Dual threat to energy guarantee from ALP and conservatives

Labor and a backbench revolt led by Tony Abbott may undermine plans for legislated emissions cuts on the electricity sector.

Tony Abbott has signalled he could oppose the proposed ­NEG even if it was approved by the COAG energy council in ­August. Picture: Kym Smith

Labor is warning that a government proposal to impose 10 years of legislated emissions cuts on the electricity sector will be too weak and will undermine its support for Malcolm Turnbull’s signature ­energy policy, which also faces the prospect of a backbench rebellion led by Tony Abbott.

Energy Minister Josh Frydenberg will come under renewed pressure today as Labor hardens its stance against annual emissions cuts it believes do not go far enough, while Coalition MPs sound the alarm over an emissions-­reduction trajectory they believe will saddle extra costs on the economy. The Coalition needs federal and state Labor support to get its energy plan through the Council of Australian Governments meeting in August.

The threat from Labor and unrest in Coalition ranks came as Australia’s biggest energy consumers warned they could be forced to absorb new costs in managing electricity contracts.

Details of the national ­energy guarantee released last week ­revealed the 100 biggest users of electricity — those with a peak load of more than 5 megawatts — would be accountable for the reliability of supply, sparking concern from the Ai Group and Energy Users Association of Australia.

Mr Abbott yesterday signalled he could oppose the proposed ­NEG even if it was approved by the COAG energy council in ­August. He likened it to a “carbon tax in disguise” during an interview with 2GB’s Ray Hadley.

Concerns about the energy guarantee are expected to be raised by up to six Coalition MPs in today’s joint partyroom meeting following the release of the next stage of the policy design, which has amplified concerns it will introduce an emissions intensity scheme “by stealth” that will favour renewables.

Labor energy spokesman Mark Butler told The Australian the most recent update to the ­design of the NEG had confirmed that the policy appeared “ineffectual” and could put opposition support at risk. He said it was clear the NEG introduced an emissions-­intensity scheme, but ­objected that it was too weak.

He indicated the opposition would move to reject any policy that locked in weak emissions cuts through legislation.

“We won’t agree to something that ties the hands of a future ­government from increasing ­ambition,” Mr Butler said. “The government is now effectively proposing an emissions intensity scheme as the emission obligation under the NEG. However, their weak ambition means the NEG will be ineffectual in supporting investment in new renewable ­energy, placing reliability, affordability and our ability to meet climate change obligations at risk.”

Mr Frydenberg said last night that Mr Butler was “punch drunk” after losing the Labor presidency, because the notion of legislated targets was spelt out in February and April consultation papers.

“Nothing has changed since then,” he said. “While Labor is trying to whip up the politics, we are endeavouring to land a durable policy solution that lowers power bills, and creates a more reliable energy system.”

Mr Butler is concerned by a “design elements” paper released on Friday that proposes the ­government set the “annual ­electricity emissions targets for the first 10 years of the guarantee in commonwealth legislation”. The paper also said the targets would be extended in 2025 for the period 2031-35 and every five years thereafter.

Mr Butler said Labor’s support for the NEG had always been ­conditional on any policy allowing a future Shorten government to lift emissions targets to meet its more ambitious objective of a 45 per cent economy-wide cut.

Coalition MPs have raised concerns about the prospect of a decade-long emissions reduction trajectory for the electricity sector that would be enshrined in legislation. Some MPs say this approach will prevent energy companies from achieving reductions at least cost. They have argued in favour of a “hockey stick” approach to emissions reductions that would allow energy companies to backload their compliance with the Paris target under which Australia is ­obligated to reduce emissions by 26 per cent on 2005 levels by 2030.

NSW Liberal MP Craig Kelly has warned the updated policy design appeared to impose an ­emissions-intensity scheme on the electricity sector.

Mr Abbott said yesterday he could support the energy guarantee only if it allowed for the ­construction of a new coal-fired power station. Agriculture Minister David Littleproud said he supported the expansion of coal-fired power plants in Australia. “We’ve got to keep the bills down and keep reliable power,” he said.

Energy Security Board chairwoman Kerry Schott today rejects as “incorrect nonsense” The Australian’s report yesterday that power companies and large industrial energy users were told during the deliberations of a government-appointed working group that the NEG would introduce an emissions intensity trading scheme by stealth.

In a letter to The Australian published today, Dr Schott says that no member of the ESB “said such a thing”, arguing that the emissions requirement on retailers under the guarantee was not a trading scheme.

“The guarantee will have a registry to enable retailers to comply at lowest possible cost and to allow the Australian government to meet the commitments it has signed up for under the Paris agreement,” Dr Schott said.

Additional reporting: Greg Brown