Tony Abbott has been given cover to break an election promise not to touch Australia's renewable energy target after his hand-picked review panel recommended the scheme be dramatically cut back.
Clean energy industry leaders said the findings of the review, headed by businessman and climate sceptic Dick Warburton, represented the "worst case scenario" and would cost thousands of jobs and more than $10 billion in investment if the government adopted its recommendations.
Clean Energy Council acting chief executive Kane Thornton said the proposals would "shut down the future of the industry" in Australia.
Environment Minister Greg Hunt – who favours keeping the target, but faces opposition in cabinet – said the government was considering the report and that he was "very, very mindful" of its election commitment to maintain it.
But Labor environment spokesman Mark Butler said the review paved the way for Mr Abbott to break another election promise.
He said it was a political document written by "climate change deniers", not an independent review.
The panel recommended two options for Australia's renewable energy target, which is currently set at 41,000 gigawatt hours of electricity from large-scale renewable energy by 2020 - now equivalent to about 27 per cent of expected generation.
Under the first option, the scheme would be closed to new investment beyond those under construction or winning full financial commitment within a month of the change. This scenario would slash the target to about 15 per cent.
Under the second option, the target would be set at 20 per cent. The target would be reset each year and new renewable energy power stations be given approval only if electricity demand increased. The target was one of the few climate change-related measures to enjoy bipartisan support before last year's election.
After the election the government bypassed a review by the Climate Change Authority and commissioned a panel selected by the Prime Minister's office.
Mr Hunt favours the 20 per cent scenario, which he views as a compromise to avoid closing the scheme to new investors. But Mr Abbott is understood to favour the tougher option.
Any change proposed by the government will set the scene for another parliamentary fight, with Labor, the Greens and Palmer United Party all opposed.
Analysis conducted for the report found coal-fired power stations would be the biggest beneficiaries of a cut in the target. The review acknowledged that the scheme had lowered wholesale electricity prices and that its impact on household bills over time would be "relatively small". But the panel found the cost for emissions-intensive companies was not justifiable, and called on the government to find lower cost alternatives to cut carbon emissions.
The Greens said it was no surprise that a review led by a climate sceptic had "trashed" the target. Greens leader Christine Milne said both options put forward would destroy the renewable energy sector. "I'm glad this dangerous and ignorant report is finally public so everyone can see it for the climate denier drivel it is," she said.
It is expected to be at least a fortnight before the government responds.
