Billions of dollars of investments in renewable energy could be at risk if the Abbott government cuts or abolishes the Renewable Energy Target (RET), and millions of Australian superannuation holders could be among the losers, says a major investor group.
The Investor Group on Climate Change (IGCC), which has a combined $1 trillion of funds under management, said the prospect of weakening the RET “stunned investors because investments were made with the expectation of continued bi-partisan support for the policy”.
Newspaper reports on Monday suggested the federal government was moving to scrap the RET in a bid to save $11 billion in proposed investment.
The Australian Financial Review reported that Prime Minister Tony Abbott had asked prominent Australian businessman Dick Warburton to review the option of cancelling the RET altogether.
But IGCC Chief Executive Nathan Fabian said institutions had invested hundreds of millions of dollars in renewable energy projects under the RET.
“Renewable energy investments with long-term horizons of over twenty years were undertaken on the basis that the RET was here to stay,” he said.
“Investors are aware of the need to transition to a low carbon economy and to include low carbon investments in our portfolios. The RET provides those opportunities in Australia,” Mr. Fabian said.
“If the government seeks to weaken the RET, Australia will continue its move from being one of the most advanced markets for low carbon investment in the world, to being dead dog last.”
The IGCC comprises more than 50 businesses, from Stockland and UBS to industry super finds like LUCRF and First Super.
Finance Minister Mathias Cormann said the government would wait for a review of the RET before making any decisions, but insists it is not considering dropping the policy.
Modelling by the Climate Institute and other environmental groups found that if the agreement was terminated, coal-fired power generators would reap an extra $25 billion in profits between 2015 and 2030. Carbon emissions would also climb 15 million tonnes a year from the nine per cent increase in coal-fired power.
The RET, which was conceived under the Howard Government, mandated that 20 per cent of Australia’s electricity be generated by renewable energy sources by 2020.
The AFR reported that when the RET was first conceived, it aimed to reduce 20 per cent of total power production by 2020, which would equate to 41,000 gigawatt/hours of renewable energy produced each year.
The “real 20 per cent” option favoured by Environment Minister Greg Hunt advocates for the production of renewable energy be almost cut in half, to 27,000 gigawatt/hours, with a decline in manufacturing in Australia seeing the 20 per cent target still met by 2020.
The Warburton review in July favoured Mr Hunt’s model, and found that the RET would not add significantly to household bills, despite claims from the prime minister that the agreement is driving up power prices.
It is understood that the Abbott government is being lobbied heavily the business and electricity sectors to abolish the RET as renewable energy gained a larger than expected share of the electricity market.