Mr CRAIG THOMSON (3:02 PM) —My question is to the Minister for Resources, Energy and Tourism. Why is a price on carbon needed to provide investment in the energy sector?

Mr MARTIN FERGUSON (Minister for Resources and Energy and Minister for Tourism) —The debate about a price on carbon is a complex and difficult economic debate. As minister for energy, I know that better than most in the House. When you look at the fundamentals of the Australian economy, a highly efficient market energy driven system has been the key to the Australian economy. The Australian energy market is actually held up as the most efficient in the OECD world. That goes to a key issue which has to be resolved: our responsibility as a community to debate and finalise the debate about how we put in place once and for all a price on carbon. That goes to the question of certainty. At the moment, the Commonwealth parliament is not responsible for the substantial increases in the price of electricity. There are quite substantial price increases going through the system, because of the need to invest in distribution and transmission. But our problem is that the CEOs in the energy sector have outstanding investments of many billions of dollars going to the question of additional capacity from the point of view of electricity generation.

When we talk about this additional capacity, let us deal with a few facts, because these are the problems that confront us as a community from an economic point of view at the moment, because of our lack of certainty with respect to where we go on a price on carbon. Firstly, it is estimated that over $17 billion of capital is required for power generation assets—that is, refinancing, capital expenditure and new build over the next five years. Secondly, and importantly, it is estimated that $6.4 billion of that $17 billion has to be refinanced for existing generation prior to the end of 2012. That is why Brad Page, CEO of the Energy Supply Association of Australia recently said on ABC. He said, ‘We are not talking about short-term investments. We are talking about investments made by the sector that really last for 40 or 50 years and we need stable policy.’

With respect to some of these investments, these decisions have to be made in the next two or three years. That is complex at the best of times, because it goes to difficult issues going to environment or regulatory approvals. But, before we can even get to that point, to be able to bank these investments we have to know what the investment horizons are from the point of view of what is a price on carbon. If we do not get this right, then for the first time ever the Australian community will turn its sights on the Commonwealth parliament, because we will be the ones correctly held responsible for failing to guarantee the reliability of the Australian electricity sector. Historically, it has been a state and territory responsibility. If you have any doubts about that from a political point of view of potency, have a look historically at what happens to state and territory governments of all political persuasions when the lights go out. They are held responsible and they soon disappear from office. So I simply say, in conclusion, that the time has come for us to finalise this debate so as to maintain Australia’s energy security and reliability and to ensure that the economic vandalism—which the other side of the House will be responsible for, for not allowing us to finalise this once and for all—is overcome.