Senator Allison asked the Minister for the Environment and Heritage, upon notice, on 26 July 2004:

(1) What is the basis of the former Minister's claim that lifting mandatory renewable energy targets to 5 per cent would cost $11.5 billion in lost economic growth.

(2) Can the data and assumptions supporting this claim be provided.

Senator Ian Campbell (Minister for the Environment and Heritage) —The answer to the honourable senator's question is as follows:

(1) The economic modelling undertaken to inform the Tambling Review of the operation of the Renewable Energy (Electricity) Act 2000, which enacts the Mandatory Renewable Energy Target (MRET), demonstrates the significant economic costs of the measure, particularly for higher targets. This modelling indicates that a target of 20,000 gigawatt hours by 2020, as recommended by the Tambling Review, would impose a cumulative net present value (NPV) cost of $5.1 billion in foregone economic growth over the period to 2020.

Compared to the Tambling recommendation, a target of 5 percent by 2010 would require liable parties to source 50 to 70 per cent more Renewable Energy Certificates (RECs) by 2020. In addition, the more rapid increase in the target in the period through to 2010 would require that more expensive renewable generators be installed, resulting in higher average REC prices.

Given the lack of precision in regard to the specifications of alternative targets, the extrapolation from available modelling to assess the economic impacts of imprecisely defined alternatives can only provide an estimate of the costs associated with such targets. A figure of $11.5 billion is a reasonable estimate of costs within this range of uncertainty.

(2) Data and assumptions supporting the claim are outlined above.