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Wednesday, 11 December 2002
Page: 10235

Ms LIVERMORE (12:32 PM) —I rise to support the Renewable Energy (Electricity) Amendment Bill 2002. However, I cannot say that I support the government's overall approach to the renewable energy sector or, indeed, its environmental credentials. This bill amends the Renewable Energy (Electricity) Act 2000 by clarifying certain definitions within the act to improve its effectiveness and efficiency. The original act passed in 2000 established the mandatory renewable energy target—the MRET. The MRET requires electricity retailers and other large buyers of electricity to increase the amount of electricity purchased from defined renewable energy sources and to demonstrate this each year to the Office of the Renewable Energy Regulator. Renewable energy can be defined as any source of energy that can be used without depleting its reserves. These sources include solar, wind, wave, biomass, hydro and tidal energy.

In the electricity sector, current use of renewable energy contributes approximately 10.7 per cent to our total energy consumption, most of which is generated from large-scale hydroelectricity schemes. The MRET scheme was designed to increase this by two per cent to 12.7 per cent by the year 2010. The specific target under the act is for the industry to generate an extra 9,500 gigawatt hours per annum of electricity from renewable sources by the year 2010. In his recent evidence to the House of Representatives environment committee, Mr David Rossiter from the Office of the Renewable Energy Regulator put that figure into perspective. He described the target as the equivalent of constructing two Snowy Mountains schemes in 10 years. So there is a big job ahead for the electricity industry and that will bring with it challenges and opportunities.

In the original act, the MRET is coupled with a scheme of renewable energy certificates. Each megawatt hour of qualifying electricity is eligible to create one renewable energy certificate. These RECs can then be sold or traded between the generators and wholesale purchasers to meet individual liabilities. Accredited power stations generating power from renewable sources can supply RECs to other generators to cover their liability under the MRET scheme. The aim of the scheme is to accelerate the uptake of renewable energy in grid based applications so as to reduce greenhouse gas emissions. By stimulating the demand for renewable energy, it also creates a base for the development of commercially competitive renewable energy and potentially gives rise to new export industries meeting the energy demands of growing economies within Asia.

It is not yet clear whether any of these aims will be achieved through the legislation as it is currently framed. The amendments before the House are administrative in nature and do not address these important issues. In fact, the evidence so far suggests that the government's MRET will not even deliver an additional two per cent market share for renewable energy. For example, a study undertaken by the Business Council for Sustainable Energy found that, contrary to the goal of a two per cent increase in the market share of renewable based energy by 2010, renewables will struggle to maintain their present market share of total electricity generation.

Another report commissioned by Greenpeace analysed the impact of the current MRET of 9,500 gigawatt hours. That target was based on an assumed 2.1 per cent annual growth in the rate of demand for electricity between 1996 and 2010. However, actual growth in electricity demand per year between 1996 and 2000 was much higher, averaging 3.8 per cent, and projections estimate that it may stay at that level throughout the rest of this decade. In those circumstances, the effect of the current MRET will be greatly diluted. This is important to keep in mind because the scheme in the Renewable Energy (Electricity) Act represents the only mandatory measure that the Howard government has introduced to address the problem of ever-increasing greenhouse gas emissions contributing to worldwide climate change. As far as the government is concerned, this is its flagship program when it comes to reducing Australia's greenhouse gas emissions so it has to at least be fair dinkum about it. It cannot run around pretending that this is the answer to Australia's greenhouse gas emissions when in reality it is doing no more than maintaining the status quo.

I notice that the Minister for the Environment and Heritage in his second reading speech foreshadows an independent and thorough review of the act under section 162 of the current act to commence in January 2003. In that review, the government needs to look objectively at whether the scheme is achieving the results it heralded in the year 2000 in terms of greenhouse gas reduction and the establishment of a robust and competitive renewable energy industry.

There are very good reasons for getting this right. The renewable energy industry has the potential to offer Australia very significant benefits. Not only is it capable of providing significant opportunities in terms of economic and employment growth, particularly in regional areas; it also has the potential to assist Australia to move closer towards meeting international expectations on reducing greenhouse gas emissions and to achieve other environmental outcomes.

