Liberal MP Craig Kelly calls Frydenberg emissions deal a 'double-edged sword'

Extract from The Guardian

National energy guarantee (Neg)

Minister told states target could be reviewed, but backbencher warns they may not like the result

Katharine Murphy Political editor

@murpharoo

Fri 27 Jul 2018 04.00 AEST Last modified on Fri 27 Jul 2018 07.14 AEST

Dissident Liberal MP Craig Kelly has declared the energy minister, Josh Frydenberg, is taking a risk by offering the states a review of the government’s proposed emissions reduction target for electricity.
With the national energy guarantee heading for a make-or-break meeting in early August, Frydenberg this week offered an olive branch, telling state energy ministers the Neg’s 26% emissions target could be reviewed in 2024 – four years after it is due to be implemented – stepping back from an ambit claim that it be locked in for a decade.
Kelly, the chairman of the government’s backbench energy and environment committee, says this could lead to the target being lowered rather than delivering what several states want, which is an increase in ambition.

The Labor states have been critical of the 26% target, arguing it is too weak to drive the transformation to renewable energy that will be necessary to reduce emissions sufficiently to see Australia meet its commitments under the Paris agreement.

The concerns expressed by the states were validated this week when the architects of the Neg, the Energy Security Board, confirmed that emissions in the electricity market would hit 24% below 2005 levels in the first year of the scheme courtesy of a big build of renewable energy contracted under the existing renewable energy target.

But Kelly – who has been a vocal opponent of the 26% target and has signalled he might cross the floor if he doesn’t like the final cut of the Neg – says the review Frydenberg is offering is a double-edged sword.
“Any review could seek to lower the current target as well as increase it,” Kelly told Guardian Australia.

Pressed on whether that was likely, given the weight of evidence suggests the target is already too low to see Australia conform with its Paris commitments, Kelly said it was possible that by 2024, more countries could have withdrawn from the Paris agreement, “or failed to meet their obligations”.
He also pointed to political volatility as a relevant factor.
The fate of the Neg hangs on the August meeting with state and territory energy ministers – any of whom can veto the scheme. The states could also try and push out the date for the final resolution beyond August, delaying the resolution of the issue.
In an effort to persuade the states to agree to the scheme, and give them some political cover given environmental groups are opposed to the Neg, the ESB has told energy ministers they can sign on to the policy mechanism without endorsing the Turnbull government’s low emissions reduction target.
The ESB also contends the Neg will reduce wholesale electricity prices by 20% over the decade from 2020 to 2030.
“The average national electricity market-connected household is estimated to save around $550 a year (real $2018) on their retail bill over the 2020s relative to 2017-18,” the ESB paper says. “Of this,  nearly $150 per year (real $2018) is forecast additional savings as a result of the guarantee.”
But a separate analysis by energy market analysts Reputex, funded by Greenpeace and released last week, suggests a Neg with a low emissions reduction target would increase power prices to 2030 because the policy as currently drafted locked in coal and gas over the decade, and a lower proportion of power generated from renewable sources.
The Reputex modelling suggests under a more ambitious emissions reduction target of 45% wholesale power prices would fall by a quarter to around $60 per megawatt hour (MWh) by 2030 as more renewables entered the energy mix. In contrast, under the Neg, power prices would be just over $80/MWh.