NEG will fail to lift investor confidence: analysts
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NEG will fail to lift investor confidence: analysts

The Turnbull government's much-debated National Energy Guarantee will fail to lift energy investors' confidence even if gets approval and goes ahead, leading industrial analyst IBISWorld says.

The global analysis firm said the final NEG decision, due Tuesday and Wednesday this week, will lock in energy and climate policy mechanisms that will ultimately dissuade investment.

The Coalition claims the NEG will remove uncertainty, but IBISWorld said ongoing debates in the energy industry and action by activists will stop it achieving these aims.

IBISWorld believes that the NEG will fail to provide investor certainty.

IBISWorld believes that the NEG will fail to provide investor certainty.Credit:Andrew Taylor

Its ratification by parliament would do little to improve investor confidence because it failed to deal with years of conflict around climate policy.

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Australia's long-running fight over coal, renewables and climate policy “reflects deep-seated disagreement on the aim of emissions reduction, rather than the methods by which it is achieved,” IBISWorld senior industry analyst Jason Aravanis said.

“The universal panning of the NEG by both coal supporters and environmental activists shows that the NEG does nothing to resolve this conflict.”

However, if private sector confidence was restored, "private investment in energy infrastructure may increase and the associated risk premiums associated with these projects may fall. This could support the wind and other electricity generation, hydro-electricity generation, and electricity transmission industries,” he said.

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On Friday, the Coalition of Australian Governments Energy Council refused to support the NEG due to its weak emissions targets.

Mr Aravanis said federal Labor would likely continue to oppose the legislation of weak emissions targets.

“Attempts to make the NEG immune to future amendments by a Labour federal government are likely to smother any chance of the NEG passing through the federal senate later this year.”

The Australian National University also found that under the proposed federal emissions reduction targets of 26 per cent on 2005 levels for the energy sector, Australia would likely fall to the bottom of the 35 Organisation for Economic Co-operation and Development (OECD) countries, weakening Australia’s investment potential.

ANU College of Law researcher Dr James Prest said Australia may be at risk of failing its international obligations.

“By international comparison, Australia’s aim for renewable energy is clearly quite unambitious,” Dr Prest said.

“Our review of Renewable Energy Targets in all OECD countries shows only five of the 34 OECD countries have a lower target than Australia, and some of these have already high levels of renewable electricity production.”

The only countries below Australia are the Czech Republic, Hungary, Israel, Canada, and the United States.

Other Australian industries will contue to bear the burden of lower emissions, raising their operational costs.

“The Turnbull government’s policies implicitly assume that other sectors will cut emissions at a far greater rate than previously required,” Mr Aravanis said.

“Cutting emissions from other sectors, such as agriculture, mining, or manufacturing is far more expensive and is likely to be both politically and practically difficult. Should this obligation be foisted upon operators in these sectors, it could significantly increase costs in industries such as beef cattle farming, iron ore mining, and iron and steel forging among many others.

“Ongoing failure to address the imminent and critical changes to the energy landscape in Australia will result in greater pain for the entire economy.”