The Labor Party have already committed themselves to increasing the mandatory renewable energy target to five per cent by 2010. We have come to that position because it has been shown in research, such as that produced by Origin Energy, that moving to generate five per cent of electricity needs from renewable sources would cut greenhouse gas emissions by one per cent, boost the local renewables industry and have a negligible effect on the cost of electricity. It is good policy and has widespread support from important organisations such as Environment Business Australia and individual players within the renewables sector. The Labor Party have also promised to ratify the Kyoto protocol and continue to urge the government to stop simply pandering to the United States and instead to make sure that Australia is part of this important international agenda which will affect our economy and the competitiveness of our industries whether we like it or not. Once again, the ALP have stood up to be counted on this issue while the government has failed to show any leadership at all. The government has missed an important opportunity to show leadership on climate change and a genuine commitment to growing the local renewable energy industry. The government is all over the place on this issue.

The minister's second reading speech talks about the importance of `clarifying definitions from the standpoint of investors in renewable energy'. But the government continues to send mixed or weak signals to the energy industry and investors. For example, on the one hand the government says, `We won't ratify Kyoto,' but, on the other hand, it says, `We will meet our Kyoto targets.' What is that telling business in Australia?

Australian industry has to meet the targets set under the Kyoto protocol with none of the market mechanisms available to companies in ratifying nations that introduce flexibility and make those targets easier to meet—things like emissions trading, the clean development mechanism and the joint initiative scheme. These measures not only help companies to meet their carbon reduction targets but also offer commercial opportunities to Australian companies, especially those in a position to export to the expanding Asian energy markets. The government is being incredibly short-sighted and the Australian business community is paying the price.

Another mixed signal is that, on the one hand, the minister said in his speech that the Renewable Energy (Electricity) Act 2000 and the MRET are a critical plank in the government's greenhouse response, but the COAG energy market review panel, chaired by former Liberal minister Warwick Parer, has recommended that the MRET be abolished altogether. This is at a time when we need to be encouraging massive new investment in innovative energy technologies.

Added to all of this confusion within the government is the status of the Australian Greenhouse Office. Not so long ago the government was boasting about establishing the world's first and only government agency dedicated to the reduction of greenhouse gas emissions. Since then the government has slashed funding to the AGO—a fall of $30 million or 45 per cent from 2001-03. It has allowed six months to go by without even advertising for a new chief executive officer to replace the CEO and her deputy, who both resigned earlier this year. This is yet another example of the government failing to show leadership in an area which the Prime Minister himself identified as a priority in the Governor-General's speech to open this term of parliament. The speech states:

The government's ongoing funding package of $1 billion over five years for greenhouse gas abatement is among the largest by any government in the world. These funds are assisting to develop strong government industry and government-community partnerships that are beginning to reduce the rate of greenhouse gas emissions.

Except none of that is happening. The money is not being spent, emissions keep on rising and businesses are missing out on access to the funding and assistance that the AGO was supposed to administer. The corporate sector and investment in new technology are the keys to finding low cost solutions to rising greenhouse gas emissions. But how can you garner business support and get them to spend money in the areas that are needed unless they are getting strong signals from the government about where we are heading on these issues? The government has been spooked by the Americans on Kyoto and as a result has failed to see the opportunities that exist in this area for industry development and job creation.

According to the studies that have been done, the renewable energy sector has great potential for job growth in Australia, particularly in rural and regional Australia. This was reinforced by the submission prepared by the Office of the Renewable Energy Regulator for the inquiry of the House of Representatives Standing Committee on the Environment and Heritage into jobs in the environment sector. The opening statement of that submission confirms that `electricity from renewable sources constitutes a growing area of employment in the environment sector'.

David Rossiter from the Office of the Renewable Energy Regulator explained in his evidence before the committee that to meet the current MRET a capital investment of around $6 billion would be needed before 2010. This would be split between existing generators improving their efficiency, new projects based on biomass wastes and emerging industries in the areas of wind, solar, photovoltaics et cetera. His estimate of the jobs to be created in the period up to 2010 is 45,000 construction jobs of variable duration and 3,000 permanent jobs.

