The authority reviewing the renewable energy target (RET) is looking at what would happen to electricity generators’ emissions if the target was scrapped and the carbon tax alone was left to drive change.
The Climate Change Authority is also modelling what would happen in terms of the nation’s carbon reduction if there was no carbon tax in play and the RET remained.
A third scenario examines both mechanisms being in place - as is the case now.
Interestingly, the authority is using two different ‘‘carbon price paths’’ - one the same as the existing Treasury estimate that includes a $29-a-tonne world price in mid-2015 and another that’s lower.
Many experts think pollution permits will be much cheaper than $29 in three years. At the moment European credits cost just $10.
The authority will advise on key aspects of Labor’s emissions trading scheme (ETS) much like the central bank sets monetary policy.Its first job is to review the RET, which is meant to ensure 20 per cent of Australia’s electricity comes from renewable sources by 2020.
But softer demand and the popularity of rooftop solar panels means the 20 per cent target - actually a fixed amount of power generation - may be exceeded.
Critics says that would unnecessarily drive up power bills.
The authority in August released an issues paper which asked stakeholders: ‘‘Should the target be revised to reflect changes in energy forecasts?’’
During a budget estimates hearing on Monday, chief executive Anthea Harris said the authority had commissioned its own economic modelling as part of the review process.
The three scenarios being examined are: no RET, no carbon tax and both mechanisms running in parallel.
‘‘We’ll certainly be taking into account the carbon price when we’re doing the modelling that we’re undertaking,’’ Ms Harris said in Canberra.
The modelling by consultancy firm SKMMMA will use Treasury’s carbon price estimates and another path ‘‘that’s lower’’ initially but joins the government’s path later on.
Liberal senator Simon Birmingham asked if a higher carbon price was being examined too.
‘‘No, we haven’t done one at this stage that is higher,’’ Ms Harris told the hearing, adding the authority had to prioritise.
All other things being equal, a higher carbon price would make it easier to meet the RET at a lower certificate cost, she said.
The modelling will be made public, including the underlying assumptions.
