikely … that will survive a change of [Commonwealth] government."

"There will be a change because outside of the Coalition, no-one else supports this target."

4. Inclusion of state schemes
If states and territories have their own emissions reduction schemes, any improvements resulting from those will be counted towards the NEG's 26 per cent emissions reduction target.

The ACT is close to meeting its target of having 100 per cent of its power generated by renewable energy sources, and Victoria and Queensland also have large-scale renewable energy targets.

"The other jurisdictions in the National Energy Market … will free-ride on the work that is being done" by the ACT, Victoria and Queensland, Mr Rattenbury said, pointing specifically to New South Wales.

He is also concerned the progress that ACT has already made prior to 2020 in reducing emissions won't be taken into account, although he hinted a deal on that was close to being finalised.

So what happens now?
The ACT Cabinet will decide whether or not to sign up to the NEG on Monday, ahead of the crucial meeting of COAG energy ministers next Friday.

Mr Rattenbury says it won't be his decision, but one ACT Government members bear collectively.

"I think that there is an enormous political pressure to resolve this matter," he said.

The Victorian and Queensland Governments will need to decide whether they are willing to endorse the scheme, too.

After Friday's COAG meeting, the plan then has to be agreed to the Coalition partyroom and then the Federal Parliament.

The ACT, Victoria and Queensland are worried Coalition backbenchers opposed to the NEG will try to alter an agreement struck between the Commonwealth and the states and territories.

There is also the prospect the Senate could block legislation on any deal struck, unless the Federal Opposition decides not to block any agreement that is reached.

The focus may be on Mr Rattenbury, but the ACT Climate Change Minister sees political pressure on everyone.

"There's a strong argument being put that it is in the national interest for us to deliver an outcome on this and I don't think you can underestimate the weight that that carries in a lot of people's minds," Mr Rattenbury said.

Source: ABC News and ANU

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