Two new papers have been released by Professor Ross Garnaut as part of his Climate Change Review for the Australian Government.

 

The first, ‘Low emissions technology and the innovation challenge’, finds that public funding for innovation in low-emissions technology should be substantially increased under a new scheme administered by an independent authority.

 

Professor Garnaut argues that with global public expenditure on research, development, demonstration and commercialisation of low-emissions technologies increasing in the aftermath of the Great Crash of 2008, Australia “should do its proportionate part as a developed country in the global innovation effort”.

 

He identified key areas for improvement as:

 

  • in basic research focusing on areas where we have comparative advantage in research capacity and strong national interest in application;
  • in commercialisation, following business priorities backed by investment commitments; and
  • reducing other costs of innovation by expanding relevant high-level education and removing regulatory and legal barriers to new activities.
  •  

He proposed a package of measures to ensure the optimal level of innovation:

  • increasing support for public and private basic research;
  • market-led support for private demonstration and commercialisation;
  • the Low-Emissions Technology Commitment on total funding, leading to roughly a doubling of research, development and commercialisation expenditure to $2-3 billion per annum; and
  • strong and independent governance arrangements. 

The scheme should be administered by an independent authority, taking important decisions on advice from independent expert bodies.

 

The second paper,  the last to be released before Professor Garnaut’s final report in May, examines the future of the electricity sector.

 

Garnaut predicts that under a carbon pricing regime,  an early response within the electricity industry will be a switch from coal to gas and an increasing focus on less emissions-intensive forms of generation. While he felt that carbon pricing would not threaten energy security, it would be prudent to introduce an Energy Security Council to implement measures to counter energy market instability and to provide loan guarantees to high-emissions generators through the transition to carbon pricing.

 

Professor Garnaut observed that electricity prices are likely to increase as a result primarily of increased costs of transmission and distribution resulting from overinvestment in networks, and he suggested that the forthcoming review of regulatory arrangements by the Australian Energy Regulator would be an opportunity to correct distortions in current regulations.

 

He also argued that large gains could be made from “a truly national electricity market, with greater inter-state connectivity increasing competition, resilience against supply shocks, and reducing the cost of connecting new low-emissions power sources.”

 

Under a carbon pricing scheme, other more expensive power generation mitigation measures, such as the renewable energy target and subsidies for new roof top solar, could be phased out.

 

The two reports are available at http://www.garnautreview.org.au

Professor Garnaut’s final report on his update of his 2008 Climate Change Review will be completed by the end of May.