Ensuring a cost-effective transition

This paper examines the current state of the transition in NSW and sets out the course corrections we need to progressively decarbonise our economy.

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Net Zero Paper 1 - NSW Productivity and Equality Commission

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Net Zero Paper 1 - NSW Productivity and Equality Commission

We are not on track, unless we make changes. That’s the focus of our paper on NSW net zero emissions targets. 

NSW has ambitious climate targets, but we face major challenges in meeting them. The state is projected to miss our legislated  targets - not only for 2050  but also for 2030 and 2035. 

Our series will outline potential policies and  solutions that can drive this change to ensure we can reach our targets while keeping  productivity and living standards high. 

To achieve our targets in an efficient,  fair, and timely way, we found that:

  1. Rapidly decarbonising electricity generation  is crucial for enabling other sectors to electrify and reduce their own emissions.
  2. All four remaining NSW coal generators are scheduled to close by 2040, requiring  careful coordination of: renewables, firming capacity, and transmission infrastructure.
  3. Smart technology and pricing reforms will be essential for helping to contain system costs during the transition.

Our research highlights the importance of: cost-reflective  pricing, accelerated smart meter rollout, and virtual power plants to help  manage peak demand and grid stability. This will also mean bill savings  for households and businesses.

We know we face challenges in this transition. We will need significant capital investment and skilled workers to deliver these targets.  But the construction sector is already experiencing severe labour shortages from record  infrastructure investment and housing development. 

Meeting these targets while maintaining living  standards requires careful coordination of policy, investment, and technology deployment.

Achieving net zero is not only a climate goal but also a fundamental part of ensuring NSW’s long-term productivity. And it’s not a can we can afford to kick down the road. If we get this right, we can unlock new opportunities for: innovation, investment, and high-quality jobs, resulting in a stronger economy and better quality of life for everyone. Visit our website to find out more.

Key findings

The first paper in our Achieving net zero research series explores the essential policy directions to help NSW reach its targets while protecting productivity and living standards:

  • Decarbonising electricity as a foundation for all sectors: Rapidly decarbonising electricity is essential to meet emissions targets for the electricity sector itself and to reduce emissions in transport, manufacturing, and buildings. This transition must happen alongside actions in other sectors, with coordinated investments in renewables, firming capacity, and grid infrastructure as all four remaining NSW coal generators close by 2040.
  • Smart technology to manage costs: Reforms like cost-reflective pricing and accelerated smart meter rollouts can reduce peak demand and contain system costs, delivering direct bill savings to households and businesses.
  • Clear policy principles for a cost-effective path to net zero: With no economy-wide carbon price in place, the transition will require policies that maximise cost-effectiveness, create certainty for investors, remain technology-neutral, and ensure coordination across jurisdictions to avoid overlap and inefficiency.

We know we face challenges in this transition. Achieving net zero will require a skilled workforce and capital investment, but NSW construction sector is already stretched by demands from infrastructure and housing. Addressing these constraints is vital to meeting emissions targets in the most efficient way possible.

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Type: Research paper
Author: NSW Productivity and Equality Commission
Publication Date: 01 November 2024

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