Near chaos with policy cocktail

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The unpredictable nature of Australia's renewable energy scene has edged further towards chaos with the combination of an in-principle agreement on national tax reform, a final report of the government's intended 2% renewables target, and a proposed new market trading scheme for green power.

A ten percent broad-based goods and services tax (GST) has been debated for a decade but is now a certainty after the Conservative government's plan received in-principle support from minority parties. The green-tinged Democrats, however, who with independents hold the balance of power in the Australian Senate, successfully negotiated several key social and environmental concessions, including: an extra A$400 million over four years for greenhouse gas abatement; a A$32 million program over four years to subsidise household photovoltaic systems; a A$24 million investment program over four years to boost commercialisation of renewables; and a four year, A$264 million scheme to subsidise remote off grid renewable systems (RAPS).

In spite of the concessions, the tax package has been roundly criticised by environmental groups who say one of the key concessions to industry-the removal of wholesale taxes on diesel and petroleum fuels-will add five million tonnes of greenhouse gases to Australia's post-Kyoto greenhouse ledger. Ian Higgins of Greenpeace Australia says the deal "hands out almost A$8 billion to polluters over three years." The government has also allocated A$21 million over three years to offset the cost of the GST on consumer purchases of green electricity, but an analysis by the Australia Institute, a liberal think-tank, concludes that these grants "look highly tenuous."

Meanwhile, the federal government has released its final report on proposed legislation to increase renewables electricity by 2% over the next decade. The report, compiled by a group composed of state and federal bureaucrats, representatives from the fossil fuel industry, and a representative from the fledgling Sustainable Energy Industries Association (SEIAA), says the proposed legislation will lead to an extra 9000 GWh of electricity from renewables, with average price increases for electricity by 2010 of around 1.3%-2.5% or A$100-A$250 million in 2010, based on generation costs.

The working group recommends a "tradable certificate" system to account for the new capacity, with retailers and businesses in the wholesale market obtaining certificates that are credited to generators of new renewable capacity. An individual retailer's target would be calculated on its percentage of total electricity bought. The program would be gradually introduced from 2001.

The working group rejected a portfolio approach specifying a set capacity for each renewable, arguing that it is more cost-effective to let the market determine the best renewable option. SEIAA says this will prevent promising but more expensive technologies from entering the market. Also, if coal-seam methane qualifies as a renewable, it will completely overwhelmed the target, says SEIAA.

The report leaves open the question of penalties for non-compliance, opting instead to recommend "incentives" such as a system of "redeemable penalties," refundable if a portion of a missed target is met within a certain time frame. Long time clean energy campaigner Alan Pears of Sustainable Solutions, remarks that the focus on incentives is "like offering drivers incentives to obey the speed limit."

The report is now being considered by the government.

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