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Environment and Communications Legislation Committee
22/03/2021
Estimates
INDUSTRY, SCIENCE, ENERGY AND RESOURCES PORTFOLIO
Department of Industry, Science, Energy and Resources

Department of Industry, Science, Energy and Resources

CHAIR: I now welcome Senator the Hon. Zed Seselja, the Minister for International Development and the Pacific, representing the Minister for Energy and Emissions Reduction, and portfolio officers. Minister, do you wish to make an opening statement?

Senator Seselja: No, I don't.

CHAIR: I welcome Mr David Fredericks, Secretary of the Department of Industry, Science, Energy and Resources. Do you have an opening statement?

Mr Fredericks : No, I don't. Thank you, Chair.

Senator McALLISTER: We have questions, as you would expect, about the Auditor-General's report into Shine. I am happy to proceed with those at outcome 3 rather than now in the general division. Is that what you were expecting?

Mr Fredericks : The relevant people to deal with the ANAO report are here and ready, willing and able to assist.

Senator McALLISTER: I think we're happy to do it later. Is there a problem if we do it later for anyone? We can do it at any time, either now or—

Mr Fredericks : We're here.

Senator McALLISTER: That means that, certainly from a Labor perspective, we are ready to move on to outcome 2. We don't have general questions.

CHAIR: Senator Waters, do you have general questions?

Senator WATERS: I do.

CHAIR: You have the call.

Senator WATERS: I have some general questions. I want to ask first about the Vales Point grant. Even though I understand that the grant isn't proceeding, I have some questions about the timelines of the grant under the UNGI program. Have we got the right folk at the table for that?

Mr Fredericks : Yes.

Senator WATERS: As I recall—correct me if I'm wrong about any of this—in February 2020, TheDaily Telegraph published an article saying that Vales Point was going to receive $11 million for turbine upgrades. At that point, Trevor St Baker, who is the chair, obviously, and Senator Canavan, longer minister at that time, said it was proceeding. In May that year, the department said through estimates that you hadn't actually told Mr St Baker that the grant was successful or that any financial commitment had been made. That is my recollection. Correct me if I am wrong with any of those dates or facts. In October 2020, the budget allocated $8.7 million for Vales Point. We now know through FOI that, firstly, that money was never formally applied for and that, secondly, in December, they wrote saying that they were, in fact, not going to apply for that money. Have I got all of that right so far?

Ms Parry : You do, Senator.

Senator WATERS: I want to try to understand how the information had originally come to Mr St Baker in February last year. Can you shed any light on that? You have previously said that you hadn't told him, so I'm at a loss to understand how News Corp got the information.

Ms Parry : As we've previously testified, that was a matter for Mr St Baker. The $11 million, or however Mr St Baker recorded it in the press at that time, was not something that the government ever committed to. As you would be aware, Vales Point was a short-listed UNGI project. Just to carry on from your timeline, as you have recalled it there, on 6 October, a budget measure was announced of up to $8.7 million to go towards Vales Point for an upgrade. On 2 November, the minister approved the Vales Point grant guidelines because, being an ad hoc grant, it was required for Vales to submit an application. On 3 November, the grant guidelines were provided to Delta Electricity. On 16 November, the grants application portal opened for Vales Point. So they were at any point then entitled to submit an application. On 11 December, the grants portal closed. At that point, Delta had not submitted an application. On 15 December, the department was notified in writing of Delta Electricity's decision not to proceed with the grant.

Senator WATERS: Notified by them?

Ms Parry : Yes.

Senator WATERS: When did it become public that the grant wasn't proceeding?

Ms Parry : I'm not entirely sure. We were notified at that point. Delta Electricity has a media release dated 14 December. Whether or not they actually issued that media release then is unclear to me.

Senator WATERS: Did the department issue any sort of statement of its own accord?

Ms Parry : No. It did not.

Senator WATERS: Do you not think that given the size of the money, the interest and the quite detailed timeline, there was cause to put that in the public domain?

Ms Parry : We did not at that time. It was a commercial decision for Delta. The minister made a subsequent statement in February this year. He made an estimate expressing his disappointment when Delta had gone to the press in February this year. He indicated his disappointment that they had not taken up the opportunity of the grant funding. Again, that was entirely a decision for Delta, which they made on commercial grounds.

Senator WATERS: Could you confirm formally that the Vales Point grant is not proceeding and it is no longer on the UNGI short list?

Ms Parry : It does remain on the UNGI short list, but the short list does not disappear. We are not proceeding with the grant at this time. The grant guidelines have closed. Delta has publicly declared, and to the department, its intent to not proceed with the grant.

Senator WATERS: So what happens to the money now?

Ms Parry : I would like to take that on notice.

Mr Sullivan : That money is now unexpended. It is a decision for—

Senator WATERS: It is now?

Mr Sullivan : That money hasn't been spent. It was for a specific purpose. Normally it could be returned to consolidated revenue or it could be used for other purposes if the government decides to repurpose it through a budget process. But there are no plans from us at the moment to repurpose that for anything. It was a specific allocation of up to $8.7 million for the purposes of Vales. I will complete the timeline of the notification from Delta in late December. As you would imagine, we had a shutdown at that point of time. I think in mid-January we also sought to confirm with Vales that they had no intention of proceeding with it.

Senator WATERS: Mid-January?

Mr Sullivan : Yes. You asked why the department wouldn't have broadcast that significant decision. That is probably a matter for the minister and the government. We did keep communication channels open with Delta to try and get an understanding of where that happened, given the long lead time, as you said, going back to January 2019.

Senator WATERS: Senator, do you have any information on why the minister didn't tell the public that almost $9 million wasn't going to be applied for by the donor?

Senator Seselja: I don't have anything specific on that in my brief, so I can follow up to get some further information.

Senator WATERS: No problem. Thank you. I want to raise another brief matter. Renewables have obviously driven the wholesale price of energy down. My understanding is the government has created a rule in the energy market that coal companies have to give 3½ years notice before they close. Do you expect the notice of closure rules to effectively require coal companies to operate at a loss for three to four years in order to avoid the fine? Would you expect that an exemption will be granted?

Ms Parry : As you are well aware, a three-year notice of closure period came into effect. I will get some detail on this during the break about how and when that came to effect and if it was written into the national energy rules. I certainly know that it came in after Hazelwood had closed unexpectedly. A notice of closure period was required so that the market could adjust and we wouldn't see the kind of spike in prices that we saw post the Hazelwood closure. I'm happy to get more detail about the history of that.

Senator WATERS: I'm not so much interested in the history, thank you. I will certainly take whatever you are able to provide on notice. I'm interested in whether the effect of that rule is that coal companies will have to operate at a loss for that period of time before they close.

Ms Parry : There is no provision in the rules, as I would understand it, that would require a company to operate at a loss. But there would be penalties imposed on a company should they have a shorter notice of closure period.

