Victorians are paying up to three times more for a tonne of carbon removed from the atmosphere under the state’s key gas removal program when compared with other green schemes across the nation.
When asked on Tuesday about the Victorian scheme’s skyrocketing prices by The Age, the Allan government revealed it was planning new measures to bring down costs.
The Victorian Energy Program incentivises replacing gas appliances by offering carbon credits to installers. Credit: Getty Images
Under the Victorian Energy Upgrades (VEU) program, carbon credits are given to businesses that replace gas and inefficient appliances with higher-quality electric products, allowing customers to buy at a discount.
Every year, electricity retailers must buy millions of carbon credits in the form of Victorian Energy Efficiency Certificates (VEECs). One VEEC is equivalent to a tonne of carbon saved from the atmosphere. Those costs are passed onto consumers through power bills.
But at $108.50 each, VEECs are the most expensive credits of their kind in the country.
While not every state’s scheme operates in the same way, no other scheme is priced at more than $41 per certificate.
Under a federal green scheme that also measures carbon by the tonne, Australian Carbon Credit Units (ACCUs) are valued at $36.05.
The Allan government says the programs differ because the federal scheme was intended to reduce emissions in areas such as forestry and agriculture, while the Victorian one was focused on saving households money through efficient appliances.
Energy Minister Lily D’Ambrosio told The Age that the government would reform the program under new laws in a bid to reduce pressures on the system.
The changes will remove a strict time limit on when the certificates can be validated, a move designed to free up more credits and lower the price. They will also extend the scheme’s end date by 15 years to 2045.
The state’s utility regulator, the Essential Services Commission, will also get stronger enforcement powers over appliance installers.
The VEU’s purpose and function are the subject of a $5.9 million review announced in the latest state budget.
A spokesperson for the Australian Energy Council – the peak body for electricity retailers – said the review was an important opportunity to address concerns with the current design and ensure Victorians were getting “bang for their buck”.
“Energy consumers are paying for increasing VEU costs, which have steadily grown since 2020 when they were $30, to more than $100 now,” they said.
“The Victorian price is far too high, especially compared to other efficiency schemes in Australia, which is resulting in Victorian customers paying more for the scheme compared to other states.”
The spokesperson said the government should provide more flexibility to energy retailers so that they were less vulnerable to yearly rises and falls in the number of certificates created.
Victoria will set interim VEEC targets for retailers in 2026 and 2027 while the two-year review is under way.
The Allan government has previously described the VEU as its flagship emissions reduction program. It has been forced to rectify emerging issues over the last two years, banning doorknockers and telemarketers and fixing a loophole which led to free fridges dumped on doorsteps.
The Victorian government is considering mandating the replacement of gas appliances at the end of their life with electric appliances, but has ruled out cooktops.Credit: iStock
Analysis by the Australian Pipelines and Gas Association (APGA) industry group estimated the total cost of the Victorian program to the industry and consumers was on track to hit $652 million in 2024.
That would represent a 30 per cent increase over just 12 months, and a rise from $88 million a decade ago, according to the group’s analysis, which was provided to The Age.
The association has been critical of the Allan government’s policies, which include a ban on gas connections to new homes. The government is also considering mandating the replacement of gas appliances at the end of their life with electric appliances. In August, Premier Jacinta Allan ruled out including cooktops.
APGA chief executive Steve Davies said the VEU program was “hugely inefficient”.
“This is a poor tax masquerading as climate policy, and it’s ordinary Victorians who are footing the bill without being told the real costs,” he said.
“The Victorian government is effectively redistributing money from struggling families during a cost-of-living crisis to affluent communities to drive its ideological energy agenda.”
D’Ambrosio said the scheme actually helped lower power bills and the government review would look at increasing participation.
“While the gas lobby is focused on locking Victorians into high gas bills and boosting their profits, the VEU program is focused on supporting households and business to save money on their energy bills by switching to cheaper and energy-efficient electric appliances,” she said.
Opposition energy spokesman David Davis said the program was pushing additional costs onto households struggling with the cost of living.
“The last thing they need is a bungled electricity scheme that makes it worse,” he said.
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