The carbon pricing mechanism: a power industry focus

Introduction

The carbon pricing mechanism (the Mechanism) will have particular implications for the power industry. This paper focuses on the implications for power, including in particular:

• The impact of the Mechanism on electricity prices.
• How the Mechanism will assist the power industry transition to a carbon price.
• Implications for how electricity will be generated following the introduction of the Mechanism.
• Implications for the renewable energy industry.

Moving away from coal

The key driver of the Mechanism's impact on the electricity sector in Australia is the encouragement, through a market-based scheme, of the movement over time to lower carbon emitting power generation and the increase in the efficiency of the use of electricity. That will comprise a range of measures, including: the closure of the highest carbon emitting generators (brown coal power stations); the encouragement of carbon capture and storage (through existing measures);