Senator WATERS: There is no exemption written in for the fact that they might be operating at a loss?

Ms Parry : I'm happy to get some of the detail because I need to go into the rules to get a look at what those penalties are and how they would apply. I'm happy to come back in our energy session with that information.

Senator WATERS: Thank you. I appreciate that. You might need to do the same on this one. I'm interested if the rule still holds if the plant isn't closed but is mothballed, so it can obviously be reopened at any point. Does that also violate the notice of closure rule?

Ms Parry : It depends. As you would be aware, coal plants can also phase down. So it doesn't prevent a coal plant from phasing down, as it could stop operating a number of units, as Liddell is, for instance. That certainly doesn't stop them from phasing down.

Senator WATERS: I'm still keen to know the answer to the mothball question.

Mr Sullivan : We're happy to get you that extra information over the break. I want to put on the record that the coal closure strategies are an issue for the post 2025 market design work that is being led by the Energy Security Board in conjunction with states and territories and ourselves and market bodies. So that is an issue of how we maintain an orderly transition when we have a loss of dispatchable energy, given the need for security around synchronous power, regardless of whether that is hydro or coal or coming out of the market. We need to have that as orderly as possible given, as you say, the massive influx of renewables into the system.

Senator WATERS: You'll get no argument about the need for a managed transition from our party. I have one final question on this point. Given that the wholesale price is so low and that many of those coal generators are operating either at a loss or very close to a loss, how will the department manage coal closures under that rule of requiring 3½ years notice?

Ms Parry : It is one of the significant issues that the Energy Security Board is examining as part of its post 2025 market design. They are looking at what is called a resource adequacy mechanism and how the retail reliability obligation could potentially be used. Again, obviously we have a number of mechanisms in place currently, including the three-year notice of closures period. But is there a future market that would look to create a type of capacity market that would pay generators to be kind of on demand? That is one of the things that the Energy Security Board is exploring because of, again, wanting to make sure that we do have an orderly exit, that coal closures aren't happening before their expected retirement date and how the services that they provide to the grid can be recognised beyond just the energy market. That is about what a system security market, for instance, looks like and recognising the services that those plants currently offer in the market.

Senator WATERS: Thank you. This is a final tranche of questions. In light of the damage being caused by the floods that we are currently witnessing, what is the cost of the government's climate policy? I use that term loosely.

Ms Evans : Could I ask you to repeat the question?

Senator WATERS: I note continuing damage from increasingly severe and frequent natural disasters, which are made more likely by the climate crisis. There are floods just in the last few days. What is the cost of the government's climate policy? I would argue there is no policy.

Ms Evans : So you are asking about the cost of the impact of climate change on the Australian—

Senator WATERS: What is the cost of inaction by this government?

Ms Evans : Obviously, I can't accept the premise of your question.

Senator WATERS: That is why I phrased it the other way the first time.

Ms Evans : In terms of the actual impacts of climate on the Australian economy, we don't as a portfolio do specific work on that. But there has been work done in the past. We know that the impacts are quite significant—very large. Some of the costs of the kinds of natural disasters you are describing have been previously assessed. One of my team may have some numbers. It is a large impact on the economy—in the billions of dollars. That is the climate cost. The government's commitment to reducing emissions are part of the Paris agreement. Obviously, that agreement is all designed around trying to minimise the climatic impacts on Australia by keeping the temperature rise to well below two degrees or, on best efforts, towards 1.5. The government's policy is aimed to achieve that global outcome.

Senator WATERS: Well, I don't agree with the premise of that statement, but carry on.

Ms Evans : I think I've finished answering the question.

Senator WATERS: Last time we had a flood levy. Will the department look at making companies profiting off the climate emergency pay for the impact of the floods of recent days, or will that cost once again be borne by the taxpayer?

Ms Evans : I don't think the question of a flood levy that you are asking is relevant to this portfolio. I think it belongs to Treasury.

Mr Fredericks : A levy is a question for Treasury.

Senator WATERS: That is it for me for general questions. Thank you very much.

CHAIR: Noting that I advised staff that we would break for dinner at 6.50 pm, you have the call.

Senator McALLISTER: I wish to go to outcome 2.

[18:43]

CHAIR: We will call officers now for program 2.1 and program 2.2.

Senator McALLISTER: We will see you all again at outcome 3! I am interested in how the department is responding to the international discussion about a carbon border adjustment mechanism. How long has the department been aware of ideas around such a mechanism?

Ms Evans : I am just waiting for my colleague Ms Munro to reach the table. The concept of border adjustment mechanisms has been a part of the international conversation for quite a while. Certainly I remember it probably about a year ago. I have been asked about it before. They've really been around for a long time. I think the practicalities and the difficulties of how to implement them have also been part of that conversation as well. So I don't know that I can put an exact date on when they've come up. Certainly they've been around for a long time. We could probably take on notice to advise when we were aware of the more recent developments in the EU.

Ms Munro : It is something which Australia has been monitoring and, in particular, the European Union's proposed carbon adjustment mechanism.

Senator McALLISTER: Obviously the European Parliament has taken a position on a carbon border adjustment mechanism just this month. When you say that you have been monitoring carbon border adjustment mechanism discussions, were you expecting the European Parliament to vote in this way this month?

Ms Munro : I think these particular questions are probably best addressed to the Department of Foreign Affairs and Trade. They are obviously represented in these countries as well as on the very significant foreign affairs and trade impacts.

Senator McALLISTER: Did they provide advice to you in anticipation of these developments in the European Parliament?

Ms Munro : As I was saying, Australia has been monitoring these issues through our diplomatic cables and the like. Yes, there has been reporting back on these issues.

Senator McALLISTER: Did they provide you advice about the specific vote this month on a carbon border adjustment mechanism, or did that come as a surprise to the department?

Ms Munro : I wouldn't say there are any surprises in relation to this. There has been ongoing monitoring from our foreign posts.

Senator McALLISTER: Are there any staff or resources dedicated towards modelling the impact of a carbon border adjustment mechanism or a potential climate club or any similar international mechanism? Any scenario analysis?

Ms Munro : On these issues, I think it may actually be better to bring to the table the Chief Economist, if that is okay.

Mr Fredericks : I think we might benefit from our Chief Economist taking those questions.

Senator McALLISTER: Are there any staff or resources within your department dedicated to doing any analysis, modelling, scenario assessment or any kind of work to try to understand what the impact of a carbon border adjustment mechanism or similar policy might be on the Australian economy?

Mr Campbell : My division is called the analysis and insights division. We have a number of staff that actually look into trade issues in consultation with the Department of Foreign Affairs and Trade. We also work with our climate division colleagues, who have a lot of understanding specifically about the emissions intensity of exports and production. So we are definitely aware of this issue and are undertaking some preliminary assessment to make sure we understand the emissions profile as well as the exports that have been nominated by the EU as potentially of interest to them.

