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It's Crunch Time for Australia's Energy Policy Debate

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Australia has been deep in an energy policy debate for what feels like forever.

After months without a resolution, a decision on the Turnbull government’s National Energy Guarantee will finally come to a head at a pivotal meeting this week.

On Aug. 10, the federal government will ask the states and territories to commit to the National Energy Guarantee, a compact that combines climate change policy and energy policy — and one the Turnbull government believes will resolve a decade of partisan warfare.

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The guarantee will enforce two requirements onto energy retailers: a requirement to reduce emissions between 2020 and 2030, and a reliability guarantee that requires a percentage of electricity to be sourced from coal, gas, batteries, and pumped hydro.

Implementing the guarantee requires consensus from the states and territories of the National Energy Market, which means all except Western Australia and the Northern Territory need to agree.

One mechanism to drive change in the energy market would be to legislate a carbon price. Due to Australia’s tumultuous history with the ‘carbon tax’ — and former Prime Minister Tony Abbott’s promise to revoke it — the Coalition needed an alternative. Hence, the National Energy Guarantee.

The policy in its current form does little to actually reduce emissions.

The guarantee aims to reduce emissions in the electricity sector by 26% by 2030. While this sounds promising, Australia’s current Renewable Energy Target scheme is set to reduce pollution in the national electricity market by 24% by 2020, meaning when the overly complex guarantee policy takes over it will only cut emissions by a further 2% over 10 years.

Former head of Clean Energy Finance Corporation Oliver Yates feels state and territory governments should hold off signing the guarantee until it's reviewed to include meaningful emission reduction plans.

“It’s absolutely of no benefit to the national transition away from emissions,” Yates told the Guardian. “The only thing it does is help people producing emissions to know they don’t have to reduce their emissions over the next 10 years.”

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Currently, the guarantee is supported by major business groups, the majority of energy retailers, large corporations, the National Farmers Federation and the Clean Energy Council.

Environmental groups and players in the renewable sector, including the Smart Energy Council, oppose the compact.

Participants in the renewables industry are currently assembling a campaign that aims to place political pressure on the Queensland and Victorian governments to reject the guarantee. Televised advertisements put together by Greenpeace and Getup!, an Australian left-wing lobby group, will be played in the two states before the upcoming make-or-break meeting.

In 2015, Australia signed up to the Paris climate agreement, which impels the nation to reduce its greenhouse gas emissions by 26% by 2030. 

Australian Capital Territory Climate Change Minister Shane Rattenbury argues that if Australia is to fulfill its commitment to the Paris agreement, the nation needs to reduce emissions across the whole economy, not just from within the electricity sector. 

"That means if we're going to get to 26% for the whole economy, agriculture must also cut by 26%, transport sector must cut by 26%, and the various other sectors,” he told the ABC. "It is more expensive to do it in those sectors, it's less economically efficient."

Federal Energy Minister Josh Frydenberg has failed to reassure Rattenbury that the targets will be meet.

"He sort of mutters these comments about, 'Oh, we've got plans for the other sectors,' but I don't see them," Rattenbury stated. "I need something a little more than, 'trust me, I've got a plan,' to have confidence we're going to deliver in those sectors."

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Should all states consent to the guarantee, the reliability component will begin in 2019 and the emission reduction element of the guarantee will replace the Renewable Energy Target in 2020.

Should the guarantee collapse, Australia will be back to the drawing board — unfortunately a place that is all too common for Australian voters.