Emissions Reduction Target Dumped From the NEG


The Prime Minister has abandoned the emissions reduction target component of the national energy guarantee, saying the government will no longer seek to include the 26 percent Paris emissions reduction target into legislation or regulation.

The move came as Turnbull announced on Aug. 20 new measures to the national energy guarantee (NEG) aimed at reducing power prices.

The prime minister said that the emissions component of the NEG was shelved because it did not have enough support, including from his own MPs, to pass Parliament. Several backbenchers within the Liberal party such as Tony Abbott have publicly opposed enshrining the emissions reduction target in legislation or regulation.
“The government would like to crack the so-called trilemma of keeping the lights on, getting power prices down, and reducing emissions in line with our Paris targets,” Abbott said a speech on July 3.

“It’s just that there’s no plausible evidence at all that all three can be done at the same time.”

Turnbull told the media in Canberra: “It is clear that in the absence of bipartisan support, the legislation to move forward with the emissions component of the national energy guarantee will not be able to pass the House of Representatives.”

“In politics you have to focus on what you can deliver. And that’s what we’ve done and will continue to do.”

Turnbull said the emissions intensity component of the NEG remained government policy, but such a measure would not be introduced until it had enough support in the lower house.

“Where and when we believe there would be sufficient support in the House of Representatives and obviously in our party room to progress this component of the scheme will bring it forward once again,” he said.

Updates to the NEG

The prime minister announced several updates to the reliability component of the NEG aimed at bringing power prices down and ensuring big energy companies don’t abuse their market position.

“We are doing everything we can to bring your electricity bill down. Our priority is cheaper electricity,” Turnbull said.

He announced a plan to introduce a “default market offer” to give consumers an clear indication of how much they should be paying for electricity. Power companies would be penalised if they failed to bring their prices down to the set rate.

The measure was recommended by the Australian Competition and Consumer Commission (ACCC), and was estimated to save households between $183 and $416 a year, and between $56 to $1,457 for average small businesses.
“We'll set a price expectation which should be the most anyone pays. And so, through more competition and all our other changes, that price will come down,” Turnbull said in a Facebook post on Aug. 18.

“If companies don’t pass them on, the ACCC will put them on notice. And if the prices remain too high, we'll implement the toughest penalties until you’re getting value for money.

“We will not hesitate to use a big stick, as we did with gas, to make sure the big companies do the right thing by you, their customers.”

The government will also underwrite investment for new power generation, which was also recommended by ACCC, to ensure new generation gets financed.

The ACCC will be given new powers so they can intervene when big electricity companies have abused or misused their market power. The powers include issuing directions and divestiture orders in worst-case scenarios. The agency will also receive $31.9 million in additional funding to carry out this function.

The prime minister said the ACCC’s additional powers could be used to direct a power station to keep running, similar to practices in the United States.

“Directions of this kind could be used to keep a power station going and, in fact, there are many electricity markets in the world where there are rules that operate exactly like that,” he said.

“The United States, it is called the ‘generator must run’ rule where a generator can be obliged to keep running in order to maintain the relevant level of supply and security.”

Environment and Energy Minister Josh Frydenberg said he will continue talks with the states on the reliability guarantee component of the NEG. The Coalition MPs will discuss the new details of the NEG at party room meeting on Aug. 21.

Opposition Response

Opposition Leader Bill Shorten said the changes to the NEG announced today was about “appeasing Mr Turnbull’s enemies in government so he can keep his job.”

“[It’s] an energy policy that is about one thing only for the Turnbull Government: it’s to save Mr Turnbull’s job.” he said at a press conference on Aug. 20.

Shorten said Labor would reserve support for the new policies until it was able examine the details.

“We would like to talk about energy prices, as long as it includes more renewable energy, lower prices and less pollution,” he said.

“I’m not saying we will automatically agree, but I’m willing to put aside party politics to lower energy prices, to lower emissions and to have more renewable energy in the system.”

Why the Partyroom Split?

Earlier in the day, former prime minister Tony Abbott, who has led the charge against the government’s energy policy, told reporters his position was not about “personalities” or the prime minister’s leadership.

“It is not about personalities, it is not about him, it is not about me, it is about what is going to give Australians the best possible energy system that delivers affordable, reliable power,” Abbott said.

“What we have got to get is a contest. The only way we [the Coalition] can win the next election is to have a contest over policy, not over personalities, we have got to be the party that is on the side of getting prices down and let Labor that is the party all about getting emissions down.”

Earlier in July, Abbott had warned that the government’s NEG was essentially an emissions trading scheme in disguise, calling for Australia to withdraw from the Paris climate accord.

“Of global emissions, China is responsible for 28 percent, America 15 percent, Europe 11 percent, India 7 percent—and Australia a puny 1.3 percent,” Abbott said in his July speech.

But with China and India not having made any commitment the Paris agreement to reduce their emissions, and the United States having withdrawn from the agreement under President Donald Trump, Abbott said, “I think the best thing we can do right now is to pull out of the Paris agreement.”

“If we had known then what we know now, about American withdrawing and about the economic damage in particular would do to our power system and to our industries, we would never have signed up.”

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