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Focus: Federal Government Energy White Paper

16 June 2004

In brief: Yesterday, the Federal Government released its White Paper on energy policy entitled Securing Australia's Energy Future. While the White Paper does not contain any major shifts in policy direction, it does introduce several new initiatives. Its most controversial feature is likely to be the absence of any expansion of the Mandatory Renewable Energy Target scheme. Partner Grant Anderson (view CV) and Senior Associate Darren Murphy provide a brief overview of the highlights of the White Paper.

Low-Emission Technology Development Fund

The Government will establish a $500 million fund aimed at supporting industry-led projects to demonstrate low-emission technologies. Importantly, this fund will not be limited to renewable energy projects and, for example, will extend to technologies that reduce the demand for energy as well as to carbon capture technologies. Whilst it is not precisely clear how the fund will be administered, the stated criterion for funding is that the technologies must have the potential to lower Australia's emissions by at least 2 per cent in the long term and be commercially available by 2020 to 2030. The fund is intended to leverage an additional $1 billion of investment from industry.

Funding for the development of renewable energy technologies

A total of $100 million (which includes $50 million from the existing Commercial Ready program) will be provided for grants to promote the strategic development of renewable technologies, systems and processes that have strong commercial potential. In addition, $18 million will be directed to support the development of advanced electricity storage technologies and $14 million to assist with the development and installation of wind forecasting systems.

Solar Cities trials

A further $75 million will be directed to support the establishment of 'Solar Cities' trials, with a view to creating working models of future markets. The trials will involve the incorporation of solar and energy efficient technologies into residential and commercial buildings in trial areas and the use of pricing and other market arrangements that better reflect demand-side actions (including time-of-day metering) in those areas.

Energy market reform: distributed generation

In addition to previously announced energy market reform initiatives (see Focus: Energy – December 2003), the Government will work with the states and territories on specific rule changes required in the national electricity market to maximise the benefits of distributed generation (ie, generation located close to demand).

Energy efficiency initiatives

The Government will introduce a range of initiatives aimed at improving energy efficiency. They include:

  • Requiring large energy users (those using more than 0.5 petajoules of energy per year) to undertake assessments of energy efficiency opportunities every five years from 2006 and to publicly report the outcomes of those assessments.
  • Requiring businesses receiving fuel excise credits over $3 million per year and proponents of energy resource development projects above certain emission levels to participate in the Greenhouse Challenge program thereby requiring them to measure greenhouse emissions, develop options for abatement and report on progress.
  • Establishing a Productivity Commission inquiry to examine the potential economic and environmental benefits from improving energy efficiency.

No extension to MRET scheme, emissions trading or ratification of Kyoto Protocol

As stated earlier, the Government does not propose to extend the existing Mandatory Renewable Energy Target scheme which is scheduled to expire in 2020. This is in contrast to the recommendations, released to the public in January, of the review panel established by the Government and headed by Senator Tambling (see Focus: Energy – February 2004) which included an increase in the target after 2010 and an extension of the scheme beyond 2020. The Government has also confirmed that it will not introduce emissions trading or ratify the Kyoto Protocol at this stage.

Fuel excise reform

The Government will overhaul the existing fuel excise system, with changes to be phased in between 1 July 2006 and 1 July 2015. Ultimately, fuel excise is to apply only to the private use of fuel in vehicles and certain off-road applications and the business use of fuel in smaller vehicles in on-road applications. It will, therefore, not apply to the business use of fuel in any off-road applications (eg, power generation). In addition, fuel excise will be based on energy content (rather than volume) and will apply to all fuels used in road transport, although 'alternative' fuels (eg, biofuels) will be excise free until 1 July 2011 with a 50 per cent discounted rate to be phased-in thereafter. A road user charge is to be introduced for heavy vehicles.

Resources development initiatives

The Government will develop protocols to guide the collection of comprehensive and consistent geoscience data for all energy resources. It will also develop protocols for more accurately forecasting the greenhouse impacts of large energy projects.

Innovation priorities

The White Paper contains an assessment of various energy-related technologies and categorises them based on their strategic priority for Australia. The Government will incorporate these assessments into existing innovation mechanisms and review them on a regular basis. The White Paper also indicates that the Government will conduct a review of existing international energy technology agreements by the end of 2004.

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