Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Reality versus rhetoric: Australia embracing clean energy innovation: speech to the Carbon Expo Australasia 2012, Melbourne



Download PDFDownload PDF

THE HON MARK DREYFUS QC MP CABINET SECRETARY

PARLIAMENTARY SECRETARY FOR CLIMATE CHANGE AND ENERGY EFFICIENCY PARLIAMENTARY SECRETARY FOR INDUSTRY AND INNOVATION

REALITY VERSUS RHETORIC: AUSTRALIA EMBRACING CLEAN ENERGY INNOVATION CARBON EXPO AUSTRALASIA 2012

MELBOURNE CONVENTION CENTRE, 8 NOVEMBER 2012

Introduction

I am very pleased to be here this morning to welcome you all to the Australasian Carbon Expo.

I would like to pay my respects to the traditional owners of the land on which we meet.

When I spoke here last year, the Australian Parliament was just hours away from its historic vote to introduce a price on carbon.

Since then we have endured wild rhetoric and daily doomsday predictions that the start of the Clean Energy Future package on July 1 this year would tear down entire industries and bring the Australian economy to a standstill.

The reality has been very different.

Today let's take a look at the real picture.

Clean energy projects are now starting up in communities and industries right across our country - driven by the carbon price and in many cases funded by the carbon price.

Last month, I visited a piggery at Young in NSW which is creating enough electricity to power its entire operations by capturing and converting methane from pig manure. It's Australia's first carbon farming piggery and is projected to earn $175,000 in carbon credits a year.

Qenos, Australia’s largest producer of plastics and petrochemicals based in Altona not far from here, has installed a co-generation plant that is meeting all of its electricity requirements and cutting carbon pollution by 100,000 tonnes a year. At the heart of the co-gen unit is a "state of the art" gas turbine, the first of its kind in Australia.

In Melbourne's northern suburbs, the Reservoir Leisure Centre is also installing co-generation, making clean energy on site from waste heat to power the pool and gym facilities. The annual energy efficiency savings will be used to add services and keep entry fees as low as possible for the half a million people who use this community facility every year.

These last two projects are using grants funded by the carbon price. Without it, innovations like these would be far less likely to go ahead.

Energy efficiency is driving innovation, and savings, for households too.

Manufacturing companies are now competing to produce increasingly energy smart appliances with 10 star fridges and 8 star TVs becoming mainstream in the market. An 8 star TV costs $24 a year to run compared with a 1 star TV at $380 a year.

These are the types of innovation - big and small, metropolitan and rural - already underway, creating a variety of benefits, and we have barely begun.

Four months since the start of the carbon price Australia’s economy remains in robust health.

Amid that data, there is evidence the Clean Energy Future package is already contributing to a cleaner economy.

Before we turn to look at the reality of the carbon price and its implementation over the last four months, let's reflect very briefly on why we are making these historic reforms.

Why Price Carbon?

We know climate change is happening. The consensus among the scientific community is clear and the science compels us to respond as part of a global effort to cut carbon pollution.

Leading economists agree that market-based mechanisms, particularly emissions trading schemes, are the most effective way to reduce pollution at the least possible cost to the economy.

The reason is simple. A broad-based carbon price sends a clear signal across the economy directly creating incentives for businesses to find the cheapest way to reduce pollution and to use energy more carefully.

As a result of the carbon price, capital is allocated to improve efficiency and reduce emissions intensity. Over time, the most efficient, least polluting businesses have an advantage over less efficient, higher polluting competitors. Where extra help is needed to make the transition, carbon price revenue can be used to fund that support.

To sit tight and do nothing would be grossly irresponsible. Apart from prolonging environmental damage, delaying real action would cost our economy dearly.

The Clean Energy Future Package

The Clean Energy Future package of policies has been designed very carefully as a long term plan providing stability and certainty for the decades ahead.

It has been designed with the whole community in mind. While we cut pollution, the economy will grow, jobs will be created and living standards maintained.

Our Labor Government is ensuring this is a fair economic transition. We have taken particular care to help a majority of Australian households with assistance through tax cuts, increased pensions and higher family payments funded by the carbon price, while heavy polluting businesses make the switch to cleaner, more efficient energy use.

Carbon price revenue is also making a significant contribution to investment in new technology, helping business to innovate.

This policy package will make our environment cleaner and our economy stronger as we modernise our industries, making them competitive with other countries already well down the road of taking action on climate change.

