Overview

The AEMC guide How the national energy objectives shape our decisions includes updated guidance on applying the emissions component of the national energy objectives. This is Appendix A in the guide. We use this guidance when considering emissions in our rule-making and review projects.

The AEMC guidance incorporates guidance from energy ministers on the interim value of greenhouse gas emissions reduction (VER). When we are quantifying the estimated costs and benefits of a proposed reform that affects emissions, we will use the interim VER to help us decide whether the reform is in the long-term interests of consumers. The interim VER will apply until mid-2026 (unless replaced earlier).

The guidance also includes additional information on how we will estimate how many tonnes of emissions would be reduced (or increased) by proposed rule changes. We will consider impacts on emissions across Australia, in the energy sector and related sectors where relevant. For example, our rules may affect transport, household and industrial emissions. 

When estimating the impact of our rules on emissions, we will take into account binding government policies that also reduce emissions. While AEMC rules may be complementary to these policies, case-by-case consideration will be needed. These positions are consistent with the guidance from energy ministers.

In preparing the guidance, we also took into account advice provided by the Brattle Group on quantifying emissions impacts under the national energy objectives.

The AEMC guidance, guidance from the energy ministers on the VER, Brattle report and related documents are available below.

Consultation

We sought stakeholder feedback when developing the initial version of the emissions guidance. We asked stakeholders to comment on the approach we will take in applying the emissions reduction component of the updated objectives, whether the guide clearly explains how the Commission will consider the emissions reduction component in its work, and whether further guidance would be helpful. 

We called for written submissions by 18 August 2023 and held a public forum on 7 August 2023. The consultation paper, forum slides, stakeholder submissions and our response to the submissions are available in the Initiation tab below.

Background

The national energy objectives were amended to include emissions in September 2023, by the Statutes Amendment (National Energy Laws) (Emissions Reduction Objectives) Act 2023 of South Australia. This change requires the AEMC to consider the impacts of its rules and recommendations on the achievement of Commonwealth, state and territory targets for reducing Australia’s emissions, as well as targets 

that are likely to contribute to reducing emissions (such as renewable energy and electric vehicle targets). 

The AEMC publishes a list of the relevant targets, and updates it as required. 

The AEMC published the initial version of its guidance to stakeholders on applying the emissions component of the national energy objectives in September 2023, and updated it in March 2024 when government guidance on the VER was made available. 

On 19 July 2024, Energy Ministers agreed to extend the interim VER until 30 June 2026, and on 23 July 2024 they sent the AEMC a new version of the MCE statement containing this new expiry date.  

These documents are available below.