Emission intensities in the Australian National Electricity Market – An econometric analysis

Abstract

This study examines the evolution of CO2 emission intensities in the wholesale electricity sector for the National Electricity Market (NEM) in Australia. Using daily data, we examine the impact of demand, changes in the generation mix, as well as the closure of major coal-fired power plants on emission intensities in the four largest regional markets of the NEM. Particular emphasis is also placed on the assessment of any potential association between the examined driving factors and major Australian climate and energy policies such as the 2012–2014 Carbon Pricing Mechanism (CPM) or the Renewable Energy Target (RET) scheme. Our results suggest that changes in renewable deployment can be considered as the principal factor affecting emission intensities of all regional markets. Moreover, the fossil fuel mixture effect, more precisely the reduction in coal-fired generation combined with the increase in generation from gas and renewables, also played a significant role in reducing emission intensities in the Australian power sector. Interestingly, our findings suggest that the influence of the implemented CPM was not too substantial and had only temporary effects on emission intensities.