The Clean Energy Future plan achieves this with four key elements:

• a carbon pricing mechanism creating the incentive for businesses to cut pollution and invest in cleaner energy sources;

• strong support for renewable energy including the $10 billion Clean Energy Finance Corporation, which will invest in businesses seeking to get innovative clean energy proposals and technologies off the ground. This support, together with the carbon price and the Renewable Energy Target, will drive $20 billion of investment in renewable energy over the next eight years and $100 billion to 2050;

• support for energy efficiency in businesses, households and communities including the Low Carbon Communities program and the $1 billion Clean Technology Investment Program which is driving investment in energy efficient and low pollution equipment in manufacturing businesses; and

• the Carbon Farming Initiative to promote the storage of carbon on the land through improved agricultural and land management practices, and the capture of carbon pollution from landfill.

The carbon pricing mechanism is at the heart of the plan.

For the first three years, the carbon price will be fixed, starting at $23 a tonne in 2012-13.

The three year fixed price period is transitional. It gets Australia on the road to an emissions trading scheme, where the carbon price is set by the market.

International Action

The carbon pricing mechanism enables Australia to link our efforts to cut pollution with other nations. Creating a deeper market allows us to cut pollution at the lowest possible cost.

On 28 August this year - well in advance of expectations - the Government secured an agreement to link Australia's carbon price with the European Union Emissions Trading Scheme.

It is a strong international endorsement of the design and integrity of our scheme by the largest and most mature emissions trading scheme in operation.

This means that from July 2015 Australia's carbon price will reflect the carbon price in Europe, the largest carbon market in the world.

Linking our carbon price with Europe is a historically significant outcome. It is a major step in countries joining together in their efforts to tackle climate change.

The Government is also working with counterparts in US, NZ and throughout the Asia-Pacific region to share experiences in carbon pricing and build an integrated and robust global carbon market.

We are now seeing plans for more and more countries in our region to implement emissions trading schemes.

By next year, 850 million people will be living in a country, state or city with an emissions trading scheme.

Countries like the United Kingdom, Germany, France, Sweden, Norway, New Zealand and Switzerland have already acted.

Carbon trading is also operating at the sub-national level in the United States, Canada and Brazil.

And there's more:

• Japan introduced a carbon tax this month;

• California and Quebec will commence emissions trading next year;

• China is developing pilot emissions trading schemes in seven cities and provinces, also from next year; and

• Korea’s emissions trading scheme will commence in 2015.

Countries like Thailand and Chile are considering market based approaches and carbon prices to reduce pollution.

In fact, 94 per cent of OECD members have or are implementing emissions trading at the national or sub-national level.

This is because the governments of these rapidly growing, dynamic economies recognise the obvious: that pricing carbon is the most economically efficient way to reduce pollution.

The proposition that Australia is acting alone or leading the pack can only be dismissed as an absurd and dangerous lie by anyone who takes just a minute to examine the facts.

This kind of deliberate misinformation does a great disservice to the public, and I believe all of us have a responsibility to challenge it.

A Carbon Price And A Strong Economy

As Prime Minister Gillard said back in July “…our carbon price will not only cut carbon pollution - it will strengthen our economy”.

The facts speak for themselves.

Since the details of the carbon price were announced in 2011, Australia’s economy has grown three per cent, household consumption is up three per cent and new business investment is up twenty per cent - the biggest comparable lift in investment in 17 years.

The IMF's October 2012 World Economic Outlook shows that Australia is now the world's 12th largest economy and has leapfrogged three places ahead under this government after slipping back three places under the previous government.

S&P has reaffirmed Australia's gold-plated AAA credit rating. This is an endorsement that's increasingly rare. In fact, we are now one of only seven nations rated AAA with a stable outlook by all three major international agencies - something never achieved under any previous Australian government.

The impact of the carbon price on prices in the economy and the electricity market are in line with Government predictions.

The Treasury estimated the impact on the Consumer Price Index (CPI) of introducing emissions trading under a $23 fixed price to be around 0.7 per cent.

Some claimed that massive price increases would be instant and sustained. We heard the cost of a car would go up $400, a leg of lamb up $100, electricity up 30%, Weetbix so expensive they’d be off the menu, not even Mars Bars would be safe according to the

Herald Sun. Over a six month period, one study calculated 89 per cent negative news coverage on the issue in Australia’s tabloid media.

The list of wild nonsense has been endless.

The data released for the September 2012 quarter tells a different story, proving these fact-free assertions to be completely wrong.

The price of breakfast cereals declined by 0.9 per cent in the quarter, down 1.3 per cent over the year.

Prices of motor vehicles came down 1 per cent in September quarter and down 1.5 per cent over the year.