Apart from employment, there are other potential benefits that could flow from renewable energy projects. Biomass has already been identified as an important source of renewable energy and it is one of the cheapest sources. It is possible that revegetation projects to mitigate dryland salinity in areas such as the Murray-Darling Basin and the wheat belt of Western Australia could produce large amounts of biomass suitable for bioenergy. Figures from the US National Renewable Energy Laboratory suggest that, for every megawatt of wood waste biomass electricity generation capacity installed, 4.9 jobs are created. Australian figures put that figure slightly lower but it is still clearly an area worth encouraging.

It keeps coming back to the signals that the government is sending to investors and the business community. When they are making large long-term investment decisions, they need to know what direction this country is heading. If the government says it is serious about addressing climate change through reducing greenhouse gas emissions and backs that up with action, such as signing the Kyoto protocol and supporting the Australian Greenhouse Office, then we will see more businesses switching their focus to pick up on the new opportunities in this sector. It is not just new industries that are struggling as a result of the government's failure to lead. Existing companies are seeing opportunities to export their products and services overseas under threat as the government continues its stubborn and blindly pro US stance on the Kyoto protocol.

A recent paper prepared by Environment Business Australia—The business case for ratification of the Kyoto protocol—stated that the organisation `is concerned at the extent of its membership contemplating expatriation of their operations offshore in order to exploit carbon credit revenue denied them if they remain domiciled in Australia'. Is this a great new industry development policy from the Howard government—chase your best and brightest overseas so that they can take their technological innovations with them?

John White of the company Global Renewables spelled out the threat not just to companies like his own trying to compete in the renewables sector but also to our traditional export industries, such as coalmining, at the recent Environment Business Australia conference in Sydney. He raised the very real prospect of Japan imposing a carbon tax, which would apply to Australia's coal exports to that country. In those circumstances, Japanese companies would be looking for carbon credits to bundle with their coal purchases to offset the carbon tax. Where are those carbon credits going to come from if we do not ratify Kyoto? This is expanded upon in the Environment Business Australia paper, The business case for ratification of the Kyoto Protocol:

... there have been signals from a number of Japanese and European investors that they will not invest in renewable energy, carbon sink, or land remediation projects in Australia if they cannot expatriate Kyoto compliant credits to retire against their forthcoming Kyoto Protocol obligations. Trading entities are also seeking to purchase Australian products with bundled Kyoto compliant emissions reductions. Failure to ratify removes our ability to provide such bundled products impacting trading relationships. It is ironic that Australia is poised to lose market share for our exports that contain a high level of embedded energy through our inability to bundle home grown carbon credits to the sale of these products.

Australia should be encouraging the industries of the future and protecting our traditional export industries by developing and marketing the technology that will give both the edge internationally.

For example, the CSIRO and other researchers from both the public and private sectors are developing clean coal technology that will allow Australia to maintain its competitive advantage in terms of low-cost electricity while at the same time meeting its obligations to reduce greenhouse gas emissions. Initiatives such as coal gasification and supercritical conventional coal plants, such as the Callide power station just south of my electorate, need to be supported to reduce our domestic carbon levels and also to enable us to protect our carbon intensive exports. Trading partners will be looking for carbon credits to bundle with our high carbon exports, and leading technology in the clean use of coal is something that Australian exporters can include in those important negotiations to offset carbon penalties attached to our coal.

The Howard government is doing the Australian business community and their employees a grave disservice by failing to understand the international pressures that we are now dealing with. Speaker after speaker at the EBA conference emphasised that, like it or not, ratify or not, the impacts of the Kyoto protocol are unavoidable, so Australia needs to be in there playing the game, not standing on the sidelines.

The scheme that we are debating today is a crucial element in this country's challenge of facing up to, and benefiting from, the post-Kyoto environment. It does not go far enough, because it is not part of a broader, strategic understanding of the opportunities that exist for industry development and employment growth in this area. We are supporting the government on this bill but call on the government to make the necessary changes to the scheme that the 2003 review identifies so that this country keeps moving forward on the use of renewable energy and the development of clean, green technology.