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Tuesday, 22 June 2010
Page: 6145


Mr HUNT (6:09 PM) —In addressing the Building Energy Efficiency Disclosure Bill 2010, let me set the challenge for Australia and the globe in context. This bill is about two things: national economic efficiency and the great and abiding challenge of reducing the globe’s emissions of those gases which contribute to the great issues of greenhouse gas, climate change and the emissions reduction path which we all must face as we look forward over the coming decade, generation and century. We in Australia contribute approximately 1.4 per cent—560 million tonnes—out of a global CO2 figure of approximately 40 billion tonnes per annum. That figure is moving, of course, but it represents a global approximation. What we see there is that acting alone we will be irrelevant but acting in concert and in unison with other countries we can be successful.

The great global deal to address this issue will depend upon China and the United States—which, together, have emissions approaching 50 per cent of global emissions—striking a bilateral agreement which paves the way for a global agreement. Within that context, however, we can and must—and have been—taking immediate steps. In Australia, approximately 50 per cent of our emissions come from the creation of electricity. Whether it is through coal, gas or other forms of fossil fuels which go into making electricity, approximately 50 per cent of Australia’s emissions derive from that source. The consumption of electricity has been increasing over time, and that is understandable. As we achieve the desired elements in our quality of life, we face the simple fact that our office environments, our commercial environments and our domestic environments are all energy hungry.

To put it in context, as we consider the variations to the renewable energy target bill in the Senate today, and most likely in the House over the coming days, the very reason for the bill before us tonight is that we are likely to see an increase in energy generation in Australia from approximately 240,000 gigawatt hours at present to approximately 300,000 gigawatt hours by 2020. Those figures are open to interpretation. The 240,000 gigawatt hours figure will vary depending on whether you are talking about received or transmitted energy, but the general orders of magnitude are significant. Over the course of a decade, we are likely to see in the vicinity of a 25 per cent-plus growth in energy generation in Australia. That would be the single biggest contributor to greenhouse gases in Australia over the coming years.

Where does the energy efficiency challenge fit in with that? I will start with the challenge and then go to the solution. The challenge is simple: to reduce the amount of energy needed to achieve the same or better quality of life outcomes for Australians. How do we bring this about? McKinsey recognised in the cost curve it prepared for the Australian economy as a public service to Australian policymakers and the public that it is possible for Australia to achieve emissions reductions, through energy efficiency steps, of approximately 50 million tonnes per annum over the coming decade and beyond. The Australian Sustainable Built Environment Council has provided a figure of 40 million by 2020. Other groups, such as the Energy Efficiency Council, provided a figure of a similar magnitude, and the Green Building Council, under Romilly Madew’s stewardship, has done incredible work in this space. All of those organisations have identified comparable levels of savings over the coming decade and beyond through genuine energy efficiency measures.

Let us understand where these measures fit on the cost curve for Australian emissions reductions. The latest version of the greenhouse gas abatement cost curve for Australia set up through the work of Monash University and ClimateWorks in conjunction with McKinsey and Company shows that energy efficiency in the commercial environment delivers a net positive return to Australia on the basis of the investment. It is, however, hostage to a series of barriers that inhibit action where it would appear on the face of it to be economically prudent to take such energy efficiency measures. Essentially, it is first the problem of split incentives between landlord and tenant. Secondly, it is the problem that a business will naturally prefer to invest a set amount of money, whether it is $1 million or another figure, in productive activity which will enhance its revenue through sales rather than in defensive activity which will reduce its costs in terms of electricity outlay. There is a well established history in terms of economic behaviour at the firm level where capital is organised to have a bias towards capital which will produce subsequent revenue rather than capital which will reduce subsequent expenditure.

We need to break through that barrier so as to provide incentives to ensure there is genuine energy efficiency in commercial and in domestic spaces. We know that commercial air handling, commercial heating and cooling and commercial lighting including street lighting in our public places can produce significant real and tangible greenhouse emission reductions. In order to effect this we need to do two things. First, we need to have efficiency measures, and this bill goes to that task. We have had some quibbles about the scope and scale, but the direction is clear and agreed upon by both sides of this House. The Building Energy Efficiency Disclosure Bill falls within that category of items which have bipartisan support, subject to agreement on small or minor elements in relation to its implementation. This bill sets up some of the measuring and some of the standards to ensure that we are in a position to make the savings which McKinsey, the Green Building Council, the Energy Efficiency Council, ASBEC and private firms such as Szencorp have identified.

The second big thing is to provide real and tangible financial incentives. That is why the coalition has established a direct action program. The heart of the coalition’s direct action program to achieve the objectives sought through this very bill is an emissions reduction fund. That fund, which totals approximately $10 billion over the period between when it would commence and 2020, which is $2.55 billion over the first four years, is very simple—it will purchase the lowest cost abatement available in Australia so long as it is measurable and verifiable. In that context energy efficiency is likely to be one of the greatest areas of contribution. The work we have done with the Energy Efficiency Council indicates that, with some additional measures but using a lowest cost abatement model, energy efficiency will contribute a minimum of 20 million tonnes per annum by 2020 out of our 140 million tonne challenge and objective. How that works is that if, for example, one were to be seeking to save a million tonnes of CO2 per annum, they would tender it up and say ‘We will, in return for a payment’—whether it is $10, $11, $12 or $13 per tonne—‘produce savings which would comprise a million tonnes of CO2 reduction against what would otherwise have occurred’, and that would be placed in the bidding market and we would purchase the lowest cost abatement.

What that means in practice is that it is the way, if you have a set amount of money to expend, to produce the greatest emissions reductions for the country. In other words, we get the most bang for our buck, we reduce our emissions most effectively, we create an abatement purchasing market rather than a tax or production market. It is very simple. If BlueScope Steel, which has approximately 10 million tonnes of emissions in Australia, were charged under the government’s emissions trading scheme, which has simply been deferred, then it would pay, at $20 a tonne, approximately $200 million for its activity. It might be able to reduce its emissions by a million tonnes, but it would still pay $180 million. Under our scheme, if its benchmark is 10 million tonnes, it can receive benefits and credits if it can make energy efficiency savings of a million tonnes. That is a positive way of providing incentives, rather than a system which represents a production tax and a unilateral approach which will simply transfer Australian production and, significantly, jobs and emissions overseas.

That is the system we have set out. It is a very simple system. We support this bill. We think it is a good bill. It is in line with things which we are proposing, subject to some of those elements which my colleague the member for Dunkley has outlined, but we also clearly and distinctly believe that the single fastest avenue to emissions reduction through energy efficiency is through a genuine emissions reduction fund, an abatement purchasing fund, which will find the lowest cost abatement. Energy efficiency will, on the advice of the Energy Efficiency Council, represent approximately 20 million tonnes, at a minimum, by 2020—we believe we can achieve more—and for organisations such as local councils, who want to tender in transfer projects such as transferring old lights to LED lights for their street lamps, this is an opportunity to save not just hundreds of thousands but millions of tonnes of CO2 equivalent per annum. We would encourage councils and others to look at the single fastest way to reduce emissions in Australia, and that is to provide incentives and then to participate in providing those incentives for reducing emissions. I commend the bill and I thank the House.