Aug 3, 2012

Time to untangle the web of renewable energy policies

The RET was intended to let the market choose the cheapest way to generate renewable energy. But it all got very complicated, write Andrew Macintosh and Richard Denniss.

Australian climate policy has been defined by its volatility. Grand plans have been hatched, only to wither in the face of opposition. Where policy measures have come to fruition, most have had a short lifespan. On the surface, the one major exception to this is the renewable energy target or RET, which was created by the Howard government in 2001.

When first created, the RET (or mandatory renewable energy target as it was then known) was supposed to deliver a 2% increase in the proportion of electricity supplied from renewable sources by 2010. The stated aim of this mandated increase was to help boost the renewable energy industry and reduce greenhouse gas emissions, and to do so using market forces. More specifically, the RET is a tradable certificate scheme that was designed to incentivise the deployment of least-cost renewables.

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3 thoughts on “Time to untangle the web of renewable energy policies

  1. Roger Clifton

    There is a fundamental difference in purpose between RET and CEFC. CEFC is directly intended to protect the greenhouse from fossil carbon and thus placate public concerns for tomorrow’s climate.

    It is not accurate to suggest that RET was set up to protect the greenhouse from carbon. Arguably it was first set up to prop up the price of wheat by subsidising ethanol. If ethanol production required more diesel to make it, the farmers would have been using ethanol themselves, so it may actually have increased the release of fossil carbon.

    By calling it “renewable”, RET appealed then and now to thrifty souls who warn their children that the world is running out of resources. This is at the same time that miners reassure us that we have more fossil carbon available than is needed to destroy the environment many times over.

    Wind in particular increases the spread of gas, and in its distribution increases the leakage of methane into the greenhouse.

    RET and CEFC could work together to protect the greenhouse if the Australian Government allowed the use of the one large-scale energy source that releases negligible carbon, uses little resources and leaves behind little waste.

    In that scenario, the market would indeed be able to choose between highly-taxed high-carbon products and greenhouse-friendly, low-carbon, low-taxed energy. The government website that defines eligible fuels for the RET would actually permit nuclear to qualify.

    Of course, it does depend on what you tell your children. The time will come when they will hold us to task for what we have failed to do.

  2. Mark Duffett

    Hmmm. Is “a single objective for renewable energy policy — to accelerate the decline in the cost of renewable technologies” really what we want? I’d have thought the overriding aim is to accelerate the decrease in emissions intensity of energy production. The former goal is not necessarily the best way of going about the latter.

  3. Modus Ponens

    The CEFC and RET aren’t that incompatible. If projects supported by the CEFC started intruding significantly in the 20% space, or had the potential to, the CEFC could just include in its grant conditions that that proportion of the project funded by the CEFC cannot create RECs.

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