Angus Taylor to seek states' support for emissions reduction fund overhaul

Katharine Murphy and Adam Morton
Photograph: Mick Tsikas/AAP

Angus Taylor has scheduled a discussion with state and territory energy ministers about the planned overhaul of the Morrison government’s emissions reduction fund, a move following the government’s decision to quietly appoint an expert panel to come up with new ways to cut greenhouse gas emissions.

According to the draft agenda for Friday’s Coag energy council meeting, obtained by Guardian Australia, the commonwealth has scheduled a discussion about the $2.55bn ERF, now rebadged the Climate Solutions Fund, at the long delayed meeting of federal and state energy ministers.

Ahead of Friday’s meeting, the first in nearly 12 months, Taylor has signalled he wants to pursue a series of deals with the states to roll out new generation and transmission – an approach that has followed the Morrison government’s decision to ditch the national energy guarantee (Neg). The Neg was a casualty of the federal Liberal party’s leadership eruption last August.

Related: ACT warns Angus Taylor against division and deal-making at key Coag energy meeting

The Coalition initially faced pressure from some of the Liberal state governments, including New South Wales, to revive the Neg, which was supported by most stakeholders in the energy sector.

But with Canberra refusing to reboot the Turnbull-era policy mechanism that combined reliability standards and emissions reduction for electricity, the states have in more recent times pursued a plan B, giving Canberra specific wish lists of projects they want assistance with.

Taylor has not ruled out the side deals including direct assistance for emissions reduction in the states, and the Morrison government has been quietly pursuing an overhaul of the ERF, appointing a panel of four business leaders and policy experts to suggest options to expand it.

The conversation at the Coag meeting on Friday is expected to seek state and territory buy-in for the planned overhaul of the fund, which has been heavily criticised for failing to deliver substantial emissions reduction from the industrial sectors of the economy. It is likely the states will want cash from the fund to drive abatement in their jurisdictions.

A discussion paper flagging the ERF overhaul, first reported by Footprint, says the fund has been successful in generating carbon offsets from native vegetation and landfill projects, largely because they cost relatively little and do not require businesses to make substantial operational changes.

But it says the scheme has done little to cut emissions through energy efficiency projects and from industry, agriculture and transport, in part due to high upfront and transaction costs.

The emissions reduction fund works as a reverse auction, rewarding landowners and businesses that make cheap, viable bids for taxpayers’ support to cut pollution. The most recent auction bought emissions cuts equivalent to only 0.01% of Australia’s annual greenhouse gas pollution after officials found just three projects worth backing.

The paper says the government is looking at ways to attract more participants from industry and agricultural businesses.

Stakeholders report there is a diversity of views within the reviewing panel, headed by Grant King, the outgoing president of the Business Council of Australia and a former chief executive of Origin Energy, about how to refashion the scheme, and the process is operating on a tight timeframe.

Related: Victoria asks Angus Taylor to fast-track work on Snowy-Melbourne energy line

Ahead of Friday’s meeting, Victoria has asked the Morrison government to fast-track work on the KerangLink – a transmission line increasing power transfer capability between the Snowy area and Melbourne.

The request from Victoria follows a similar pitch from the NSW government, which has asked Canberra to underwrite new generation to replace the Liddell power station, and either underwrite or de-risk new investments in transmission that have been highlighted as urgent by the Australian Energy Market Operator. The side deal with NSW is understood to be close to sign-off.

South Australia has not telegraphed its wishlist publicly, but says it will pursue options for expanding the state’s abundant renewable energy resources in ways that deliver more affordable and reliable power to consumers.

But the ACT has expressed alarm about the current trajectory. The ACT’s energy minister, Shane Rattenbury, says the Morrison government should be implementing a coherent national plan to secure Australia’s energy future rather than cutting a series of deals with states it regards as friendly.

Rattenbury has also expressed concern that ministers at Friday’s meeting of the Coag energy council will be herded into a decision about hydrogen that will be “a backdoor means of propping up the coal sector”. Friday’s agenda includes a briefing from the chief scientist, Alan Finkel, on the national hydrogen strategy and governance.

Victoria has also sought and scheduled a discussion about a review of the reliability standard, which Taylor supports.