03-08-2025
Labor told 'implied carbon prices', fixing broken renewables approvals key to lowering emissions in Productivity Commission report
A new report from the Productivity Commission has called on Labor to introduce reforms which would produce a similar effect to an "enduring, national carbon price".
The interim report, titled: "Investing in cheaper, cleaner energy and the net zero transformation", is part of a series requested by Treasurer Jim Chalmers ahead of the Albanese government's economic roundtable.
In it, the Productivity Commission warns the government must move to address "the gaps and overlaps in emissions reduction incentives, speed up approvals for clean energy infrastructure, and create a resilience-rating system for all housing to meet our clean energy targets and adapt to climate change".
By doing so, the report says Labor will be able to both lower the cost of cutting emissions, while also maximising the opportunities presented by the energy transition to boost the economy.
The Commission places heavy emphasis on a market-based approach, arguing both the Renewable Energy Target and the Capacity Investment Scheme, both central to Labor's net zero agenda, be scrapped in favour of direct incentives in the electricity sector.
It also calls for the creation of a new independent agency which would determine a set of "carbon values" against which all emissions reduction policies would be assessed.
The agency would set "carbon values" based on the "implied carbon prices" needed to meet Australia's emissions.
By doing so, the Commission argues Australia could meet its internationally agreed climate targets at the lowest possible cost.
"Our recommendations align with many of the benefits conferred by a broad-based, enduring, national carbon price – a policy that many, including the PC, have consistently argued for," the report said.
In addition to factoring in the price of carbon while assessing emissions reduction plans, the report also calls for major reforms to the approval process for renewables projects.
"We need to build a large amount of clean energy infrastructure to meet climate targets and ensure reliable and affordable energy supply. But our sluggish and uncertain approval processes are not up to the task," Commissioner Martin Stokie said.
"Getting to yes or no quicker on priority projects would meaningfully speed up the clean energy transition."
The Commission argues for substantive changes to the Environment Protection and Biodiversity Conservation Act, including the introduction of national environmental standards, improved regional planning and clear rules about engaging with local communities and Aboriginal and Torres Strait Islander peoples.
It also recommends the appointment of an independent Clean Energy Coordinator-General to work across government and break through roadblocks, as well as the creation of a "strike team" to rapidly asses priority projects.
Other recommendations included in the report include an increase to the number of facilities covered by Labor's emissions reduction program for industry, the Safeguard Mechanism, and the abolishment of a fringe benefits tax exemption for electric vehicles.