In terms of scenarios, there is nothing yet for anyone to model because the specifics of a carbon border adjustment mechanism are subject to a proposal that is expected to be brought forward around mid-year. So we're aware of the concept. We understand it could be applied to emissions intensity. We don't know how it might apply to which countries and which exports specifically and how you might actually measure embedded carbon and how you actually might understand whether it's going to impact on an average. Is it going to be by an exporter? There is quite a large number of unknowns, so you wouldn't be able to do modelling at this point. But we're certainly preparing ourselves so that we can undertake analysis when we have a clearer view of what a proposal might look like.

Senator McALLISTER: You've talked about a preliminary analysis of the export industries that might be affected. Can you give us an idea of what they might be?

Mr Campbell : All we're going on is what was announced in the nomination by the European Parliament, which was the energy sector. I think I have a list that they nominated. They nominated the energy sector, power sector, cement, steel, aluminium, oil refining, paper, glass, chemicals and fertilisers. So they've nominated that, but they haven't actually said specifically how they're going to target particular exports and whether they're going to be the only ones they look at or whether they are going to look at other ones as well.

Senator McALLISTER: And for those listed industries, do you anticipate that a carbon border adjustment mechanism would make things better or worse for those industries in terms of their export potential in Australia?

Mr Campbell : In Australia, any border tax imposed across the globe will have a damaging effect on trade, and that is not going to be good for any of the industries involved.

Senator McALLISTER: Relative to their competitors in other nations. Do you think it would advantage or disadvantage our industries and our businesses working in those sectors?

Mr Campbell : We don't know whether Australia is targeted. We don't know what sectors are targeted. We don't know how they are going to measure the relative cost impost on exporters from one country versus another. So we actually can't say at this stage.

CHAIR: Given that it is now past 6.50 pm, we will suspend and return at 7.45 pm with programs 2.1 and 2.2 in continuation.

Proceedings suspended from 18 : 51 to 19 : 45

CHAIR: The committee will resume with program 2.1 and program 2.2.

Senator McALLISTER: Chair, would you mind allowing us to pause for a moment so I may ask Senator Rice what she's hoping to work on? I think we're all crunched for time, and I'm interested in what outcomes Senator Rice—I'm just trying to be collaborative with the others.

CHAIR: Senator Rice, if you would like to illuminate the committee and the department—

Senator RICE: Broadly, I want to talk about the Future Fuels Strategy consultation paper and the electric vehicle strategy, which is 2.1, and then I have a range of questions in program 3. 1, energy and then ARENA.

Senator McALLISTER: My question is, you have things for Outcome 2?

Senator RICE: Yes.

Senator McALLISTER: Alright. If we're sticking with Outcome 2 for a while, I want to ask some questions about the Long-term Emissions Reduction Strategy. This is something required by the Paris Agreement—is that correct?

Ms Evans : It's not strictly required. Countries are encouraged to put them in, and certainly Australia has indicated that we are preparing one and intend to have that ready before the COP in Glasgow in November this year.

Senator McALLISTER: The original deadline was 2020. That deadline has now passed.

Ms Evans : Yes. Well, as you know, mainly because of a whole range of reasons, in particular because of COVID-19, the relevant COP, which was the target of when we would be prepared, was moved by a year, so we are working towards that same event.

Senator McALLISTER: I understand that explanation, but presumably work was proceeding towards a 2020 event. Where is it up to?

Ms Evans : We continue to work on it. In the meantime we've produced things like the Low Emissions Technology Roadmap and technology statement, which will form a really important part of the long-term strategy. you've already seen publications of the kind of material that we've been working on that contributes to the long-term strategy.

Senator McALLISTER: When will the strategy be publicly released?

Ms Evans : That will be a matter for government, but the government's already indicated that it will be finalised, and presumably therefore made public, before the COP at the end of the year.

Senator McALLISTER: I think in October last year you said it would be done well before the COP. Should we expect it any time soon?

Ms Evans : Again, I think I've answered the question. It is a matter for the government as to when they publish it. They have said it will be done before the COP at the end of the year.

Senator McALLISTER: When will you finish it? Which is a different question to when the government publishes it.

Ms Evans : When we finish it will be when the government is satisfied that we have completed our job.

Senator McALLISTER: It is finished now?

Ms Evans : No, it's not finished now. We're still working on various elements of it, including work to update the technology roadmap, which is, again, publicly released and it is publicly stated that we would review that each year. There's work under way for that, and that work will also feed into the long-term strategy.

Senator McALLISTER: What is the size of the team working specifically on this strategy?

Ms Bennett : There's approximately five from the department working on the strategy.

Senator McALLISTER: And what budget is allocated to developing the strategy?

Ms Evans : There's no specific budget per se. I was going to add to Ms Bennett's answer to the last question, as well, that there are five people in the team that's working specifically on that, but they draw on many other people in both Helen's division and Ms Munro's division, so there are other resources that are contributing towards the long-term strategy as well. Similarly, there's no allocated budget per se. We're drawing on the resources available in the department to produce that work.

Senator McALLISTER: Is there going to be any CGE modelling undertaken as part of the strategy?

Ms Evans : We've looked at a whole range of different analytical and modelling products. You might even be familiar that we published last year an assessment of the kinds of modelling available, including CGE, so it's certainly possible that we will use that kind of modelling over the course of the next year.

Senator McALLISTER: The course of the next—

Ms Evans : While we're working on the strategy it's a possibility. We haven't settled yet on exactly what we will use.

Senator McALLISTER: You've been working on it for some time. Are you telling me that you don't know whether or not there's going to be any modelling done?

Ms Evans : We've drawn to some degree on some CGE modelling in the past and in the work that we've already put in the public domain. We are looking at using all sorts of analytical and modelling tools. That's just one of many we would look at.

Mr Fredericks : It's also worth noting that in the production of the Low Emissions Technology Statement and other papers that Ms Evans has referred to, obviously we've drawn on a range of sources to do that work as well, which will be brought to bear as well.

Senator McALLISTER: I may be recalling this wrong, but you didn't draw on CGE modelling for the low emissions strategy. In fact we had—

Mr Fredericks : That is correct.

Ms Evans : The low emissions technology strategy itself didn't use any CGE modelling, but we have already been looking more broadly at that question of what else a CGE modelling exercise could add, for example. I've referred a couple of times to the research report that we have published that asked that question. It's one of the tools that will be available to us, and we'll probably draw on some of it, but we don't have a final answer yet.

Senator McALLISTER: Alright. So none has been commissioned at the moment, despite the fact that this task is to be completed at the very latest by November?

Ms Evans : We've commissioned a whole range of different things. Some of them we will use, some of them we won't, depending on which ones we think are the most useful for constructing the long-term strategy. I don't have a definitive answer.

