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Alan Finkel says EIS is a way to reach Paris climate targets

Alan Finkel says EIS is a way to reach Paris climate targets

By Mark Ludlow, Phillip Coorey

Australia has reaffirmed its commitment to the Paris climate change agreement in anticipation of the US withdrawing, while chief scientist Alan Finkel is prepared to release modelling which gives the Turnbull government the option of a revised renewable energy target rather than an emissions intensity scheme.

With US President Donald Trump set to pull the world's biggest emitter out of the Paris deal early on Friday (Australian time), Prime Minister Malcolm Turnbull moved to quell any possible Coalition dissent by saying Australia was committed to the international target of reducing its carbon emissions by 26 to 28 per cent by 2030 based on 2005 levels.

"When Australia makes a commitment to a global agreement we follow through and that's what we're doing," Mr Turnbull said.

It comes as Dr Finkel said the electricity sector would need to do its "fair share" to help bring down its carbon emissions if Australia is to reach its Paris climate change targets.

The Finkel review, to be handed to state and federal energy ministers next Friday, is expected to show modelling for an EIS for the electricity sector, a renewable energy target and the Coalition's current Direct Action policies.

While an EIS is politically unpalatable for the Turnbull government, a lower RET beyond 2020 would help deliver more certainty for investors.

Dr Finkel said it was clear from the 390 submissions to the inquiry there needed to be some certainty when it came to climate policy to encourage business investment in the sector.

"What we are hearing loud and clear is the lack of clarity in the future policies around the electricity sector is giving great concern to investors and that discourages them from making the necessary investment that will bring on the new generation for lower emissions and reliability that we require," Dr Finkel told a budget estimates hearing in Canberra on Thursday.

"That is a key consideration in our minds as we are formulating our recommendations."

The Turnbull government has ruled out any EIS for the electricity sector or the wider economy, despite a coalition of businesses and industry groups saying there needed to be a scheme to help Australia reduce its carbon emissions by 26 to 28 per cent by 2030.

Control emissions intensity

Modelling by the Australian Energy Market Commission and the Australian Energy Market Operator also found an EIS was the cheapest way to reduce emissions.

When asked by Labor senator Kim Carr, Dr Finkel admitted the final report would have to deal with the issue of a price on carbon, especially in the electricity sector.

"We absolutely need to deal with the issue of ensuring the electricity sector can do its fair share in helping the nation to meet its obligations under the Paris accord," he said.

He said Australia could reach its Paris targets by either boosting renewable energy in the NEM (via a Renewable Energy Target) or through some kind of EIS.

"The commitment that we've made is for a 26 to 28 per cent reduction by 2030 of emissions on a 2005 baseline. Now you can get to that by having a system that involves a certain level of renewable generation. You can get to that by having a system that controls the emissions intensity if you know what the demand will be. And we will be addressing the means by which that outcome can be achieved."

Dr Finkel said he was concerned about high electricity prices and the reliability of the network, especially since South Australia's state-wide black-out in September last year, saying the review had met with big industrial users who were experiencing price spikes of 100 per cent.

"If you already have 5 to 10 per cent being spent on energy costs and those costs are going to double, you have to find new efficiency measures in your system or you are going to wear those extra costs and that will come off the bottom line. That's a concern," he said.

Finkel report due next week

Dr Finkel said he would be presenting the findings of his report to the Council of Australian Governments meeting on June 9, saying it would outline a blueprint to fill in the policy vacuum.

He said the review would be recommending policies that all states and territories as well as the federal government would agree to implement to boost energy security and "take surprises out of the system" and encourage new low-emission reliable power in the NEM. It will also be looking at the price impacts on households and business.

"One of the strongest messages coming to us from all the submissions is investors don't have any sense of predictability in the market. You can't ever give investors certainty but you can give them a sense of being able to use their expertise to come out with a predictable investment decision," he said.

His testimony came as cracks began to appear in the Turnbull government over climate in anticipation Mr Trump will withdraw from the Paris treaty on Friday morning, Australian time.

Liberal MP Craig Kelly, who chairs the Coalition's backbench committee on Energy and Environment, was already celebrating on Facebook. "It's not confirmed yet but have the champagne on ice," he said.

Financial Review

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