Goal: Provide leadership to reduce the greenhouse gas intensity of energy across the supply chain throughout the economy.

AGL’s goal is to provide leadership to reduce the greenhouse gas intensity of energy across the supply chain throughout the economy. We have advocated policies that deliver increased clean energy production and lower greenhouse gas emissions. We are also working with customers to reduce the greenhouse gas intensity of their business operations. Significant emission reductions can be achieved through our investment decisions, improving our own operations and by supporting customer choice. AGL has positioned itself to maximise shareholder value in an emissions trading environment.

“AGL will not invest in new coal fired power stations unless they are fitted with carbon capture and storage technology” Michael Fraser CEO

Throughout 2008/09, a number of important policy initiatives have been announced by the Commonwealth and State Governments. These policy initiatives are broadly consistent with the positions that AGL has advocated for many years. By providing leadership and preparing early for a carbon constrained future, AGL has assisted with the development of these policies and is positioned well to deliver value for our stakeholders with their implementation:

Emissions Trading - The Commonwealth Government has committed to the introduction of an emissions trading scheme known as the Carbon Pollution Reduction Scheme (CPRS). The CPRS is proposed to commence in 2011 and will cover most sectors of the economy. The scheme supports the Commonwealth Government’s long-term target of reducing greenhouse gas emissions by 60% compared to 2000 levels by 2050.
Expanded Mandatory Renewable Energy Target - The Commonwealth Government is transitioning the Mandatory Renewable Energy Target into a new Renewable Energy Target with an ultimate goal of delivering 45,000 GWh per annum of new renewable energy by 2020.
Energy Efficiency Policies - The New South Wales, South Australian and Victorian State Governments have all implemented energy efficiency targets which require energy retailers to purchase energy savings from customers. AGL supports the development of a national energy efficiency obligation which would amalgamate these State-based schemes.

AGL has published a comprehensive greenhouse gas policy which outlines our commitments in this area.

AGL Greenhouse Gas Policy

Greenhouse gas pollution is one of the most important issues facing the world today. AGL recognises that deteriorating air quality and climate change are critical issues facing the global community and accepts the scientific consensus that greenhouse gases in our atmosphere need to be stabilised so as to avoid adverse health impacts and assist in reducing dangerous climate change.

Climate Change Science

The Intergovernmental Panel on Climate Change (IPCC) believes that significant global anthropogenic greenhouse gas (GHG) emission reductions are required by the middle of this century to stabilise the concentration of carbon dioxide equivalent CO₂e in our atmosphere. AGL notes that the IPCC estimates that to ensure that temperatures do not increase by beyond 20C above pre industrial revolution levels, the concentration of CO₂e should not exceed around 450 parts per million (ppm). This effectively requires global emissions to peak in 2015 and be reduced by up to 85% relative to 2000 levels by mid-century. The current concentration of CO₂e in the atmosphere (including cooling gases such as aerosols) is around 380 ppm.¹

Emission Reduction Targets

AGL supports the leadership position adopted by the Commonwealth Government in committing to support a global agreement to stabilise levels of greenhouse gases in the atmosphere at 450 parts per million CO₂e or lower by mid century. AGL notes that this translates into an emission reduction target of up to 25% below 2000 levels by 2020.²

Longer-term, AGL believes that achievement of a 450 parts per million goal requires substantial decarbonisation of the electricity sector by mid-century. In this context, AGL will not underwrite or construct any new conventional coal fired power station as the emissions profile is inconsistent with the achievement of these targets.

Policies Required

AGL supports four key policies to achieve the proposed emission reduction targets and mitigate the costs associated with climate change and related health impacts:

Expedited development and implementation of a national emissions trading scheme which uses a broader long-term greenhouse gas emissions reduction target as its goal.
The deployment of renewable technologies through a single national clean energy obligation.
All existing State-based energy efficiency obligations must be amalgamated into a single national energy efficiency obligation.
Appropriate adaptation measures to ensure that Australia is not adversely impacted by existing greenhouse gas concentrations in the atmosphere.

Policy Principles

These policies should be developed using the following principles:

National Character - Policy and measures should be developed so that they operate nationally and not on a State or regional basis.
Economy wide approach - Greenhouse gas abatement should be tackled across all sectors of the economy.
Least cost abatement - Greenhouse gas abatement should be pursued on a least cost basis.
Management of price impact - Price shocks to energy end users and export industries should be minimised through appropriate grandfathering.
Coverage - Greenhouse gas abatement policy should cover carbon dioxide equivalent and therefore all of the six main greenhouse gases.
Equitable allocation of emissions rights - Investments made in the context of current regulatory settings should be recognised and appropriately treated.

AGL Commitments

As part of AGL’s sustainable business strategy, AGL is committed to:

Incorporating a forecast of future carbon pricing into all major business decisions.
Continuing to publish information about the greenhouse gas impacts of our investments, operations and supply chain.
Benchmarking our own performance (both using our supply chain intensity and our own generation intensity) against the overall industry.
Working with all our stakeholders to progress policy options and initiatives to reduce greenhouse gas emissions.
Expanding our investments in low emission and renewable generation, as well as commercialising new technological options for reducing emissions such as electric vehicles and geothermal energy.
Continuing to assess adaptation risks to AGL and in particular the impacts of higher temperatures on electricity and gas demand profiles.
Improve the greenhouse gas efficiency of our operations, and those in which we have an influence

¹ Climate Change 2007, Synthesis Report, Intergovernmental Panel on Climate Change, p.67
² http://www.climatechange.gov.au/emissionstrading/pubs/carbon_pollution_target.doc