There is a suite of current and pending policy measures at the federal, state and territory levels aimed at improving energy efficiency which, in turn, will help to reduce Australia's greenhouse gas emissions.

The question arises as to the extent to which these schemes overlap and, consequently, whether the schemes themselves – taken in totality – are efficient. This article summarises the relevant elements under the Emissions Reductions Fund (ERF) and compares it with state-based energy efficiency schemes operating in Victoria and New South Wales to determine whether these schemes are likely to operate cohesively. 

Comparison between the ERF and state-based energy efficiency schemes operating in Victoria and New South Wales

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Differences between the ERF and the State-based energy efficiency schemes

There are three notable differences between these schemes.

Scope of schemes: The first difference is the scope of the schemes. The VEET scheme covers activities in the gas and electricity sector whilst the ESS only focuses on the latter, although there have been recent proposals to extend the scheme to the gas sector. In comparison, the ERF will expand the scope of activities that will be covered by an energy efficiency scheme beyond these sectors and will have nation-wide coverage.

Responsibility for emissions reductions: The second difference relates to responsibility for emissions reductions. Relevant entities under the VEET scheme and liable entities under the ESS are required to acquire and surrender energy savings certificates to meet energy saving targets. In comparison, under the ERF, proponents can voluntarily opt to undertake projects to reduce emissions. The Australian Government has stated that it remains committed to providing incentives for businesses, rather than punish them.27   

Penalties: The third difference is the operation of a penalty scheme. Under the VEET scheme and ESS, penalties may be imposed in the event there is a shortfall of certificates surrendered by relevant entities and liable entities. The safeguard mechanism for the ERF has not yet been finalised. However, the White Paper suggests that revenue will not be sought nor will any revenue be budgeted in relation to the safeguard mechanism.

The Future of state-based Energy Efficiency Schemes

On 21 May 2014, the Victorian Government announced that the VEET scheme will cease at the end of 2015.  A similar announcement is yet to be announced for the ESS. However, the Electricity Supply Act 1995 (NSW) provides for the scheme to end if there is a national energy efficiency scheme.

A move to a national scheme such as the ERF will broaden the scope of energy efficiency methods across Australia. However, it is important that the ERF builds upon the successes of the existing state-based energy efficiency schemes as well as addressing any differences, particularly if these schemes cease.