Senator McALLISTER: Have you commissioned any CGE modelling at the moment, relevant to the strategy? I'm asking about modelling that would use economic data to look at how the economy might react to policies.

Ms Evans : Yes, we are looking at a range of things, and that would include CGE modelling.

Senator McALLISTER: Is that being done internally or externally?

Ms Evans : It's being done within the department.

Senator McALLISTER: So there is a CGE capability within your department?

Ms Evans : Yes, we're developing that.

Senator McALLISTER: Have you had to engage any external consultants to help you develop that capacity?

Ms Evans : Yes, we are looking at using external consultants to support our internal work.

Senator McALLISTER: Have you put a tender out to engage those consultants yet?

Ms Evans : I'd have to take that on notice.

Senator McALLISTER: Ms Evans, on what possible grounds could you take this on notice? You know the answer to this question.

Ms Evans : I'm actually not 100 per cent sure where we're up to on the process that we are looking at. We are looking at procuring some assistance. I don't know where it's up to.

Senator McALLISTER: I see. Will it be an open tender?

Ms Evans : The process that I'm referring to is not an open tender, no. As you can appreciate, there's only a select number of people who have that capability.

Senator McALLISTER: That's right, I do understand that. So the objective is to build a capability in-house to do CGE modelling?

Ms Evans : Sorry, I thought that was a statement.

Senator McALLISTER: It's a question. I'm trying to understand the objective.

Ms Evans : Yes, we are working to have some capability in-house, but we are looking at what capacity we can bring in from outside to help us to do that.

Mr Fredericks : I think you've included some other parts of the Public Service as well.

Ms Evans : Yes. When I say internally, we are drawing on other parts of the Public Service, but we are running it ourselves.

Senator McALLISTER: So it's a project that's being led by this department?

Ms Evans : Yes.

Senator McALLISTER: But you're engaged with other departments, perhaps Treasury?

Ms Evans : We have people involved from Treasury and other parts of the Commonwealth.

Senator McALLISTER: What other parts of the Commonwealth are in a position to lend expertise to this project?

Ms Evans : We are drawing on expertise from ABARES. We've also got some representatives from the Productivity Commission. And then we have a number of people from the department itself who have a good background in CGE modelling.

Senator McALLISTER: Is there an interdepartmental committee, or is it just something that people are casually providing advice on?

Ms Evans : We would never casually provide advice. We're using appropriate consultation mechanisms across government.

Senator McALLISTER: Is there an interdepartmental committee?

Ms Evans : Not formally constituted in the way you're describing, but I'm certainly engaging with my counterparts across all of those relevant agencies.

Senator McALLISTER: Moving away from the modelling question, in relation to the long-term strategy, are you consulting with anyone in the scientific community?

Ms Evans : I'm not sure how to answer that question. We consult widely, and including with people from all parts of the economy. If you think of the long-term low emissions technology strategy as being the cornerstone of what we're working on, we had a range of different inputs into that, including from the scientific community. But I'm not sure if that's what you're getting at.

Senator McALLISTER: I'm thinking about a process of consultation where you take the specific ideas that you are intending to put into your strategy—you might have some options; you might have a clear final view—and you ask stakeholders what they think of them. That's the kind of consultation I thinking of. So you're building a strategy. It's due well before November. My question is: are you talking to anyone outside of government about it, and, in particular in this instance, anyone in the scientific community?

Ms Evans : We've been talking with many stakeholders outside of government through the processes of developing the pieces of the long-term strategy. The most significant piece of that strategy is the technology road map, which had a very extensive consultation process, which I think we've outlined before, but I can take on notice to provide you with the detail of the very extensive consultations that happened through that process. There are similar consultations going, and I know Senator Rice will ask questions later about the future fuels element of the long-term strategy as well.

Senator McALLISTER: What's the furthest date included in the strategy?

Ms Evans : Could you say that again?

Senator McALLISTER: What is the furthest date included in the strategy? Is it a strategy that imagines Australia to 2040, 2050?

Ms Evans : At this stage, we're just characterising it as a long-term strategy. The Prime Minister has obviously made his clear statement that he would like emissions to get to net zero as soon as possible and preferably by 2050, so we obviously have that guidance in mind when we're framing the strategy.

Senator McALLISTER: So it's a strategy to 2050?

Ms Evans : It's a long-term strategy that is consistent with the Prime Minister's statement that he would like to see emissions get to net zero as soon as possible and preferably by 2050.

Senator McALLISTER: There must be some reason why you don't want to describe this strategy, but it's sounding very vague. To summarise what I've learned, and I may be incorrect, you've told me that this may or may not include economic analysis about the impact of long-term emissions reduction; it may or may not go to a particular date, and we can't be certain what the date is; and it may or may not be a process that sees you consult with people outside of government. I'm just trying to understand what will be in this strategy. And, in a rather more specific question: how can you do any modelling without a date?

Ms Evans : For a start, the strategy is still under development, so, once we have finalised it, we will be able to answer the kinds of questions that you are posing. We're still in a development process. In terms of modelling, the premise that we've been working with through the technology road map is that if you can achieve economic stretch goals for particular technologies then you can start to see deployment pathways emerge and therefore emissions come down. So we can do quite a bit of modelling and analytical work that is looking at exactly that kind of pathway and working out where Australia's emissions can get to, again, in the context of reaching net zero as soon as possible and preferably by 2050. So we're looking at whether or not the technology stretch goals can get us to exactly that outcome.

Senator McALLISTER: In undertaking work of this kind, will that analyse any scenarios that are more ambitious than the government's current 2030 goals?

Ms Evans : The government has clearly set its 2030 emissions reduction targets. We haven't been asked to review those.

Senator McALLISTER: No, but you're on a pathway to meet what you say is the Prime Minister's clear direction about net zero. I wouldn't characterise it as clear, but you feel clear about what the Prime Minister wants. Does that involve contemplating moving any more quickly towards 2030 than is currently planned?

Ms Evans : The government's targets for 2030 and Australia's targets for 2030 have been set, and that's—

Senator McALLISTER: So you won't be contemplating—I think that's very clear. So your strategy will not include any variation on the 2030 targets, and we can look forward, perhaps, to some explanation about what happens after 2030?

Ms Evans : The strategy is not yet complete, so I won't be able to make any definitive statements until we have finished it.

Senator McALLISTER: You don't have very long. You did say it would be done well before November. It's March, and it's been going for a long time. I'm surprised you can't tell us any more. Can I check: your stretch goals are working towards 2050, then, if that's the guidance the Prime Minister is generally providing?

Ms Evans : The stretch goals have always been working towards reducing Australia's emissions as fast as possible. They are there. I think I've answered the question. There isn't a date. There isn't a specific date attached to those stretch goals. The idea is to achieve them as soon as possible.

