Federal, state, and territory energy ministers have agreed to include emissions reduction goals in the National Electricity Objective (NEO). This decision represents a significant step forward for Australia’s clean energy transition.

WHAT IS THE NEO?

The NEO is the primary policy mechanism through which the National Electricity Market (NEM) is governed. It sets out the objectives for the operation of the NEM, including reliability, security, and electricity affordability.

Including emissions reduction goals in the NEO will signal investors that Australia is committed to decarbonising its economy. It will also provide much-needed certainty for businesses and households transitioning to clean energy.

WHY DOES THE NEO MATTER?

According to the Clean Energy Council, ‘The inclusion of guidance around achieving emissions reduction goals through the NEO would make it easier to create policies that accelerate effective NEM decarbonisation at the lowest cost. It would also help deliver an orderly transition to clean, low-cost electricity and increase investment certainty. Combined with a legislated emission reduction target, requiring consideration of environmental impacts through the NEO would increase clarity around the treatment of carbon and flow through into better decision-making across the board.’

WHAT COMES NEXT?

Education must be delivered to Australia’s energy regulators to make a change. These regulators are the Australian Energy Market Operator, Australian Energy Regulator, Australian Energy Market Commission, and Energy Security Board. Education is essential to give them the information they need to move forward with decarbonising our electricity. The CEC explains, ‘The best way of doing this is a statement of policy intent that sits above the NEO as a bridge between the 43 percent emissions reduction target and delivering the decarbonisation of Australia’s electricity system at the lowest cost.’

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