The implications of Australia's carbon pollution reduction scheme for its National Electricity Market

Abstract

This paper assesses the major implications for the National Electricity Market of the introduction of a domestic cap-and-trade carbon pollution reduction scheme in Australia. The electricity sector is the largest source of emissions in the Australian economy, and it is this sector, therefore, that will bear the brunt of the impact of the proposed scheme. The paper addresses core issues for the electricity market up to 2020 operating under the scheme. It focuses specifically on its impact on electricity prices and generation technology mix. These two variables have been assessed using a number of models, each applying different assumptions about key impact factors. In this paper we present a comparative summary of the results of the three highest-profile models and compare their assumptions in order to explain differences in projected outcomes. This comparison will give an indication of the likely range of impacts on the market of the current design of the scheme.