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Climate change policy and the role of energy efficiency: speech to the Energy Efficiency Council conference

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The Hon Mark Dreyfus QC MP Parliamentary Secretary for Climate Change and Energy Efficiency

Climate change policy and the role of energy efficiency

Speech Energy Efficiency Council Conference 02 December 2010

It is a pleasure to join you here today.

I acknowledge the indigenous owners of the land on which we met and pay my respect to their elders past and present.

I’d like to thank the organisers of the Energy Efficiency Council, its president Simon James and CEO Rob Murray-Leach, for inviting me to speak this morning. I met with Rob and industry leaders in Melbourne a couple of weeks ago and we discussed the challenges that Australia faces as we seek ways to use energy more efficiently. We also discussed the opportunities for those companies that are the first to act and are most innovative in their strategies.

This conference will be an opportunity to share ideas and discuss the importance of tackling the challenges of climate change, energy efficiency and our local environment.

I want to speak to you today about the Federal Government’s response to the challenges of climate change and the opportunities of energy efficiency. I want to focus on how the community - people, businesses and governments - can work together to reduce carbon pollution and save energy.

Climate change

Climate change is a defining challenge of our time. It is one of the most - if not the most - significant economic, environmental and strategic challenges confronting Australia.

It will remain so for the rest of our lifetimes.

Reducing the carbon pollution that is causing our climate to change will fundamentally reshape communities and economies around the world and across Australia.

The Federal Government accepts the science that warns us about the consequences of inaction on climate change.

We understand how important it is to reduce the risks of climate change by cutting carbon pollution.

This task requires a global effort and Australia is committed to playing our part in that effort.

This is why Australia must prepare for a multi-decade transformation towards a low carbon economy.

Putting a price on carbon will be critical to this transformation.

To transform our economy while maintaining the growth and prosperity that we currently enjoy, the Government has three elements to its domestic climate change mitigation policy:

1. Strong support for clean energy 2. Working for the introduction of a carbon price, and 3. Greater energy efficiency in industry and households.

On the third of these, I have particular responsibility.

The energy that drives our economy and underpins our wellbeing and everyday life is responsible for around 60% of Australia’s carbon emissions.

Energy generation is, by some margin, the biggest source of our emissions.

It is an obvious target for achieving emissions cuts.

The potential of energy efficiency

Saving energy and cutting energy waste are not objectives that seek to limit economic growth or reduce living standards.

Rather, energy efficiency is about smarter ways to produce, deliver and use energy.

In the past decade, many developed and developing countries have shown that large gains in energy performance can be achieved while at the same time improving quality of life and maintaining economic performance.

California is the classic example.

Energy efficiency policies first introduced in California in response to the oil shocks of the 1970s have seen per capita energy use remain effectively flat in that state. Now, the average Californian uses about a third less energy than the average American, and emits only about half as much carbon dioxide. Importantly, California’s per capita GDP has grown faster than the per capita GDP for the USA. In other words, California has, to an extent, decoupled energy use from economic growth.

Energy efficiency is one of the fastest and most cost-effective ways to reduce our carbon pollution. Current Australian Government energy efficiency measures are expected to deliver more than 38 million tonnes of abatement in 2020.

To give that 38 million figure some context, Australia is now faced with the challenge of reducing its emissions by a further 144 million tonnes (from a buisness-as-usual baseline) in order to meet the bipartisan -5% by 2020 target.

Of course, were it not for the energy efficiency and renewable energy actions we have already taken, that challenge would be far greater.

But even with these measures in place, there remains substantial potential to improve Australia’s energy efficiency and in so doing to cost effectively reduce our carbon pollution.

The International Energy Agency estimates that over half of the global energy-related emissions reductions required to stabilise atmospheric carbon pollution at 450 parts per million are expected to come from energy efficiency.

In Australia, research by the Bureau of Agricultural and Resource Economics (ABARE) estimates that energy efficiency could account for around 55 per cent of Australian emissions abatement to 2050.