Mr Fredericks : We should make it clear. When we talk about stretch goals, they are the five stretch goals under the Technology Investment Roadmap. As Ms Evans says, it's on the public record that those stretch goals don't nominate a date; they articulate an approach to reaching those stretch goals as soon as possible. That's on the public record, Senator.

CHAIR: Senator Small.

Senator SMALL: Thank you, Chair. I'd like to move on to hydrogen briefly. My predecessor has been going around with a colour-coded spreadsheet, so I think it would be good to clarify what Australia's actual track record is with reducing emissions relative to a 2005 baseline compared to the OECD and G20 averages.

Senator McALLISTER: I think he's talking about Senator McKenzie's colour-coded spreadsheet.

CHAIR: No. He's talking about the new Director-General of the OECD and the colour-coded spreadsheet that highlights—

Senator McALLISTER: Oh, that colour-coded spreadsheet.

Senator SMALL: The great story Australia has to tell.

Senator McALLISTER: The great climate reformer, Senator Cormann.

Ms Puleston : Sorry—your question was?

Senator SMALL: My question is: how does our performance with respect to emissions reductions from a 2005 baseline compare to the OECD and G20 averages?

Ms Puleston : If you take the time period between 2005 and 2018, on an absolute emissions basis, Australia's reduction is minus 13 per cent. That compares to the G20 average of plus 15 per cent and the OECD average of minus nine per cent. If you take the change between 2005 and 2018, on a per capita basis, Australia's emissions reduction is 29 per cent. The G20 average is plus five per cent and the OECD average is minus 16 per cent. If you take those change in emissions over the same time frames—that is, 2005 to 2018—per unit of GDP—

Senator SMALL: Like emissions intensity, you mean?

Ms Puleston : No—per unit of GDP. Then Australia's reductions are minus 51 per cent. The G20 average is minus 33 per cent and the OECD average is minus 38 per cent.

Senator SMALL: Thanks. I understand that global warming potentials for various greenhouse gases have been recently updated. I understand that, previously, this committee has heard that those updates to the global warming potentials would be applied to the way emissions have been calculated historically, back to 1990. My question is twofold, on the basis that those assumptions are correct. Are we required to use those updated GWPs for the Paris Agreement? If that's the case, what expectation does the department have with respect to the 2030 emissions reduction task this nation faces?

Ms Evans : Thanks, Senator. Mr Sturgiss will assist me in a moment. The specific answer is, yes, the global warming potentials have changed. They are among a number of methodological changes that we need to make in the way that we estimate and project our emissions. We have already implemented those new global warming potentials. We've already published the quarterly emissions report, based on those new global warming potentials. That is something that all parties to the Paris Agreement will need to do, so we are ahead of the required timing to do that, but we have already implemented it. Regarding the net effect of not just the global warming potential changes but also a couple of other methodological changes, we're working through exactly what it means for our contribution towards 2030, but we think it will reduce the size of the gap to the target by around 25 million tonnes. So it's small change, in the overall progress towards the target. I'll just check with Mr Sturgiss: was there anything else to add?

Mr Sturgiss : No.

Senator SMALL: And it's 25 million tonnes in the context of 469 million or something like that. So it is relatively small, yes?

Ms Evans : In terms of the total—

Senator SMALL: Emissions reduction by 2030.

Ms Evans : task, that's right—it's relatively small. I think at the last projections we had estimated the remaining gap to the target at about 56 million tonnes, so it does make that gap quite a bit smaller, but it's relatively small—relative to the overall amount of emissions reductions that will have occurred over the period.

Senator SMALL: Sure. We've talked a little bit about the technology road map, and something I'm focused on, being from Western Australia, is: why does that road map prioritise hydrogen over other forms of renewable energy generation?

Ms Evans : I wouldn't characterise it as prioritising hydrogen over other forms of renewable generation. I think the road map acknowledges that renewable generation is an important part of producing hydrogen itself. But the road map saw hydrogen as a key part of the Australian economy and something that also offered global potential in terms of growth as a new export industry of the future, and it has possibilities, as a fuel, of being used in multiple parts of the economy and, in particular, in what we would term the hard-to-abate sectors of the economy. So that's why it was prioritised: it was seen as something where Australia has a genuine competitive advantage, a comparative advantage, and as something that could reduce emissions both in Australia and overseas. So it was seen as a really important technology and prioritised for that reason. But renewable energy is still an important part of producing green hydrogen or low emissions hydrogen.

Senator SMALL: Can you just give me a little colour around 'hard to abate'—what, in general terms, you mean by that?

Ms Evans : I might ask Mr Murphy to respond.

Mr P Murphy : Generally, a response to climate change involves electrification, which is the process of plugging in to renewable energy, but not everything can be electrified. So hard-to-abate sectors include a lot of industrial applications—chemical feedstocks, for example. Hydrogen offers a way to turn clean sources of energy into a fuel that you can transport. So it can be used, for example, in heavy vehicle applications, where, with battery electric vehicles, the benefits are not as strong as they are if you use a hydrogen fuel cell vehicle. So there are uses in sorts of heavy vehicles—heavy transport—such as in trucking; potentially, in rail; in shipping; even the aviation industry, in the end, could use hydrogen applications. And there are all sorts of derivatives of hydrogen. A common one talked about is ammonia. Where the hydrogen is a clean hydrogen, it can then be used to make ammonia. It can be used, say, in the manufacture of fertilisers, which are then used in agriculture and so help reduce emissions in the agriculture sector. Ammonia is also used for the manufacture of explosives—say, in the mining industry. So there are all sorts of what we call hard-to-abate sectors that need an alternative to straight electrification.

Senator SMALL: Your colleague mentioned green hydrogen. We also can make blue hydrogen, from gas. Does the department have a view on the cost differential for the production of green versus blue hydrogen?

Mr P Murphy : We have the National Hydrogen Strategy, which is supported by all our state and territory governments as well. It takes a technology neutral approach to hydrogen production, and that means industry will pursue pathways that best meet the preferences of customers. It's a bit early, we think, to tell which type of hydrogen will be the winner, if you like. There are lots of predictions about price, which I can take you through. But, in summary, our analysis indicates that the clean hydrogen production using fossil fuels and carbon capture and storage could be cheaper in the near term, with the cost—

Senator SMALL: Cheaper than green hydrogen in the near term, you mean?

Mr P Murphy : No, fossil fuel production with hydrogen, with carbon capture and storage, is likely to be cheaper in the near term, but, in the longer term, the cost of renewable production methods will decrease. Now, it is dependent on the application and where CCS is used. So the strategy says, 'Clean hydrogen, whether it's what people call blue or green'—

Senator SMALL: Just one more question on that very important point, Chair, because I think this is key. How it's received internationally will obviously depend on a certification scheme of some sort, which would aim to answer, I assume, those questions as to what counts as green and what counts as blue. What work is the department doing on making sure that that system is robust and acceptable internationally? If we brand stuff as green and it's not, or it's not accepted as such, I see that as undermining our competitive advantage.

