A good analysis at the link of whether carbon pricing, and not just a drop in demand, is behind reduced carbon emissions in making Australian electricity. Here is one crucial part:
Although it’s difficult to point to concrete short term changes in the electricity market, the carbon price is having an impact on long term investment decisions, which is where the real benefits will start to play out. The economics of power systems mean that it’s much easier to materially affect the investment decisions for a new plant than to affect the short-term dispatch decisions of an existing plant. It has been argued that this already means wind is now cheaper than coal if you’re building a new plant, due to the very large impact of the carbon price on financing costs for emissions-intensive generation options.
The market is clearly responding to long term investment signals towards lower emissions generation. The vast majority of new plants in the planning stages are either renewable or gas-fired. Here again we must acknowledge complexity and the contribution of many factors – much of the investment in renewables is driven by the Renewable Energy Target scheme, and could not be supported by the carbon price alone at this stage.
But the lack of proposals for significant new coal-fired plant is a good indication that the carbon price is having an influence over investor decisions. This is where the real pay-off lies – by avoiding the installation of more coal-fired generators we avoid the very significant greenhouse emissions that would result from those power stations over their 30-year-plus lifetime.
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