Blog | 29th Sep, 2010

Mark Wakeham in the Climate Spectator

Victoria produces the nation’s dirtiest electricity, relying on soggy brown coal to keep the lights on. Which makes it noteworthy that both sides of the state’s parliament last month voted to legislate for a 20 percent cut in greenhouse gas emissions by 2020.

While its not a science-based target, it’s a lot better than anything else on offer from any other Australian state or federal leader (with apologies to the ACT, who have a stronger target, but lack an industrial economy).

Victoria’s bureaucrats are now charged with the job of developing a detailed implementation plan about how to reach the target on time. The Brumby Government’s Climate Change white paper, which heralded the new direction, provides some key signposts, but in many places the path is far from clear. The "White Paper Implementation Plan" is due for release in October, before the government goes into caretaker mode.

Victoria’s emissions are anticipated to climb to 130 million tonnes (Mt) per year by 2020 under a business as usual scenario. The 20 percent reduction target requires that Victoria’s emissions are cut to 96 Mt per annum by that date.

So, are we in for a bumpy ride or a smooth landing? That depends on whether the government chooses a linear trajectory, reducing emissions by an even 3.4 Mt each year for ten years, or adopts a wait-and-see approach, relying on a federal carbon price to jolt the state’s economy over the line at the last minute.

The signposts in the white paper are mixed. Environment Victoria's analysis suggests that the quantifiable initiatives in the white paper will deliver just 10 Mt of abatement between now and 2014. If Victoria is to be on track to meet the 20 percent reduction target we will need 34 million tonnes of abatement by 2014, so we’ve got a shortfall of 24 Mt in the next term of government.

And that’s provided that Victoria doesn’t make a serious u-turn and approve the new coal-fired power station which is currently being assessed by the EPA. There are elements of the white paper that may deliver some of the shortfall, for example the welcome commitment to improve the energy rating of Victoria’s housing stock to an average of 5 stars. However, as with other white paper initiatives, until we see the detail it’s hard to know exactly how much abatement this will achieve in the next term of government.

Perhaps the strongest element of Brumby’s policy is a plan to buy 4 Mt of abatement directly from power producers through a tender process. The stated aim of the exercise is to close down two of the eight turbines at the infamous Hazelwood power station, Australia’s most carbon-intensive electricity producer.

This is the first time an Australian government has attempted to retire existing coal-fired generation capacity for climate policy reasons. If Australia is to kick the coal habit, it won’t be the last. This makes it critical that the Victorian government’s tender process succeeds and is accompanied by a transition plan to create new jobs and industries in the Latrobe Valley.

Again, the white paper gives only a few clues about how the tender will be run. The state government will be seeking bids from brown coal-fired generators to see who can make the cuts most cheaply – a process designed to deliver least-cost abatement. If Brumby is to convince the Gillard government to stump up some of the cash, the tender needs to specify that emission cuts will be national – meaning the electricity can’t just be replaced with imports from slightly less polluting black-coal generators in NSW.

Another key question is whether the tender will be capped at 4 Mt. Hazelwood’s owners, International Power, have already said they want all or nothing, and would prefer a plan to phase out the entire power station, which emits over 16 Mt per year. An open-ended tender to see who could deliver the most cuts for the least cash could really clean up Victoria’s electricity industry. Quite a contrast to the CPRS negotiations, where generators bid for billions of dollars worth of compensation to keep polluting, instead of naming their lowest walk-away price.

There’s a strong argument for the Gillard government to get on board and that acting to replace Hazelwood is consistent with the introduction of a price on carbon. It will take time for the new Climate Change Committee to reach consensus on the best model for a much-needed carbon price, and then further time to implement the agreed model. In the meantime the electorate is ready for some action.

Replacing all of Hazelwood, which produces nearly 3 per cent of national emissions, would demonstrate that the feds can deliver real emissions reductions. Removing Hazelwood from the equation would also remove the single largest recipient of free permits under the doomed CPRS, making it easier to achieve a more robust, less compromised price-tag on pollution.

It's eight weeks until the Victorian state election. While the Premier has some runs on the board with his Climate Change white paper, it’s not yet a memorable innings for Victorian voters. A deal between Victoria and the Commonwealth to replace all of Hazelwood by 2012 would deliver Premier Brumby the abatement pathway he needs to reach his 20 per cent target. But perhaps of greater importance to both the Premier and the Prime Minister, it would deliver tangible evidence of climate change action that Australians, and particularly Victorians, are thirsting for.

This article was published in the Climate Spectator on Thursday, 30 September.