Mr P Murphy : The hydrogen strategy covers certification and encourages the Australian government to take the lead internationally and to try and influence the certification scheme that has developed internationally. We're also working domestically to look at what the industry needs are for certification. So we've done some consultation with the emerging hydrogen industry; we're also very active internationally, especially in a group called—it's a bit of a mouthful—the International Partnership for Hydrogen and Fuel Cells in the Economy, or IPHE; and we're working on production analysis pathways for different ways of making hydrogen and working to help build a scheme that will enable trade internationally and will show the amount of emissions used in the production of hydrogen, what type of hydrogen is produced and the location of the facility. Our hope is that we can very much marry the needs of the domestic scheme, or harmonise it as much as possible, with the emerging international scheme.

CHAIR: Senator Waters.

Senator WATERS: Hi, folks. The IPCC, in the fifth assessment report, said that we've got a global carbon budget of around 1,000 gigatonnes, calculated from 2011 to the end of the century, to have a likely chance of staying below two degrees. How does the Australian government define its fair share of that 1,000-gigatonne global carbon budget?

Ms Evans : Senator, you can imagine that there's quite a debate about burden-sharing allocations, so we haven't got a position on what Australia's allocation is of that share. What we're doing is trying to reduce emissions as soon as possible, and, for the purposes of each of our Paris commitments, we have then defined a budget that we're working to. In that context, where we have got budget amounts allocated both for our 2020 target and for the 2030 target, in both cases the emissions reductions have been in excess of what was required to stay within that budget.

Senator WATERS: Okay. I'll take you to the Climate Change Authority report in 2015, which followed the Garnaut report. They recommended that Australia's fair share of our global carbon budget was 0.97 per cent. Has the department turned its mind to working on whether that might be a measure of our fair share, given our historical emissions?

Ms Evans : There was a response by the government to the Climate Change Authority's 2015 report. It would be in the public domain, and the current targets, as set by the government, remain as they are.

Senator WATERS: Okay. So, just to clarify, you're not working to a 'fair share' concept. You're saying the government's set the targets; that's what you're working to.

Ms Evans : We're not working to any different global budget, other than the ones that are specific to our targets.

Senator WATERS: Okay. Do you know what share of the global carbon budget our Australian government policy would be?

Ms Evans : I think that will depend on where we land with the long-term strategy, what is happening with other countries and so on—so not at this stage.

Senator WATERS: In a Climate Targets Panel report prepared by Will Steffen, Lesley Hughes, Malte Meinshausen and John Hewson—which I'm sure you saw last month—they used that 0.97 per cent fair share and found that, for Australia to stay within that fair share of our global carbon budget, we'd need to reduce our emissions by 50 per cent by 2030—based on 2005 levels—and reach net zero by 2045. That's to track to two degrees. If we wanted to track to 1½ degrees, they found that we'd need to reduce our emissions by 74 per cent by 2030 and reach net zero by 2035. Do you dispute their findings?

Ms Evans : Their findings are of that panel. I am not in a position to offer an opinion on them.

Senator WATERS: Has the department done any analysis of those calculations?

Ms Evans : We have not taken that particular report and done any analysis of their conclusions, no.

Senator WATERS: Have you read the report?

Ms Evans : We've had—

Ms Bennett : People in the department have read the report.

Senator WATERS: Has the minister been briefed on the report? I

Ms Bennett : I would need to take that on notice.

Senator WATERS: You don't know that already?

Ms Evans : We would have to check. We brief on a lot of reports, and we would need to double-check whether that particular one had a specific briefing.

Senator WATERS: Thank you. I suspect that the answer is as you said earlier, but can I just check: given that, during the Christmas and New Year break, the government decided to resubmit our existing 2030 targets to the UNFCCC, does that mean that, despite increasing pressure, the government's got no intention of revisiting those 2030 targets?

Ms Evans : As you said, we recommunicated the nationally determined contribution for our 2030 target at the end of last year, and that target remains 26 to 28 per cent below 2005 levels.

Senator WATERS: Is there any process for further review of that, particularly given that it's widely known that the new US administration will shortly announce what's expected to be a massive increase in their NDC?

Ms Evans : We have already submitted ours. In terms of the rules that are required for different countries under the Paris Agreement, there are some differences between those countries that have made only a commitment to 2025 and those, like Australia, that have made a commitment to a 2030 target. That real sense of something new and increasing is for those countries that hadn't already made a contribution to 2030. We have already done that, and we've submitted as of December last year.

Senator WATERS: Is there any ability for us to submit an increased NDC for an increased 2030 target?

Ms Evans : That would be up to the government. From a practical perspective, I'm sure there are mechanisms for updating them at any time, but we have fulfilled our obligations under the Paris Agreement in that regard.

Senator WATERS: Is there any work currently being done by the department on developing options or alternatives—different 2030 targets—to take to COP26 in November?

Ms Evans : It's really up to the government to decide whether those are things that they want to do. From our perspective, we have already communicated the nationally determined contribution back to the UNFCCC.

Senator WATERS: So no staff are working on any options or alternative targets?

Ms Evans : You're putting words in my mouth.

Senator WATERS: No, that's a question. Are any staff working on alternatives?

Ms Evans : We have not been asked specifically to look at alternatives for the 2030 target.

Senator WATERS: Okay. Thanks very much.

Senator McMAHON: I'm changing the topic very slightly. Is the issue of small modular reactors something that you have looked at, and, if so, how many designs? And are you watching that space under the tech road map?

Ms Evans : It is listed as a technology that's under a watching brief in the technology road map, so we are monitoring it. In terms of the specifics, Mr Sullivan might be able to add some more detail.

Mr Sullivan : In terms of the specifics of how we monitor that, we work at an international level with the International Atomic Energy Agency, as part of our membership of the International Energy Agency. Part of the IEA's work is to look at countries and what countries are doing with respect to small modular reactors, so we take that opportunity, through the IEA, to keep up to speed with where countries are heading.

We also monitor where the private sector is going. Prior to the pandemic, when we had the opportunity inside governing board meetings in Paris, we took the opportunity to look at, for example, what Westinghouse is doing with the French government with respect to the development of SMRs. We're working closely with the US and Canada, who have target dates for the implementation of SMRs, towards 2027 through to 2029. That period is seen as conservative by some commentators and optimistic by others. In terms of the coverage of SMRs, it's important to remember that there's a whole range of what small modular reactors can be in terms of the gigawatt or megawatt range that the reactors can give.

So what we're doing domestically to monitor what's happening with SMRs is generally through those international lenses. In addition, CSIRO, in its regular GenCost reporting, keeps SMRs and nuclear as part of that costing process for comparison of other emerging technologies.

Senator McMAHON: So have you actually done any technological analysis of their capabilities, capacities et cetera yourselves?