And lamb prices are down 2.3 per cent in the three months to September, and down 4.3 per cent on a year ago. In fact, the price of a 1.3 kg lamb leg roast is $18 today.

Much is still being made about the impact of the carbon price on electricity prices. Yet again, the reality and rhetoric are worlds apart.

The impact of the carbon price on electricity prices has been consistent with the Treasury’s estimate of an average price increase of 10 per cent. The average price impact for households was 9 per cent in New South Wales and around 5 to 7 per cent in South Australia, Tasmania and the Northern Territory.

As I said earlier, the carbon price funds assistance for the vast majority of households to cover or help cover these increases. The Labor scheme has been carefully designed to ensure households are taken into account.

The main driver of electricity price rises over the last 4 years has been over-investment in poles and wires by power companies, largely under the jurisdiction of state governments.

Before the carbon price had started, New South Wales’ residents saw a rise of nearly 70 per cent in the four years to July 1, Western Australia and South Australia saw a rise of 62% in the same period, and Queensland more than 42 per cent.

Environmental Effectiveness

The early signs are that the carbon price is proving itself environmentally effective.

We are already seeing electricity generation becoming less pollution-intensive.

Data from the Australian Energy Market Operator (AEMO) show the emissions intensity of electricity generated for the National Electricity Market has fallen since June this year.

The AEMO figures show that in the first three months of the carbon price, electricity generated for the National Electricity Market emitted 0.85 tonnes of carbon pollution for each megawatt hour - a 7.6 per cent decline in emissions intensity compared to 2011-12.

While flooding in June at the Yallourn brown-coal-fired power station contributed to this, the recent decision of that power station to scale down production at one of its four units will mean the emissions of the electricity sector are likely to continue at a lower level.

This follows similar steps taken by other emissions-intensive generators to reduce electricity generation.

Of course, the carbon price is not the sole reason for these changes. The Government’s Renewable Energy Target and energy efficiency policies have also been important.

Opportunities In The Land Sector

The Clean Energy Future package presents opportunities across the board.

Importantly, under the Carbon Farming Initiative, it creates opportunities for Australia’s farmers, Indigenous landholders and local government.

There are two points to emphasise at the outset.

First, the Carbon Farming Initiative is a voluntary scheme. The Government is not making anyone undertake carbon abatement measures on their land.

What we are offering under the Carbon Farming Initiative are opportunities for farmers who want to improve the productivity of their land while creating extra income.

Secondly, the Government is not asking farmers to capture carbon as a favour. This Government believes in market mechanisms.

That’s why the Carbon Farming Initiative is based on providing the right economic incentives for farmers to get involved in reducing our nation’s dangerous carbon pollution while making Australia’s farming industries and communities even more productive.

Opportunities Under The Carbon Farming Initiative

Under the Carbon Farming Initiative, farmers can earn carbon credits from activities that cut or avoid carbon pollution.

Just last week, a savanna burning project by the Indigenous Land Corporation was approved to earn carbon credits for managing savanna fires on Fish River Station, a property 200km south of Darwin.

Under this Carbon Farming Initiative methodology, Indigenous farmers shift the timing of savanna fires to earlier in the dry season. This reduces the fuel load and a smaller area is burnt. The result is a reduction in emissions of carbon pollution.

These rules have been developed in collaboration with Indigenous stakeholders. They follow traditional knowledge of fire management practices and are combined with the latest satellite mapping technology.

The income from this project will be invested in protecting the biodiversity of the property, exploring other commercial opportunities and training local Indigenous workers.

As I mentioned earlier, I also visited a farm near Young last month to launch the first approved Carbon Farming Initiative project for methane capture from piggery manure.

Farm owners Edwina and Michael Beveridge have 22,000 pigs on their farm.

The Beveridges covered their effluent ponds and are capturing methane gas. The methane is turned into renewable electricity using a biogas generator. The technology and equipment was built by a Brisbane company Quantum Power. Industry body Australian Pork expects the same processes to be applied at several hundred piggeries across Australia.

Many other new Carbon Farming Initiative projects are in train, and as we expand the number of methodologies available, carbon farming will increasingly become an integral part of our agricultural economy.

Methodologies In Development

Under the Carbon Farming Initiative, the rules, which we call methodologies, explain how to carry out an abatement project and how to measure the resulting reductions in carbon pollution.

Four are up and running and there are a large number from both the public and private sectors in various stages of assessment.

