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200^ Frontier Economics, Options for the Design of Emissions Trading Schemes in Australia (April 2008) i.

201^ See Frank Jotzo, ‘Commentary: Australia’s Carbon Price’ (17 June 2012) Nature Climate Change 1.

202^ See David M Driesen, ‘The Limits of Pricing Carbon’ (2014) 4 Climate Law 107-118.

203^ Ibid 112, where it is rightly noted that the lack of stringency in setting the cap and the ‘over-allocation’ of allowances in the European ETS (as evidenced in the first and second phases) have been responsible for the limited emissions abatement; see also, David Driesen, ‘Capping Carbon’ (2010) 40 (1) Environmental Law 1-51, which considers different types of cap-settings and the benefits of auctions over permit allocations, and Leslie K McAllister, ‘The Over Allocation Problem in Cap-and-Trade: Moving Toward Stringency’ [2009] 34 Columbia Journal of Environmental Law 395-446.

204^ Interestingly, a comparison of levelised cost of electricity for on-shore wind and solar (as outlined in Energy Innovation, Comparing the Costs of Renewable and Conventional Energy Sources (7 February 2015) ) against the NEM wholesale prices (as reported by the Australian Energy Market Operator, National Electricity Market Data Dashboard (accessed 30 October 2017) during the CPM period highlights that, without the assistance of LRET, there would not have been any meaningful deployment of large-scale renewable generation even with the inclusion of a carbon price.

205^ See Jotzo, above n 201, 1 showing the discrepancy in prices between the CPM and the prevailing EU ETS and CDM prices.

206^ CCA Review 2016, above n 81, 61.

207^ See eg, Joshua Prentice, ‘2030 Vision: An Analysis of Proposed Structural Reforms of the European Union’s Emission Trading Scheme’ (2014) 21 Environmental and Planning Law Journal 236.

208^ Clean Energy Act 2011 (Cth) pts 7, 8.

209^ Peel, ‘Australian Carbon Pricing Mechanism’, above [173], [451]; see also Caripis et al, above n 189, 598.

210^ For details on the permit allocation under various ETS internationally, see Climate Change Authority, Special Review, Second Draft Report – Australia’s Climate Policy Options, above n 146, 18. As auctioning results in firms passing through such costs to consumers, the impact on low-income households and forms of compensation to households will need to be considered when determining how the auction revenue is to be used.

211^ CCA Review 2016, above n 81, 65.

212^ Hari M Osofsky and Jacqueline Peel, ‘Energy Partisanship’ [2016] (65) Emory Law Journal 695, 702.

213^ Ibid 701, which consider the use of such strategies to overcome partisan politics in the American context.

214^ Ibid 702.

215^ CCA Review 2016, above n 81, 66.

216^ The success of an ETS will depend on how stringent the cap is set – which will need to be set below ‘BAU’ emissions to create scarcity such that generators either pay the price or ultimately exit the sector; see also Kevin Kennedy, Michael Obeiter and Noah Kaufman ‘Putting a Price on Carbon: A Handbook for US Policymakers’, (World Resources Institute, Working Paper, April 2015), 21-22.

217^ See CCA Review 2016, above n 81, 60.

218^ The welfare effect of an ETS will depend on how the tax revenue is utilized; see generally CCA Review 2016, above n 81, 54-75 for a comparison of the different cap and trade ETS models.

219^ AEMC Review, above n 70, 10.

220^ See Alexandre Kossoy et al, State and Trends in Carbon Pricing (Report, World Bank and Ecofys, September 2015) 12, which outlines the regional, national and subnational carbon pricing mechanisms adopted across the world.

221^ Frontier Economics, Emissions Reduction Options – A Report Prepared for the Australian Energy Market Commission (November 2016) 5 (‘Frontier Economics Report 2016’); this diagram shows that for the same certificate price, there should be the same degree of fuel switching under an EIS when compared to an ETS but with lower wholesale prices.

222^ In theory, an EIS can be designed with varying emissions baseline based on facility and technology type. However, that will result in market distortions and less efficient abatement outcomes; see Ibid, 6-7.

223^ As a result, an EIS is considered ‘revenue neutral’ as there is no tax transfer to government.

224^ CCA Policy Options Paper, above n 82, 34. See also, Frontier Economics Report 2016, above n 221, 4.

225^ As noted above, Frontier Economics had modelled the price advantages as part of their submission to the 2008 Garnaut Review.

226^ CCA Review 2016, above n 81, 61.

227^ Ibid 54; see also Joint Report, above n 163, 7.

228^ Recourse cost is the cost associated with new capacity investment (such as capital, fuel and labour) and the increase in operating costs from dispatching new and existing generation in order to achieve the emissions reduction target; see Frontier Economics Report 2016, above n 221, 7-9 which underpins the findings of the AEMC in the AEMC Review, above n 70, viii-xi.

229^ CCA Review 2016, above n 81, 64; see also CCA Policy Options Paper, above n 82, 55.

230^ CCA Review 2016, above n 81, 66.

231^ AEMC Review, above n 70, vii-xv.

232^ Ibid viii.

233^ Ibid.

234^ Ibid xvii. Interestingly, based on AEMO’s 2015 demand forecast, the electricity sector emissions will need to fall from 0.81 tCO_2e/MWh in 2020 to 0.62 tCO_2e/MWh to the meet the 28 per cent emissions target in 2030. Without any additional policies, the business as usual scenario is likely to result in emissions intensity of 0.77 tCO_2e/MWh in 2030, see AEMC Review, above n 70, 51.

235^ Ibid 52.

236^ See Centre for International Economics, Review of Economic Modelling Exercises & Assessment of the Impact of Uncertainty (Report, 31 May 2017) 20-21.

237^ This may well change with technological advances in battery storage that can provide security and reliability support for intermittent generation.

238^ See especially, Finkel Review, above n 56, 105-120.

239^ Finkel Review, above n 56, 105.

240^ See generally, Stephen Letts, ‘Gas Prices: Deal Done but the Days of Cheap Gas are Long Gone’ ABC News (online), 29 September 2017