The Howard Government has declined to increase the targets in existing Mandatory Renewable Energy Target (MRET). The federal MRET scheme sets the level of renewable energy output eligible to receive the subsidy at 9500 gigawatt hours by 2010 - just 2% more than renewable generation levels in 1990.

The renewable energy industry says the cap means it will not be able to expand beyond 2007 and may threaten the development of a wind manufacturing industry. The target means only about 1000 megawatts of extra renewable energy generation can receive the subsidies that allow it to operate, when there is up to 5000 megawatts in renewable infrastructure planned.

As a result of the cap, Theophanous said the states "have decided to investigate a state-based MRET scheme”, according to a report in The Age.

The state-based MRET scheme would set levels between a doubling of the 9500 gigawatt hours target by 2020 and adopting the Victorian Government's stated position of 19,000 GW/h by 2010.

A state-based MRET scheme would run parallel with a plan to develop a carbon-trading scheme that penalises big emitters of carbon dioxide and drives investment in greenhouse solutions. Environment minister John Thwaites is expected to make an announcement on carbon trading tomorrow.

NSW already has a carbon trading scheme. The Victorian Government wants other states to develop an in-principle agreement to introduce a national emissions trading scheme that bypassed the Howard Government’s hostility to higher renewable energy targets and carbon trading.

Victoria would implement its plan only when other states had agreed to sign up. But according to a report in The Australian, the resource-rich states of Western Australia and Queensland were unwilling to commit to such a scheme at this stage