Mr Sullivan : We've done some rudimentary work as preparation for some of that work. I've probably been privy to a fair bit of that, primarily because I led the International Energy Agency review of energy policy across the European Union. A lot of the focus of that three-week study was looking at where nuclear energy was going across Europe, in terms of traditional nuclear energy—modern nuclear plants that are being built and decommissioned, and the decommissioning age—but also the emergence of SMRs. What we're doing domestically is really keeping a watch, literally, on what's happening internationally.

CHAIR: Could I just ask a follow-up question on this. What was the outcome of your three-week study? What's happening with SMRs?

Mr Sullivan : It wasn't just on SMRs. Sorry if that's—

CHAIR: That's fine.

Mr Sullivan : It was broader energy policy.

CHAIR: That's true, but it was—

Mr Sullivan : A big part of this was looking at the future: what are the projections in Europe of the reliance on nuclear energy? Nuclear continues to play a role as part of their longer-term strategy forecasts at the moment, at approximately the same level as now, but there's a lot of decommissioning that needs to happen in Europe between now and 2030, 2040 and beyond. So I think there's some optimism around SMRs, primarily attached to how they support the emergence of renewables but also in avoiding larger transmission costs in some areas of Europe.

Senator McMAHON: Did the analysis include what would be the effect of nuclear on the energy market in Australia?

Mr Sullivan : No, we haven't done that in terms of the application of SMRs. It really is looking at the technology and capabilities. Obviously, there's a complete regulatory barrier to looking at nuclear energy in Australia—it's prohibited under legislation—and we do not have a regulatory regime for a nuclear industry, in terms of nuclear energy in electricity. So, rather than just having the watching brief and it suddenly all being cost efficient and going ahead, there's a whole lot of work that needs to be done with respect to the regulatory settings and the regulatory posture.

Senator GREEN: Have we moved on to outcome 3?

CHAIR: No, we are still in 2. I think Senator Rice and then Senator Canavan will be finishing us up with 2, and then we'll be moving to 3.

Senator McMAHON: Apart from the regulatory and legislative barriers, do you see any other barriers to their inclusion in Australia?

Mr Sullivan : I think part of the experience overseas is the social licence issue. Small modular reactors have natural social licence barriers that are being addressed, and we'll watch that with interest as to how they are addressed, particularly in North America.

Senator McMAHON: Could you update us on the progress of the government's response to the parliamentary inquiry into nuclear energy?

Mr Sullivan : I will get my colleague Mr McIntyre so that we get that right.

Mr McIntyre : Yes. The department has done some extensive consultation following the inquiry handing down its report, and at this stage the government is still considering its response.

Senator McMAHON: So there is nothing to update at this stage?

Mr McIntyre : No, I'm afraid there is no definite date for that.

Senator McMAHON: Okay.

Senator RICE: I want to ask about the future fuels discussion paper/absence of an electric vehicle strategy. We had the announcement of a national electric vehicle strategy by the Prime Minister. We were meant to have it in February 2019, and then the release of the strategy was delayed mid-2020 and then to late last year. Finally, in February this year, we got a future fuels discussion paper which is not focused exclusively on electric vehicles, nor is it a strategy. My first question is: when was the decision made to release the future fuels discussion paper instead of an electric vehicle strategy, and who made that decision?

Ms Evans : We might have to take the specific date on notice, but we were asked by our minister to broaden the work to look at future fuels more generally, and it was some time—we had done some extra work—before we were at the position where we would publish it. I would have to check the date.

Senator RICE: You say it was some time before. We had the discussion paper released in February, so what was it? A month? Six months?

Ms Evans : It was a good four or five months before—something like that—but I would need to take the date on notice. It was the third quarter.

Senator RICE: At the time that decision was made, how far progressed was the electric vehicle strategy?

Ms Maguire : There were some early drafts of an electric vehicle strategy. Then the government or the minister asked us to ensure it focused more broadly, on a broader set of technologies, to ensure it could meet the objectives of enabling consumer choice and was not just focused on electric vehicles. So there were some early drafts of an electric vehicle strategy, and a lot of that is reflected in the Future Fuels Strategy discussion paper.

Senator RICE: So had stakeholders been engaged on an electric vehicle strategy per se?

Ms Maguire : My understanding is that there were a number of conversations, with up to around 80 different stakeholders, over a 12- to 18 month period.

Senator RICE: You had a draft strategy, which presumably actually was a strategy rather than a discussion paper and had some objectives and time lines, potentially.

Ms Evans : I think it's fair to say we were always working on a discussion paper, but the original focus had that narrower sense of just electric vehicles, and then we were given guidance to make sure it was broader.

Senator RICE: So basically that was the justification for going from a strategy, which actually outlined what you were going to do and how you would get there, to a discussion paper. So the only justification was to make things broader.

Mr Fredericks : I think Ms Evans's evidence was that from the outset the focus was to be a discussion paper, and the focus of the discussion paper expanded from electric vehicles to future fuels more broadly.

Ms Evans : Just to be clear as well, this is still a step along the way to finalising a strategy that is both covering electric vehicles and more broadly dealing with the broader set of future fuels that we've covered in the discussion paper.

Senator RICE: So what's the time line now on actually having a strategy that would incorporate electric vehicles, then?

Ms Maguire : The government has said—and I think it's in the discussion paper itself—that we will release a final strategy mid this year.

Senator RICE: Okay, so only 2½ years or so after it was initially proposed. I want to move onto some of the modelling included in the future fuels discussion paper. There's a number in it that Minister Taylor has also promoted: that subsidising electric vehicles would cost almost $750 per tonne of carbon. That number—it's actually $747—comes from table 1 on page 31 of the discussion paper. That's correct?

Ms Maguire : Yes, that's correct.

Senator RICE: The walk-through examples are comparing internal combustion engine vehicles with electric vehicles. That table actually shows that abatement costs range from $195 per tonne to $745 a tonne, doesn't it?

Ms Maguire : Yes, it does, and the front of the discussion paper, upfront, also says that that is the range that has been estimated.

Senator RICE: Yet Minister Taylor picked on that $747 as being what the cost would be.

Ms Maguire : Yes, but the discussion paper clearly points out, in the introduction, that the range is $195 to $747.

Senator RICE: Let's go to the $747. That comes from comparing a Renault Kangoo Compact, which is an internal combustion engine car, with a Renault Kangoo Maxi, a battery electric vehicle. Are these comparable vehicles?

Ms Maguire : I have seen, in the media, a question about whether they are the best vehicles to compare. We were focused exclusively on comparing petrol vehicles, and so they were comparative in that sense. The Renault vehicle of comparable size has a diesel engine.

Senator RICE: So what's the problem with comparing it with the diesel vehicle? There are a lot of diesel vehicles in Australia.