Analysis by ClimateWorks Australia has also found that many of the most cost-effective forms of abatement are through improved energy efficiency.

The ABARE and ClimateWorks analyses are also clear that a carbon price is essential to delivering the full potential of energy efficiency.

Most Australians have cost-effective opportunities to improve their energy performance -- whether at home, in business and industry, or in the community sector.

The experience of water demand management in Queensland shows that Australians will do their bit to conserve natural resources if they can be effectively informed, empowered and motivated.

During the recent sustained drought, Brisbane water users demonstrated a shift in water use from 300 litres per person per day before the drought to below 140 litres, a drop of around 55 per cent. Even now that the drought has subsided in that state - and water restrictions have been relaxed - Queensland Water is forecasting long-term usage to remain at around 230 litres per person per day. NSW and Victoria have achieved similar outcomes.

We are having shorter showers, we are washing our cars with more buckets and fewer hoses, and we are installing dripper systems rather than sprinklers.

This shows that shifts in long established habits can be achieved.

The challenge for all of us here is to make it easy for the community to consider a similar shift in long-established habits for energy usage.

Energy efficiency has a role beyond climate change

Energy efficiency has benefits beyond responding to climate change.

Improving energy efficiency enhances the overall productivity of the economy.

Indeed, energy efficiency is sometimes defined as using less energy to achieve the same outcome.

Where such an improvement involves an upfront capital investment, the savings from lower energy bills can be used offset or ‘repay’ the upfront costs over time. Such energy efficiency improvements are sometimes referred to as “negative cost” opportunities.

In other words, by investing in energy efficiency improvements, we create a income stream of savings. These savings make us better off over the long time, environmentally and economically.

Most of the “negative cost” opportunities to reduce emissions identified in the recent ClimateWorks Australia report, Low Carbon Growth Plan for Australia, are energy efficiency improvements in buildings, industry and transport.

Put simply, if we can produce more with less energy, this frees up resources to be used elsewhere, which in turn helps drive sustainable economic growth.

Energy efficiency also plays a role in maintaining the security and reliability of our energy supply.

Improving the efficiency of our transport fleet reduces our reliance on imported fuels.

Improving the efficiency of energy delivery networks helps improve reliability and reduce supply interruptions. Keeping energy supplies secure and reliable will be important in maintaining productivity during our economic transformation.

Improving energy efficiency can also help improve quality of life, especially for those on lower incomes, by reducing energy and fuel bills.

Other social benefits include making homes more comfortable, better access to transport services, improved air quality, and healthier environments.

Saving energy is a long term project, but an urgent one

If Australia is to continue to grow its economy, improve its living standards and reduce carbon pollution, we need to think and act now to ensure that we do not ‘lock in’ decisions that will make reducing emissions more difficult - and more costly - in the longer term.

Many of the buildings, appliances, cars, and pieces of industrial equipment that are now being built, purchased and commissioned will still be consuming energy for many decades to come. The longest use period is for buildings, which typically last for between 30 and 80 years. Consequently, the substantial majority of the buildings which will be in use in 2020 are already built.

The consequence of that is that improving energy efficiency today will reduce carbon emissions far into the future.

Investing in energy efficiency is a bit like education - big investments are required, and some of those may take a while to pay off, but over the long term those investments are absolutely essential to our productivity, well being, and national interest.

More than a price signal

The Government has repeatedly stated that a broad-based carbon price is still the only way that Australia can cost effectively meet its 2020 emissions reduction target.

A price on carbon will help drive energy efficiency as people will respond to higher prices by changing the way that they use energy.

We’re not alone in thinking this. Experts such as Professor Paul Krugman, Professor Ross Garnaut, Dr Peter Shergold and Lord Nicholas Stern all advocate a price on carbon as the right mechanism for achieving substantial emissions reduction in a responsible and flexible manner at the lowest possible cost.

But equally we know that while a carbon price is foundational, it is not the whole of the story.

A broad based carbon price must be partnered with broad based energy efficiency policies.

To save energy, Australians need the right tools.

We need reliable and trustworthy information about the best ways to improve our energy efficiency.

