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I would like to acknowledge the traditional owners on whose land we meet today, and pay my respects to their elders, past and present.
Thank you for inviting me to give a keynote address at the 2013 Clean Energy Week.
In particular, thank you to David Green (CEO of the CEC) for making me so welcome here. I would like to start by passing on apologies from Mark Butler, the Minister for Climate Change, who is not able to be with us today.
I am pleased to have the opportunity to talk to you this morning about the Government’s strong policies to address carbon pollution which include an emissions trading scheme, the legislated Renewable Energy Target, Clean Energy Finance Corporation and Australian Renewable Energy Agency.
When discussing the Labor Government’s clean energy policies, it’s useful to start with the reasons why this government decided to act. There are two contexts for our decision – a scientific context, and an international context.
The scientific context for action on climate change
First, the science. Earlier this year, the atmospheric concentration of carbon dioxide breached 400 parts per million. The last time this concentration existed was sometime in the Pliocene – between 3.2 and 5 million years ago.
As each month goes by, science continues to paint a picture of a world unlike any that the human race has experienced in its history. If you can, I recommend tracking down the recent National Geographic documentary “Chasing Ice”, which shows time-lapse footage of retreating glaciers across the northern hemisphere – images captured by acclaimed photographer James Balog. Despite a scientific upbringing, before this project Balog had been a skeptic about climate change. In this documentary, some glaciers are shown to have retreated in the past ten years by the same distance that that they retreated in the previous 100. It is footage that will stop you in your tracks.
For decades scientists have been warning that rising concentrations of carbon pollution in the atmosphere are driving a changing climate. Worldwide the ten hottest years on record have all occurred since 1998. For the past 50 years, each decade has been hotter than the decade before. Sea ice extent in the Arctic Ocean reached a record low last year, and it’s possible that it will break that record this year.
Extreme weather – like the bushfires, rain and flooding that we experienced this past Australian summer – will become more common. The fact is that serious climate change impacts are already being felt today, and will be felt more and more sharply throughout the lives of our children and grandchildren.
Carbon pollution is more than just an ‘invisible substance’.
The international context for action on climate change
So that is the grim scientific context for why we need to act on climate change. But there is an international context too. The fact is that climate change is a global problem that requires a global solution, and a global solution is, indeed, emerging. Ratifying the Kyoto Protocol was one of the first acts of the Labor Government in 2007.
Last December Australia signed up to the second commitment period of the Kyoto Protocol. We will move to ratify the Protocol next year. Beyond that, action among the major emitters is continuing to deepen. Following the agreements reached at Cancun, Durban and Doha, global action is now focused on finalising a new treaty to be agreed at Paris in 2015, and to begin no later than 2020.
Australia’s environment is vulnerable to the impacts of climate change, but our economy is vulnerable to the shape of the emerging international agreement. It is in Australia’s interests that we are in the room while that agreement is negotiated. The fact is that Australia is the world’s twelfth biggest economy and fifteenth highest emitter. Moreover, we are the developed country with the highest per capita emissions.
We need to act to reduce our emissions to do our part in the global effort and to remain competitive in the emerging industries of tomorrow. But in addition to that, we need to be seen to be acting if we are to be taken seriously by our international peers, and to retain influence among them. To be taken seriously, we need robust targets for the near- and long-term, and we need credible domestic policies that show we can meet those targets.
That is why we have pledged to reduce our emissions by between 5 and 25 per cent of 2000 levels in the near term, and by 80 per cent in the long term. And it is why two years ago the Government announced our plan for a Clean Energy Future.
Our Plan for a Clean Energy Future
This plan comprises five important elements:
• First, an emissions trading scheme (ETS) – to put a price on the pollution of around 370 of our largest polluters and create the incentives for businesses to cut pollution and invest in cleaner energy sources;
• Second, ongoing support for renewable energy – including the legislated Renewable Energy Target, the $10 billion Clean Energy Finance Corporation and the Australian Renewable Energy Agency (ARENA). In concert with the emissions trading scheme, this support will drive $20 billion of investment in renewable energy over the next eight years and $100 billion to 2050;
• Third, measures to encourage energy efficiency in businesses and households. These measures include the Clean Technology Programs which are encouraging manufacturing businesses to invest in energy efficient equipment and modernise their facilities;
• Fourth, a range of land sector measures, including the Carbon Farming Initiative, to reduce emissions, protect biodiversity and promote the storage of carbon in the land; and
• Fifth, critical independent bodies to enforce and monitor the Plan, including the Clean Energy Regulator and the Climate Change Authority.
