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Wednesday, 19 August 2009
Page: 5361

Senator WONG (Minister for Climate Change and Water) (11:50 AM) —For ease of the debate I might respond now to what has just been put by senators. I am sure that senators will return to some issues later. The last thing that Senator Macdonald raised was the inclusion of gas. I assume he means not waste coalmine gas but natural gas.

Senator Boswell —No, he meant waste coalmine gas.

Senator WONG —I am sorry, Senator Boswell; I do not know if you want to get to your feet. I recall that the inclusion of gas was the coalition’s election commitment. They had, from memory, a 15 per cent clean energy target, including gas and renewables. The government’s election commitment was for a renewable energy target which comprised renewable energy, not gas.

We do recognise the importance of gas. Gas will be an extremely important fuel after the introduction of a carbon price. I think experience around the world demonstrates that. Gas has been one of the major and important contributors to baseload energy in the transition which occurred in the United Kingdom. The government would anticipate that gas in a world where there is a carbon price will become comparatively more competitive. Certainly I have had good discussions with various companies and organisations that operate in this field and they do see significant commercial benefit to them flowing from a situation where there is a carbon price. For example, Santos, which is located in my home state, has made some public comments about that.

Senator Macdonald is right: there is some greenhouse gas displacement and that it is a cleaner field than other fossil fuels. But we did go to the election with a renewable energy target commitment. We believe that once a carbon price is introduced that will certainly support the deployment of gas. I think that if you talk to industry there is a similar view there too—not that I want to speak for all of them, but that has certainly been some of their public statements.

Senator Boswell made a number of comments and asked about price impacts. The modelling the government has done in relation to the renewable energy target suggests that, between 2010 and 2020, as a result of this renewable energy target policy the likely impact would be an increase in electricity prices of around four per cent over the decade. Obviously, electricity prices may move for other reasons. State governments have made various decisions about retail prices, but as a result of this policy measure that is the estimation the government has been provided. There is a more significant impact from carbon price, which I know the senator has raised in various ways in this chamber. We have been upfront about this, and so was former Prime Minister Howard, to give him his due: you cannot introduce a carbon price and make something that was previously free have a cost without having some cost impact. We have been very conscious of that, Senator Boswell.

In the package that the Prime Minister announced at the National Press Club in December, half of the auction revenue from the permits will go back to Australian households—I will come to your non-government organisation issue in a moment, because we also had some discussions with that sector. That is a conscious policy decision by government; to prioritise particularly in low- and middle-income Australia, to enable assistance to be provided to adjust to the impact of a carbon price. My recollection is that, as a result of what the government announced, we will deliver through the tax and welfare system, if the CPRS is passed, to reflect our desire to assist low- and middle-income Australia, a package which ensures that around 90 per cent of low-income households will receive about 120 per cent of the likely cost impact, and around 97 per cent of middle-income households will receive some form of assistance. The policy that was announced by the Prime Minister enables that assistance to be delivered through the tax and welfare system. I can provide Senator Boswell the definitions and thresholds of low and middle income that were canvassed at that time, if he would like.

The senator raises the issue of non-profit organisations. This was an issue we discussed with the welfare sector. I am not sure I can respond specifically on the precise dollar figures you have put forth, Senator Boswell, because I do not have that submission in front of me. I again go back to our four per cent modelling, which is the advice to government. We have ensured that the Climate Change Action Fund does have a stream, which would also enable assistance to be provided to non-government organisations. That was in direct response to the representations made by that sector.

Senator Milne asked a number of questions. She referred to a national energy efficiency target and financial mechanism to underpin that. I have previously indicated in public discussions in various forums that we are reluctant as a government to set up yet another market based scheme to drive these policy outcomes, given that there are a whole range of changes that we anticipate as a result of the introduction of a carbon price. There is the National Strategy for Energy Efficiency which COAG has signed off on, which does look particularly at new commercial buildings. We also announced the Australian Carbon Trust. We want to showcase and encourage the retrofitting of existing buildings by business to drive those energy efficiency outcomes. Energy efficiency is an area which requires a range of policy mechanisms, and the government is conscious of that. We have implemented a range of those and we also believe that the introduction of a carbon price through the Carbon Pollution Reduction Scheme will be of benefit to that.

Senator Milne’s contribution also called for an increase to 30 per cent of the government’s renewable energy target. We believe a four-fold increase by 2020 is a very substantial investment. It is also consistent with what we took to the Australian people. The senator raises a very reasonable point, which is about the operation of aspects of the current eligibility criteria insofar as they relate to heat pumps. The evidence, or the suggestion, that has been made to a number of senators in this place, and also to the government, is that the operation of the heat pump aspect of the renewable energy target is problematic. I place on record that we do understand that those concerns are being raised by industry. The government is minded to consider how we manage changes such that we could restrict the arguable misuse of the renewable energy target in relation to heat pumps.

I also want to say publicly on this issue and on other issues associated with solar, which is another issue that the senator raised, that the Council of Australian Governments has agreed that by the end of this year some of the eligibility provisions of the renewable energy target for new small-scale technologies as well as heat pumps should be examined to ensure that the eligibility rules remain relevant over time to reflect new technologies and recent developments in renewable technology. We would anticipate that by year’s end COAG would have considered some of the issues that the senator has raised and the government, after considering the COAG review, would be in a position to have a more comprehensive response. The government is minded to consider interim measures, pending the finalisation of that review, designed to ensure the integrity of the renewable energy target and the way in which heat pumps, in particular, are assisted under this legislation.

The senator asked me a specific question about the amount of renewable energy that would be displaced by these technologies. She made a number of assertions based on modelling which assume no policy change and make a range of other assumptions about which I cannot comment. I can say to the senator that the modelling the government commissioned through MMA indicates that less than five per cent of the renewable energy target would be taken up by solar hot water and by heat pumps. But, of course, the ultimate proportion of the 20 per cent target by 2020 would depend on whether or not there are any changes as a result of the COAG review and also any changes as a result of the mooted 2014 review that the government has flagged.

Finally, the senator raised the issue of coal-seam methane—I think she means waste coalmine gas—and the assertion that that is not a renewable energy. The government does not disagree. I think in my summing up I made clear that it is not a renewable energy source. This is a transitional measure to reflect that there are a range of companies who are engaged in utilising this waste gas. There is an environmental benefit as well as employment in that sector. We believe this transitional measure is a sensible way forward and, to ensure that renewable energy is not crowded out, we have proposed that this component of energy be above the 20 per cent target. I think that addresses the issues that were raised by senators in the debate.