We need the skills to evaluate and select the options that are best suited to our individual circumstances.

We need new products or services, and these must be reliable and high-quality.

And systems such as energy markets, the tax system, business supply chains, and government assistance, must allow and encourage us to respond effectively to changing energy prices.

Many of the known barriers to improving energy efficiency will remain even when a carbon price is present. These include:

• ingrained behaviours and habits; • perceived risks concerning the purchase of new technologies; • poor access to information; • time and capacity to interpret relevant information; • energy pricing structures that reduce incentives to improve energy efficiency; • regulations that hold back energy efficient behaviour; • restricted access to the funds needed to make changes; and • mismatches between those who bear the costs of implementing energy efficiency

improvements, and those who reap the benefits.

There is an ongoing role for the Australian Government to help reduce or remove these barriers, working with State and Territory governments, with business and industry, with the community and not-for-profit sector, with households, with local government, and in its own operations, so that we can all play our part in responding to a carbon price.

The Australian Government’s role in energy efficiency

The Australian Government will continue its work in three important areas:

Building a comprehensive and integrated approach to improving energy efficiency in every sector. The Government will continue to work co-operatively with state and territory governments through the National Strategy for Energy Efficiency and will build on the work of the Prime Minister’s Energy Efficiency Task Group to strengthen governance around the design of energy efficiency policy to ensure a consistent, coherent set of policies.

States and Territories play a major role in delivering energy efficiency measures and monitoring compliance - the Commonwealth’s role will be to work with them to help provide consistency across jurisdictions where applicable and reducing the burden of

compliance and complexity.

Striving for world’s best practice in energy efficiency performance standards. The Government will continue to work with business and industry to make Australia’s buildings, appliances, vehicles and energy supply systems reflect best practice. The Government will also keep engaging in international forums to build knowledge and expertise in Australian industry, and to help ensure that Australians have access to the best-performing vehicles, equipment and appliances.

Building community engagement and consensus on the need for action on climate change. The Government will work with business, industry, the community and not-for-profit sector, and households to help build understanding of the need for a carbon price, its expected impacts, and the tools and information needed to respond appropriately. For many Australians, the easiest and most effective response will be through using energy more efficiently.

The Prime Minister’s Energy Efficiency Task Group report

The Prime Minister’s Task Group on Energy Efficiency Report was released by Julia Gillard and Greg Combet on 8 October 2010.

The Report was commissioned by the Government to advise on policy that could strengthen Australia’s response to climate change and reduce pressure on the energy costs of all Australians.

We welcomed the report as a substantial contribution to the climate change debate in Australia.

The Task Group was clear that the introduction of an explicit price on carbon is the only way we can be confident that we can reduce our greenhouse gas emissions and meet our 2020 emissions reduction target. The Task Group was also clear that a carbon price needs to be supported by well targeted energy efficiency policies.

Task Group recommendations and a National Energy Savings Initiative

The Task Group has recommended five ‘foundation measures’ as the basis of achieving a step-change in energy efficiency:

• setting an aspirational energy efficiency target; • adopting a national energy savings initiative; • strengthening the energy efficiency governance framework; • improving the data, information and analysis around energy efficiency; and • building an energy efficiency culture in Australia.

The Task Group has also recommended that the Government consider other measures to remove barriers to energy efficiency improvement in particular areas of the economy.

A national “energy savings initiative” or ESI would put an obligation on certain parties to generate energy efficiency savings. This is often referred to as a ‘White Certificate’ scheme. The Task Group described how a national energy savings initiative could help prepare the

Australian economy for the introduction of a carbon price.

The Government will engage with industry and the community on all of the proposals in the Report.

Minister Combet, the Department of Climate Change and Energy Efficiency and I have already begun seeking views on the Report’s recommendations, as part of formulating a Government response.

National Strategy on Energy Efficiency and other energy efficiency initiatives

In the meantime, the Government is making other improvements through the National Strategy on Energy Efficiency (NSEE) and other energy efficiency programs.

