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MPhil in Engineering for Sustainable Development

global challenges, engineering solutions

Studying at Cambridge

Michael Li

Economic impacts of policies to decarbonise the Australian electricity grid

In December 2015, the international community committed to global action on climate
change through the signing of the Paris Agreement. Australia, like all countries, has an
obligation to contribute to international climate change mitigation goals by reducing
greenhouse gas emissions. The electricity sector contributes approximately 35% of
Australia's emissions, so decarbonising the electricity grid is an important area of focus for
climate change mitigation.

The focus of this research is on the National Electricity Market (NEM), which connects
electricity suppliers with consumers across the majority of eastern and southern Australia.
Under the right policy framework, the NEM has the potential to harness economic
motivations of both suppliers and consumers to drive decarbonisation of the electricity grid.
The overall goal of the research is to identify ' leverage points' in the NEM, where small
changes in one part of the electricity system can induce significant reductions in emissions.

Systems thinking is utilised to provide insights into the causal relationshi ps, feedbacks and
behaviours within the complex NEM system. Leverage points in the NEM are identified
and their effectiveness ranked according to the hierarchy proposed by Meadows (1999) in
Leverage Points: Places to Intervene in a System. The leverage point framework is used to
assess the effectiveness of economic policy case studies m Australia and internationally.

This research makes a novel contribution to the literature as no other systems thinking
studies of the electricity sector methodically identify policy leverage points based on a
fundamental understanding of system behaviour. An understanding of leverage points and
their effects, through the application of systems thinking to climate change policy, can be a
powe1ful capacity builder for decision makers aiming to decarbonise Australia's electricity