Exclusive: Minister floats proposal to win states’ sign-off on Neg mechanism before a second meeting to discuss emissions targets

Josh Frydenberg has flagged a two-stage process with state and territory ministers in an attempt to maximise the government’s chances of achieving sign-off for the national energy guarantee in August.
State sources have told Guardian Australia the commonwealth has floated a proposal where ministers would sign off on the detailed design of the Neg mechanism at a meeting of the Council of Australian Governments energy council long scheduled for 10 August.
The first meeting would also cover the legislation states will have to implement in their own jurisdictions to give effect to the policy.
Assuming in-principle agreement to proceed, the energy minister has now flagged a second conversation on the following Tuesday, on 14 August, where the states would be briefed about the more controversial emissions reduction components, which are scheduled to be put to the Coalition party room in Canberra earlier in the day.
Frydenberg is expected to seek party-room sign-off for federal legislation covering the emissions reduction target, the use of domestic offsets, and the treatment of emissions-intensive trade exposed industries once parliamentary colleagues return from the winter recess – a process that will inevitably reignite the government’s internal energy policy debate.
Given that a number of states are worried about the consequences of the low ambition of the Neg’s emissions reduction target, some states are also understood to be pushing for access to the detailed modelling underpinning the final design paper to have access to the assumptions used in the analysis.
At least one jurisdiction has privately flagged delaying a final decision on the Neg beyond August, but the commonwealth and energy market officials are resisting that entreaty on the basis the current problems in the energy market need an urgent solution.
In an effort to coax the states to the table, Frydenberg last week offered an olive branch, telling state energy ministers the emissions reduction target of 26% by 2030 could be reviewed after five years – stepping back from an ambit claim that it be locked in for a decade.
In an effort to give the states political cover to sign on, the Energy Security Boad also told state governments in the final design paper it circulated last week in unequivocal language that they could sign on to the policy mechanism without endorsing the federal government’s low emissions reduction target.
“Support by the energy council for the detailed design of the guarantee mechanism, as summarised in this paper, does not constitute approval, agreement or endorsement of the elements of the emissions reduction requirement that are the responsibility of the Australian government,” the ESB said in the final design paper.
It also reassured jurisdictions reluctant to sign on that the final design of the Neg “does not limit the ability of states and territories to set and meet their own emissions reduction or renewable energy targets”.
The unusually direct observation from officials is an implicit reference to the fact that Victoria and Queensland are under pressure from the environment movement, parts of the solar industry, and the progressive activist group GetUp to reject the Neg because of the demonstrable insufficiency of the emissions reduction target.
The groups are running a grassroots campaign which declares if the states rubber stamp the Neg in August, they will “own” the 26% emissions reduction target, which a range of experts say is too low to see Australia meet its obligations under the Paris climate agreement.
Victoria, understood to be rattled by the offensive, is particularly exposed to a campaign by progressive activists because the government of Daniel Andrews faces a difficult election in November.
The Queensland energy minister, Anthony Lynham, wouldn’t be drawn on where his state would land in the looming deliberations.We are still analysing some aspects and will be expecting further information on how this affects Queensland’s non-negotiable components,” he told Guardian Australia.
The ESB’s final design paper on the Neg confirms the concerns of many experts that the policy as now envisaged will add very little to Australia’s efforts to reduce emissions over the decade to 2030.
The Neg will only deliver additional emissions reduction of 38m tonnes between 2020-21 to 2029-30 relative to a scenario without the guarantee. The ESB paper says emissions in the national electricity market are expected to be 24% below 2005 levels by 2020-21 – which means the decade-long target is almost reached in the first year of the scheme.
A number of stakeholders – not just environment groups – are worried that the target is set to low to give investors in the energy market certainty. The market will assume the target will need to be raised to see Australia conform with its international climate commitments.
If Frydenberg manages to emerge from the next fortnight with sign-off from the states, the political battle will switch to the federal arena, with Labor muscling up to fight the 26% target.