Australia, along with the rest of the world, must decarbonise its energy sector by 2050 to have any hope of averting dangerous climate change, and the Climate Institute has released research to help get there.

The report, A Switch in Time: Enabling the electricity sector’s transition to net zero emissions, finds that a $40 carbon tax could meet the government’s 2030 target of a 26-28 per cent emissions cut based on 2005 levels. However, it would not lead to coal being replaced with clean energy.

Consequently, this would lead to more extreme actions needed from 2030, such as more than 80 per cent of coal plants needing to be shut within five years, which would have disruptive economic effects.

What is needed, the report says, is a policy that will lead to an orderly phase out of high-carbon energy to low-carbon sources, and for clean energy investment to be de-risked.

“Our research shows that a policy package that actively supports both clean energy investment and the orderly replacement of our aging coal-fired power stations can better manage a timely transition to a cleaner electricity supply,” Climate Institute John Connor said.

“A baseline and credit or emissions trading scheme alone will not be strong or reliable enough to drive the change we need, when we need it.”

A successful policy framework, the report said, would:

  • be consistent with a predictable pathway to net zero emissions by mid-century, and a 1.5-2°C national carbon budget
  • start systematically retiring existing high-carbon generators on a timeline that ensures all have exited by 2035
  • facilitate replacement of high-carbon generation with zero or near-zero emission energy
    provide a well-funded and well-planned structural adjustment package for communities affected by generator closure
  • strategically deploy energy efficiency policies to minimise costs to energy users and further reduce emissions
  • include a carbon pricing mechanism that is capable of scaling up over time to provide a bankable signal for investment consistent with net zero emissions by mid-century

One of the modelled options, “Clean In Carbon Out”, found that teaming a weak carbon price with other measures – such as a renewable energy target of 50 per cent by 2030 and a 45-year operating lifetime limit for existing coal plants – would see a timely transformation of the energy sector.

Key outcomes of the scenario are:

  • clean energy capacity grows by 2500MW a year
  • retirement of coal generators is spread out over time to average 1500 MW annually to 2035
  • the reliance of clean energy investments on a subsidy declines from about 50 per cent of their revenue to barely four per cent by 2030
  • requirement for 290 million tonnes of offsets to achieve the carbon budget

The scenario would reduce electricity emissions by 45 per cent below 2005 levels in 2030, which is in line with the Climate Change Authority’s recommended reduction. Energy efficiency improvements could further reduce the costs and carbon emitted.

The Switch in Time report can be downloaded from the Climate Institute website.