Clean energy subsidies should be replaced with ‘market-based incentives’ from 2030, Australia’s Productivity Commission says | Productivity Commission

The Productivity Commission says clean energy subsidy programs should not be extended beyond 2030, and that “market-based incentives” should guide investment in the clean energy transition over the coming decades.

The commission’s interim report on investing in cheaper, cleaner energy and the net zero transformation is one of five which will be released over two weeks and which set out a series of reforms to reinvigorate Australia’s productivity.

The commissioner Barry Sterland said: “Australia’s net zero transformation is well under way.”

“Getting the rest of the way at the lowest possible cost is central to our productivity challenge,” he said.

The commission stopped short of repeating previous recommendations for a broad price on carbon.

But it advocated for a significant expansion of the safeguard mechanism, which sets emission limits for only the heaviest polluters, by slashing the threshold from 100,000 tonnes to 25,000 tonnes of carbon dioxide equivalent a year.

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Chris Bowen, the climate change and energy minister, last week announced an increase in taxpayer subsidies available for green energy projects under its successful capacity investment scheme.

The CIS and the government’s other clean energy subsidy scheme, the renewable energy target, do not extend beyond 2030, and the commission argued that the two programs should be replaced with “market-based incentives in the electricity sector”.

The commission also said the implementation of the new vehicle efficiency standard meant federal and state governments should phase out specific concessions for electric vehicles, including on fringe benefits tax, stamp duties and registration fees.

A new emissions-reduction incentive for heavy vehicles should also be introduced, the commission said.

The commission said it took too long to develop green energy infrastructure and there were deep concerns that the government would not reach its 2030 climate targets, which include 82% of energy production from renewable sources.

The report called for an overhaul of how green energy projects are assessed under the Environment Protection and Biodiversity Conservation Act, to allow decision-makers to consider whether a project is important to Australia’s clean energy transition.

Martin Stokie, a commissioner who is leading the inquiry alongside Sterland, said Australia’s “sluggish and uncertain approval processes are not up to the task” of delivering the huge amount of clean energy infrastructure needed to meet national climate targets.

“Overdue reforms to the EPBC Act would both speed up approvals and better protect the environment,” he said.

The environment minister, Murray Watt, is reviewing the act as part of a new package of federal nature laws, which were shelved before the election after lobbying from mining companies and the Western Australian government.

The commission also made a series of recommendations to build the country’s resilience to the effects of the climate emergency.

The interim report called on the commonwealth to lead development of a public database of all climate hazards, and a series of goals and policies to improve the resilience of houses.

Notably, the commission backed a climate resilience star-rating system that would reflect the potential damage from the climate crisis.

“People’s experience of climate change will depend on the resilience of their home, but most lack the information they need to invest in upgrades,” Sterland said.

“As climate risks intensify, boosting our resilience can lower the costs of disaster recovery and create a healthier, safer and more productive Australia.”

The commission will now consult on its draft recommendations before the final report due at the end of this year.