Living with a price on carbon pollution
At the centre of the plan is the obligation of Australia’s largest polluters to surrender a permit for every tonne of pollution they create. Australia’s carbon price has been in place now for more than one year. In that time, and in concert with the Government’s other policies, the carbon price has already begun to reduce Australia’s emissions.
Since 1 July last year:
• Emissions in the National Electricity Market (NEM) fell 7 per cent compared to the previous year, equating to over 12 million tonnes less pollution from the electricity sector;
• Generation from Australia's brown coal power stations fell by 13 per cent; and
• Generation from renewables was up by 25 per cent.
• Millions of households have been assisted with tax cuts, increases in Family Tax Benefits and higher pensions and allowances;
• The economy is growing – real GDP has grown at an annualised rate of 2.5 per cent;
• More than 160,000 new jobs have been created and unemployment remains at a low 5.7 per cent;
• And the impact on the cost of living has been lower than expected – which means our assistance has gone further in helping low and middle income earners make ends meet.
Businesses of all kinds are making changes in response to the lived experience of carbon pricing, and in the process discovering new ways to think about waste and energy.
• A.J. Bush and Sons has invested $12 million in renewable energy and energy efficiency to cut the energy costs of its Bromelton meat rendering plant by 46 per cent, and its emissions intensity by 64 per cent.
• Tweed Council has reduced its emissions below the carbon price liability threshold through methane-capture technology at its Stotts Creek Resource Recovery Centre. The Council is using captured methane to power around 400 homes in the region.
• Mackay Sugar has invested $120 million in a cogeneration plant at its Racecourse facility to also eliminate its carbon price liability.
The plant is generating clean energy to power its sugar mill and a third of the town’s energy needs. These are real-world examples of how businesses are responding to the carbon price and profiting from the move to a low carbon economy. The Government’s comprehensive package of clean energy policies is driving investment and innovation by businesses across Australia.
For instance, the Clean Technology Programs has supported around 500 projects – involving a total investment of almost $800 million – at manufacturing plants around the country. These CTIP grants are further complemented by the $100 million Energy Efficient Loans program announced by the Clean Energy Finance Corporation and Commonwealth Bank earlier this month.
These programs are helping to modernise our manufacturing sector, aiding businesses to remain competitive in a globalized economy, and unlocking innovation in the technologies of tomorrow.
Early move to emissions trading
The fixed price period was implemented in order to assist businesses and the community to transition smoothly into emissions trading. After one year, the implementation has been smooth and the overwhelming response from business is that they are ready to move to emissions trading as soon as possible. It is for this reason that the Prime Minister announced last week that the Government will bring forward the start of emissions trading by one year to 1 July 2014. This change will see the fixed price period end early, and will bring the Australian price in-line with the international carbon price in 31 other countries and covering a population of more than 500 million people.
The move to emissions trading means that like other commodities, the price of carbon will now be set by the market. Moving to emissions trading earlier will ensure that we meet our national emissions reduction target at lower costs to Australian businesses and consumers. It means that Australian businesses will have broader access to abatement options through earlier access to international abatement and unlimited use of offset credits generated under the Carbon Farming Initiative. The CCA’s ‘Caps and Targets’ review The Government remains committed to the emission reduction targets it has pledged to the Australian public and the international community. Bringing forward emissions trading does not change this commitment.
Furthermore, the Government remains committed to making a final decision on Australia's emissions reduction target only after having received the recommendations of the independent Climate Change Authority. The CCA is presently undertaking its 'Caps and Targets' review and will make final recommendations to the Government in February 2014. I encourage all of you to make submissions to that review. A range of factors will feed into the CCA’s deliberations.
At the forefront will be their assessment of action by other countries and the policies being adopted to reduce emissions. In that context, it is useful to note some of the recent developments on this front: Countries such as Brazil, China, Chile, Mexico, Turkey and Kazakhstan are all exploring or implementing market mechanisms to support low carbon growth through the World Bank’s Partnership for Market Readiness (PMR).
The broad-based emissions trading scheme in California – the world’s 9th largest economy in its own right – started in January this year. The Californian scheme joins other North American schemes in Quebec and the Regional Greenhouse Gas Initiative that operates in nine North-Eastern US states.