Since April, the expert Domestic Offsets Integrity Committee has released more than a dozen methodologies for public comment. These include proposals for using covered ponds to destroy methane from dairy manure, and assisting the regeneration of native forests.

We are putting in place a system for projects that will last for many decades so it is vitally important that we get the methodologies right - we cannot afford to cut corners.

It takes time, but scientific integrity is essential because companies buying Australian Carbon Farming Initiative credits want to know that those credits represent a real reduction in carbon pollution. This is critical to developing and maintaining confidence in Australia’s carbon market. There will be no demand for credits that lack credibility.

This rigour in methodology development lies at the heart of a successful Carbon Farming Initiative.

We must get the science right on each and every one. We need real, not fictional, carbon abatement to deal with the threat of climate change.

Soil Carbon

Soil carbon - a methodology under development - is a case in point.

This is not a magic fix for climate change. Our most respected research body, the CSIRO, is working on the science of soil carbon and despite some promising early results, the scientific jury is still out on how this abatement can be measured reliably and cost-effectively.

The Government is using carbon price revenue to make a significant investment in this research and we are developing guidelines for measuring changes that will be available next year.

It’s easy to be carried away on the Opposition’s rhetoric on soil carbon as an instant miracle cure but the fact is the hard, scientific evidence does not support their claims.

Reaching Australia’s unconditional (and bipartisan) emissions reduction target of 5 per cent below 2000 levels involves permanently taking over 700 million tonnes of carbon pollution out of the atmosphere between now and 2020.

To reach our 2050 objective of 80 per cent below 2000 levels requires reductions of over 17 billion tonnes.

It defies both logic and the known science to suggest that Australia could retain one of the highest polluting energy sectors on the planet, be the highest per capita emitter in the developed world and sequester all of these emissions in our soils.

I firmly believe soil carbon will play a part once the methodology is established, but the reality is that it's likely to contribute less than one per cent of Australia's carbon reduction task.

Markets For Carbon Credits

Carbon generated from Carbon Farming Initiative projects can be sold in carbon markets to businesses that have to pay the carbon price or to organisations that are making voluntary reductions.

When you fly on major airlines in Australia, you can choose to pay a small amount to offset the carbon pollution from your flight. The airlines then pay the money collected from passengers to an abatement provider in exchange for carbon credits.

As I mentioned at the outset from 1 July 2015, the Australian carbon pricing mechanism will be linked to the European Union’s Emissions Trading Scheme.

This link will produce the world's largest carbon market and be a major driver of the global transition to a low carbon economy.

Linking means the value of Carbon Farming Initiative units will reflect the shared European-Australian carbon price when the flexible price period commences in 2015-16.

I can reassure you that all projections show that demand for credits generated under the scheme will remain very strong.

The Carbon Farming Initiative is projected to provide around 60 million tonnes of abatement between now and 2020. Expected demand for emissions units in Australia between 2015 and 2020 is more than 30 times that.

Conclusion

Tomorrow you will hear from two speakers with remarkably different approaches - Greg Combet, Minister for Climate Change and Energy Efficiency, and Greg Hunt, Shadow Minister for Climate Action, Environment and Heritage.

Mr Hunt will speak about a short-lived “direct action” plan that seems to last just 4 years.

It pays a handful of big polluting companies to voluntarily cut their pollution, funded by the taxpayer. It offers no household assistance. It takes away tax cuts, increased pensions and family payments to pay the big polluters.

Mr Hunt will also talk up the unproved prospects of soil carbon and sequestration of carbon by planting 20 million trees.

No credible economist or scientist has yet worked out how this could achieve a five per cent reduction in carbon pollution by 2020.

The tree planting alone would have to cover an area the size of Victoria and Tasmania combined and would effectively swallow up all of Australia's prime agricultural land.

The Opposition’s so-called “direct action” plan barely rates as a fig leaf to disguise the complete lack of anything resembling a policy to credibly, effectively and seriously protect Australia from the environmental and economic impacts of climate change.

Mr Hunt’s leader, Tony Abbott, continues to insist the world is not acting, the carbon price is a wrecking ball and, when it suits his audience, that climate change is “absolute crap”. Their ally Alan Jones tells people it is “witchcraft”.

By contrast Greg Combet will speak of the Gillard Labor Government’s serious long term plan to cut carbon pollution and grow our economy. He will also talk of fairness and innovation.

He will talk of global action to cut carbon pollution and the markets that make this a reality and which are pivotal in creating a cleaner, safer global future.

The Government’s Clean Energy Future plan is a carefully and fairly crafted scheme. And it is the only real plan for Australia’s future.

Thank you.