Kyoto flexibility mechanisms and renewable energy - opportunity or obstacle?

In the absence of such measures, it is most unlikely that a scheme that concentrates on large emitters and relies on flow-on of price signals will be effective in encouraging an energy system towards low-CO2 outcomes.

• 'Hold back' permits during initial allocation so that they can be awarded to new entrants as well as RE companies.

One way to reduce barriers to new entrants would be for the government to reserve permits for new emitters. To further encourage the development of the RE industry, major RE projects could also be awarded some of the reserved permits, thus allowing them to trade in the primary market from its onset.

Government Action

Two key things that governments can do to promote the growth of sustainable energy solutions to climate change are to

1. Create long-term loan programs to finance long-lived RE projects.
At present RE projects can only get relatively short-term funding, e.g. less than 10 years, which make it difficult for companies to build new projects, generate low cost power and provide profits needed to attract other investors.
2. Stop government subsidisation of power generation projects that burn fossil fuels.
The fossil-fuel industry is mature and shouldn't need government assistance. Taxpayer-provided funding for carbon emitting power plants should end if governments are serious about reducing GHG emissions - and about promoting RE. In Australia the fossil fuel industry has received over $A3 billion in direct subsidies and over $A37billion in subsidies to consumers since the end of World War II .

RE industry action

The RE sector can also promote itself as a greenhouse solution via the flexibility mechanisms by: developing cost effective approaches to 'bundling' the CO2 benefits of small projects; streamlining certification , verification and monitoring; identifying multiple income streams from RE projects; developing partnerships with 'big emitters'.

CONCLUSIONS

Emissions trading requires a higher priority in the policy debate. Yet emissions trading alone will not be sufficient to create a sustainable energy system in Australia, to meet Australia’s international obligations under the Kyoto Protocol nor to prevent dangerous climate change. Other actions will be needed, such as RE industry development, removal of market barriers and streamlining the certification of CO2 savings from RE projects.

A strong focus must remain on reducing emissions at source.

A focus on sinks as a quick fix to climate change could divert investment away from RE and EE. Ultimately, we need to change the energy system and that means boosting investment in RE and EE.