In our region, South Korea – our 4th largest trading partner – will start an emissions trading scheme on 1 January 2015 covering approximately 60 per cent of Korea’s emissions. And from this year, China, Australia’s largest trading partner, is implementing pilot emissions trading schemes in seven major cities and provinces, and plans to introduce a national scheme after 2015. Taken together, the pilot regions contribute one-third of China’s GDP and comprise around one fifth of its population and energy use. Including the EU-ETS and Australia’s emissions trading scheme, around 2 billion people will live in regions where polluters pay for their pollution by 2015.
The Renewable Energy Target and CCA RET Review
The CCA’s ‘Caps and Targets’ review follows on from it’s review of the Renewable Energy Target, which was provided to the Government earlier this year. The Government believes that the RET has been critical in driving investment in both large and small-scale renewable energy in Australia.
Since Labor came to power in 2007, more than 2,400 megawatts of large-scale renewable energy projects have been completed, representing around $6 billion of investment. Wind capacity has trebled. Over 370 renewable generators are now accredited under the large-scale target. Meanwhile, more than one million small-scale solar PV systems have now been installed under the RET’s small-scale component.
This investment is not only creating cleaner energy, it is also creating new jobs. For instance, development and construction of AGL’s 420 MW Macarthur wind farm – the largest wind farm in the southern hemisphere – supported more than 2,700 jobs.
Australian manufacturers, concrete producers, and local quarries all won work on this $1 billion investment – all 140 wind towers were manufactured in Australia. As many of you are aware, the Government accepted almost all of the CCA’s recommendations. We are presently finalising legislative changes and intend to introduce these to parliament later this year.
Among those changes will be a shift from two-yearly to four-yearly statutory reviews. We’re making this change because we agree with the comments that Michael Fraser [CEO of AGL] made earlier, namely that biennial reviews create needless uncertainty for businesses operating under the RET. I wish to dwell for a few moments on another of the CCA’s recommendations, namely that the overall target should remain set at a fixed 41,000 GWh. In accepting this recommendation, the Government rejected calls from some corners that the RET be reduced or abolished altogether.
The Government accepted the CCA’s recommendation for three reasons: First, we accepted the findings of the CCA’s economic modelling. The modelling found that the RET will take pressure off energy costs by reducing wholesale prices. Lowering the target would not provide any material reduction in energy costs, but would increase emissions by 119 million tonnes over the period to 2030. Second, changing the target would create uncertainty and discourage investment. This would significantly undermine existing and future large-scale renewable energy investments. Third, reducing the ambition of the RET to reflect lower energy demand would send a contradictory message to the community. It would signal to households and businesses that any action on their part to become more energy efficient would simply result in a weaker Renewable Energy Target. This Government understands that, if Australia’s energy sector is to be transformed, this is the wrong signal to be sending.
I’ve dwelled on this issue because I see that Simon Birmingham is the next speaker. In recent months, the Coalition has been deliberately vague when asked about their support for the Renewable Energy Target. Their standard response has been “the Coalition supports the 20% renewable energy target”, without confirming whether it specifically supports the fixed 41,000 GWh target. So I challenge Simon to clear this issue up once and for all this morning. Confirm your party’s support for the fixed 41,000 GWh target, or be honest that you intend to reduce it. The Labor Government’s response to the CCA’s review makes clear that we are committed to the existing large-scale target.
The Labor Government sees a 20 per cent share for renewables in 2020 as the minimum that we should be aiming for.
Like the floating of the dollar and the opening up of Australia’s economy by the Hawke and Keating Governments, the Clean Energy Future plan is in the great tradition of Labor reforms. A year after the carbon price started, the evidence shows these policies are helping reduce carbon pollution, driving investment in clean and renewable energy, and transforming Australia’s economy to be more globally competitive. In less than twelve months the fixed carbon price will end and a market-price emissions trading scheme will commence. The incentives created by the emissions trading scheme will flow through the economy. The Government’s climate policies are already making clean technologies more competitive, and motivating lower carbon actions and decisions at all levels across the nation.
Over time, this will bring about profound shifts in business and consumer behaviour and to the way energy is sourced and used in Australia. Thank you once again for inviting me to speak here today and I trust that Clean Energy Week will be a major success for the Clean Energy Council.
Media contact: Minister's office (02) 6277 4501