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And we’re on the road again with the next iteration of Commonwealth Government policies and measures to reduce Australia’s emissions in line with the commitments we made as part of the Paris Agreement. Last week, the Government released its response to the expert panel report examining additional sources of low cost abatement, agreeing to 21 of the 26 recommendations in full or in principle. Later in the week, the Government released its Technology Investment Roadmap setting out how the Government will invest in technology to drive emission reductions across the economy.
This update looks at what was announced and what it might mean for the energy market and the transition to a lower emissions economy.
21 out of 26 ain’t bad…
The King Review made 26 recommendations – the majority which have been accepted. If implemented, some of the most significant of these recommendations would see:
• A carbon offset methodology developed for carbon capture and storage (CCS) and/or carbon capture, utilisation and storage (CCUS)
• An approach for accounting for the implicit carbon content of a large scale generation certificate (LGC) to provide additional information to assist buyers and sellers in voluntary markets to understand the carbon content of LGCs. However, LGCs will not be able to be used to meet obligations under the Safeguard mechanism
• A ‘below-baseline crediting arrangement’ for large facilities using the Safeguard Mechanism architecture. The arrangement would provide credits to facilities who reduce their emissions below their Safeguard baselines by undertaking ‘transformative’ abatement projects
• A goal-oriented technology co-investment program to accelerate the uptake of transformative, high abatement potential technologies that are not currently cost competitive
• The mandates of ARENA and the CEFC amended to give these bodies a broader remit to invest in low emissions technology.
Big winners in the Government’s response to the King Review appear to be CCS/CCUS project proponents. But it is worth noting that the current price of an Australia Carbon Credit Unit (ACCU) is $16.14 per tonne of carbon, which is well below what a CCS/CCUS project would need to be commercially viable. ACCU prices tend to move slowly – it has taken five years for the price to reach $16 from a starting point of $13.95 per tonne of carbon. With CCS requiring a higher price per offset than many other available offset methods, we may have some time to go yet before we see a CCS project generating ACCUs.
Who needs market mechanisms when you have technology?
On the back of the response to the King Review, the Commonwealth Government released its Technology Investment Roadmap. Potentially signalling the end of the climate change wars, or maybe just kicking off another round of debate on the best approach to encourage a reduction in emissions. With the release of the Roadmap, Angus Taylor declared that “at its core, this [the Roadmap] is about technology not taxes. It means reducing emissions, not reducing jobs and the economy. It is an approach based on rigour, discipline and optimism, not ideology.”
The Roadmap looks at over 140 new and emerging technologies looking at their abatement potentials, technological and commercial readiness levels and cost-effectiveness over a number of sectors, including:
• Electricity generation (including enabling technologies)
• Industrial process heating
• Mining and industrial equipment
• Built environment (residential and commercial)
• Negative emissions.
Just over 50 of these technologies were shortlisted as priority technologies for further investigation.
With so many technologies canvassed, the Government doesn’t say much about what it will do to tap into the carbon reducing potential of technology. It mostly seems to be throwing money at the problem, reducing barriers to commercialisation and waiting for the private sector dollars to roll in. But creating a market for the technology seems to be a bridge too far.
Emma is a Director in Deloitte’s Energy Transition team. She focuses on how Australia’s energy markets are changing in response to climate change and emission reduction objectives. Emma has extensive experience working with energy clients to understand the energy market transition, identify opportunities and risks within the transition and develop strategies to capture growth opportunities.
Kumar is a Partner in the Financial Advisory practice and is responsible for the Energy and Resources Sector. He specialises in portfolio management, policy advice, commercial and financial analysis, market modelling (electricity, gas and renewable energy), strategic positioning and assisting clients with growth strategies. Kumar helps his clients make future decisions with confidence.