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Finkel Review Hedges Its Bets


Australia’s Chief Scientist, Dr Alan Finkel, has unveiled a blueprint for the national electricity market that “risks falling short of Australia’s task and opportunities in reducing carbon emissions”.

“Finkel offers a chance to start breaking down the political deadlock over energy and climate policy. The report rightly points out the need for policy and markets to be adapted to the realities of new technologies, and the need to integrate emissions reductions policy with energy policy. Importantly, Finkel emphasises the cost that continued policy uncertainty would have, and shows scenarios where electricity prices are lower under a stable low-emissions policy framework than under continued uncertainty. Policy-makers should take heart to embrace reform to markets and policy, and to do so with a long-term trajectory in mind.

The clean energy target recommendation seems calibrated to political realities, as an emissions trading scheme is politically out of the question for the current government and an emissions intensity scheme was also rejected by government. How effective a clean energy target would be depends on the ambition that government fills it with, its design and implementation, and on whether industry will have confidence to invest on the basis of it. That, in turn, requires political stability around energy policy.

However, the low-carbon ambition that Finkel suggests risks falling short of Australia’s task and opportunities in reducing carbon emissions. Finkel calls for a minimum 28% reduction in carbon emissions from electricity by 2030, proportional to the national Paris target. Twenty eight per cent would not be enough because the electricity sector can and needs to deliver much greater percentage reductions than the economy overall.

There are large opportunities to cut carbon before 2030 by replacing ageing, inefficient coal plants with renewables. The opportunities for renewables are plentiful in Australia and costs are coming down rapidly, including for storage to manage intermittency.

The worry is that governments will take Finkel’s 28% reduction for the electricity sector as its target and thereby fail to achieve the economy-wide reduction by 2030, because less will be done in other parts of the economy. This would set Australia on a long-term emissions trajectory that is higher than it needs to be and out of line with the larger objectives.”

A/Prof Frank Jotzo is Director of the Centre for Climate Economics and Policy at the Australian National University’s Crawford School of Public Policy.

“The Finkel Review into securing the future of our electricity system has chosen to hedge its bets on the design and implementation of a transition strategy to a low carbon economy. A clean energy target is a simplified approach to an emissions intensity scheme, and reiterates why removing a price on carbon has failed to increase the security of our electricity grid.

While it seems that all technology options have re-emerged from previous white papers, the Finkel review has raised the white flag to gas, nuclear and carbon capture and storage options.

Since the commencement of LNG exports on the east coast, gas prices domestically have had an enormous effect on electricity affordability. While the pursuit of unconventional gas resources may improve supply concerns, the continuation of high gas prices will be unabated. The reliance on gas as a transition technology towards a low carbon economy should only be a short-term option (

The inclusion of nuclear as a viable option for Australia has been discussed at length and rejected by energy economics experts continually. The use of nuclear power generation in Australia, while unpopular, is seen by many energy economics experts as the panic button option. Its cost of deployment, operation and overall life-cycle have yet to present a viable option for Australia. Furthermore, the lack of human capital in Australia capable of operating utility-scale nuclear power generation would require more than 10 years to establish.

Australia needs a range of technologies and policy options to address energy security coupled with the challenges of climate change. The timeline for improving supply certainty must be dealt with now to avoid grid-wide blackouts. Additionally, in order for Australia to transform to a lower carbon-intensive economy, renewable energy needs to be front-and-centre of any plan to design the future electricity grid.

The Finkel Review has failed to excise itself from the previously identified pitfalls of non-renewable energy technology highlighted over the past 10 years. While Australia tolerates another pseudo-white paper on energy, what in effect will change? The answer is, most likely, nothing.”

Dr Liam Wagner is a Lecturer in Economics specialising in energy economics and policy at Griffith University.