Dan Cass writes: Another excellent report has been released by the Grattan Institute. Although its focus is on pollution markets, it indirectly provides us with a clear economic justification to be bullish about the prospects of renewable electricity baseload, on the back of higher than predicted energy efficiency gains.

The report, Markets to Reduce Pollution: Cheaper than Expected finds that trading schemes generally deliver far more pollution cuts than predicted, which results in the price of pollution crashing.

Authors John Daley and Tristan Edis analyse the experience of 6 pollution pricing schemes in the USA, Europe and Australia. Those of us intimidated by economics can quickly understand the evidence, because it is presented in clear and compelling graphs.

The report uses this historical evidence to provide some valuable advice on how to design a good emissions trading scheme for Australia.

I would like to focus on the central finding, which is that clean technology always outperforms market and government expectations in an emissions trading scheme. This is not just good news, it is decisive for the most important question of all – can renewable energy deliver baseload power?

Every plausible scheme for decarbonising the economy is based on saving about the same quantum of energy as renewable energy can provide (at a reasonable cost). The evidence in this report is that even modest prices on pollution drive firms to outperform the stated policy objective, dramatically, in 5 out of 5 cases (excluding the Queensland Gas scheme).

This must be taken into account by Australia’s Multi-Party Climate Change Committee. Our ‘carbon captured’ Federal Energy Minister Martin Ferguson has a sour view of energy efficiency technologies and should be chained to his desk until he digests the evidence.

Think tanks, researchers and climate groups around the world, such as Beyond Zero Emissions are designing road-maps for radically decarbonising the economy, which all rely on ‘better-than-predicted’ energy efficiency gains. These justifiably optimistic plans all deserve a new hearing from governments and markets, in the wake of today’s report from the Grattan Insititute.