In July 2009 the Council of Australian Governments agreed to a comprehensive 10-year National Strategy for Energy Efficiency to accelerate energy efficiency improvements and deliver cost-effective energy efficiency gains across all sectors of the economy.

The NSEE will streamline roles and responsibilities across governments by providing a nationally consistent, coherent and coordinated approach to energy efficiency. It will target cost-effective energy efficiency opportunities in commercial and residential buildings, appliances and equipment, industry and business, government, transport, skills, innovation,

advice and education.

The measures agreed to under the NSEE by the Commonwealth, the States and the Territories will help households and businesses prepare for the introduction of a carbon price and for deeper emissions cuts in the future.

Empowering the market through disclosure of energy performance: the Commercial Building Disclosure (CBD) program

I’d like to talk for a few moments about energy efficiency in buildings, and commercial buildings in particular.

I was pleased to launch the CBD program last month at the Pixel Building in Melbourne, built by Daniel Grollo’s company Grocon as a leading edge example of an energy efficient new building.

Energy used by the commercial building sector currently accounts for about 10 per cent of Australia’s total greenhouse gas emissions. The Pixel Building is the first carbon neutral office building of its type in Australia; it is setting a new standard for high achievement in energy efficiency and sustainability measures.

The CBD program was launched there to send a signal that we want all office buildings to aspire to that standard of energy efficiency.

The CBD program represents a key step in creating a more energy efficient building sector. Under the program, most owners of commercial buildings are now required to disclose an energy efficiency rating when selling, leasing or sub-leasing office space with a net lettable area of 2000 square metres or more. The program is one of the COAG commitments under the NSEE.

I know many people in this room were excited by the passage of this legislation - unanimously through the Parliament - and by the commencement of the program itself on November 1.

Energy efficiency disclosure creates a more informed market, which rewards better performing buildings and stimulates greater investment in energy efficiency as buyers and tenants demand buildings that are more efficient. For every one-star increase in an office

building’s NABERS Energy rating there is an estimated 15 per cent saving in energy costs.

The commencement of the CBD program comes on the back of some tremendous developments in the area of building energy efficiency.

The NABERS accredited assessor training program has been expanded over the past year in order to prepare for an additional volume of assessments resulting from the CBD program. There are currently 675 NABER assessors, with a further 200 expected to be trained by the end of 2010.

In the recent election, the Government announced Tax Breaks for Green Buildings and Low Carbon Communities to provide direct financial incentives to improve building performance. This is on top of measures like the Green Buildings Fund and the Australian Carbon Trust which are also supporting innovation in energy efficiency.

The Government is introducing these policies because we know that investing in energy efficiency today will give Australia a strong position to implement the low carbon economy of tomorrow.

I want to challenge those in this room - as I challenged industry leaders when I met with them in Melbourne last month - to join with the Government in analysing the benefits and outputs of programs like this.

We need to get better at measuring our energy efficiency results, at doing the scientific studies and commercial analysis, and then describing those results in terms the public readily appreciate. The Prime Minister’s Task Group talked at length about the weaknesses in our energy efficiency dataset. And you can’t improve what you can’t measure.

We have a big selling job to do, and my call on those who will be the job engines of the new economy is to get out there and help us make that case for action.


Energy touches every aspect of Australian life: it drives our economy, keeps our homes comfortable, moves us from place to place, delivers goods and services, and is exported to the world.

As a result, improving Australia’s energy efficiency will require action across our economy, in every sector.

Coupled with a broad-based carbon price, energy efficiency will play a critical role in reducing Australia’s greenhouse emissions.

At the same time, we have the opportunity to reap the other benefits of greater energy efficiency -- through securing our energy supply for the future, improving Australia’s productivity, and smoothing the transition to a low carbon economy.

I am enjoying my new role as the Parliamentary Secretary for Climate Change and Energy Efficiency, and I am excited about working with all of you as we seek to meet the challenges of climate change.

Thank you for the opportunity to speak today, and I congratulate the Energy Efficiency Council for organising such an engaging conference.