Ms Maguire : Well, just for the purposes of our calculations, we were being consistent and using petrol. But we could compare it with diesel, and we have done a back-of-the-envelope calculation, and it still shows that it would be upwards of $500 a tonne.

Senator RICE: So you have actually done the comparison with the equivalent diesel Kangoo Maxi?

Ms Maguire : Yes. When there was commentary about that, we had a look at them and compared it with the diesel one but it was still giving us figures over $500 a tonne.

Senator RICE: Can you forward me that comparison, please?

Ms Maguire : Sure.

Senator RICE: Certainly a Renault spokesperson said you shouldn't be comparing the Kangoo Maxi with the Compact version because the Maxi is much bigger than the Compact. What was the process for selecting vehicle types to compare, to model in the cost walk-through?

Ms Maguire : We got the information from the Green Vehicle Guide.

Senator RICE: Did you do all of the vehicles in the Green Vehicle Guide, then? How did you choose which vehicles?

Ms Maguire : We made a judgement about comparing like for like vehicles and drew it all from publicly available information.

Senator RICE: What other vehicle types did you model?

Ms Maguire : I haven't—well, except what's outlined in the table on page 31.

Senator RICE: Were there any that aren't in the table that you also modelled?

Ms Maguire : I would have to take that on notice, but I don't think so. I think we published what we modelled.

CHAIR: Senator Rice, how much more have you got on this?

Senator RICE: I have another five minutes. In the same table, you modelled the fuel savings and maintenance over five years?

Ms Maguire : Yes.

Senator RICE: Why was five years chosen, given that the average age of vehicles in Australia is 10.4 years?

Ms Maguire : One of the assumptions we used was the five-year financing period, which is a pretty average financing period. But we assumed a 10 year life of a vehicle for the purposes of estimating emissions.

Senator RICE: But not for the purposes of estimating fuel and maintenance savings, even though most ordinary people who aren't leasing vehicles keep their vehicles for 10 years, so there would be fuel and maintenance savings over that 10 year period.

Ms Maguire : No, we chose to look at the five years because that's the average financing period for a vehicle.

Senator RICE: But why is the average financing period more relevant than the average lifespan of a vehicle, given that the vehicle's fuel and maintenance savings continue over the lifespan of the vehicle? Surely that would be a more appropriate time span.

Ms Maguire : We chose the five year financing period—

Senator RICE: Which, of course, makes the comparison worse for electric vehicles because the savings continue over the 10 years of the vehicle. If the 10 years had been chosen, would you agree that the difference would be much less?

Ms Maguire : I think you could change all the assumptions that we made and get a different outcome. I think what is important to note is that the most influential factor in determining the total cost of ownership is the purchasing price, and that is still very high. Yes, of course changing those other assumptions would change what the outcome was, but the most important factor that we found in doing the assessment was that the upfront purchase price is the—

Senator RICE: Which we know, which is, of course, why other countries are subsidising the upfront cost. You could have an electric vehicle strategy!

Moving on to the emissions and the comparison of light vehicle emissions standards, how did the department take into account that many electric vehicle owners charge their vehicles off grid through solar panels using 100 per cent renewable energy, for example, or with renewably powered public charging infrastructure?

Ms Maguire : We don't have the data to be able to do that, so we only included information about charging on the grid via the grid.

Senator RICE: So you don't have the data? So you don't know what percentage of current electric vehicle owners do charge using renewable energy sources?

Ms Maguire : My understanding is we didn't have that data, no.

Senator RICE: Did you attempt to find that out before you did the comparison?

Ms Maguire : I'll have to take that on notice.

Senator RICE: Presumably, if you did take that into account, it would show that the emissions for electric vehicles would be substantially lower once again. If people who have electric vehicles are actually charging them renewably, they haven't got the high emissions of the grid.

This is my final question. The ABC obtained a leaked version of the future fuels discussion paper in December last year and, according to media reports, the major difference between this version and the version that was formally released less than two months later was the total cost of ownership comparison. That included both the cost walk-through examples and comparison of light vehicle emission standards across jurisdictions and grids. When was the modelling that was included in the version of the paper that was finally released done?

Ms Maguire : I understand we did that through November and December.

Senator RICE: So that was after that report, the leaked report. Whose decision was it to add this modelling?

Ms Maguire : We were engaging with the minister's office throughout the drafting of the strategy.

Senator RICE: Was it a directive from Minister Taylor's office to add this modelling?

Ms Maguire : I'm not sure I would describe it as a directive.

Senator RICE: But, through engagement with the minister's office, there was a decision made to add this modelling from the previous draft in the last two months?

Ms Maguire : There were many iterations of the drafting of the document to ensure that we captured the government's—

Senator RICE: Why was this modelling added to the document just weeks before its release?

Ms Maguire : Well, the document was still being drafted right up until its release early this year, and there were many aspects of the document that were being drafted.

Senator RICE: But the minister's office basically said, 'Find some modelling that's going to make electric vehicles look more expensive in emissions.'

Ms Maguire : Senator, no.

Senator RICE: And the emissions comparison was dodgily compared.

Ms Evans : No, that's a standard piece of—

Mr Fredericks : Senator, to be fair, we have a right to respond to that, and we reject that.

Senator RICE: Well, I think it's very clear that, if you'd had a different time—10 years rather than five years—and if you'd actually compared like for like in your vehicles, you would have come out with very different answers in your modelling.

CHAIR: Senator Rice, that's a debating point.

Mr Fredericks : Senator, the witnesses have given evidence in response to that, and I reject your conclusion.

CHAIR: Secretary, thank you, I am speaking. That's a debating point, Senator Rice. I think Senator Canavan is our last questioner in outcome 2.

Senator GREEN: Chair, can I just get some indication of how we're managing the program from here? We're an hour behind. We've got about an hour on outcome 3, at least. This the third government senator who's asking questions.

CHAIR: In terms of the overall time that you have—

Senator GREEN: We actually gave—no—

CHAIR: I recognise that estimates are predominantly for the opposition and for the crossbench, but it's about a 10-to-one ratio. If Senator Canavan has a set of questions on outcome 2, then we will finish and come to outcome 3, and Senator Carr will be our next questioner.

Senator GREEN: There were questions. We gave up.

Senator CANAVAN: I've been given the very generous allocation of five minutes.

Senator GREEN: Excuse me.

Senator CANAVAN: If you didn't interrupt, I'd be almost done.

Senator GREEN: Excuse me. You just walked in. You weren't here when we were here for general questions, and the Labor senators actually gave up time during that section of the program so we could get to outcome 3 quicker. That's what's happened, so I'm just asking what we're doing now.

CHAIR: We will be coming to that in five minutes.

Senator GREEN: Is there another government MP that needs to ask some questions?

CHAIR: Five minutes for Senator Canavan, and then we're going to outcome 3 with Senator Carr.

Senator CANAVAN: Okay, five minutes starting now.

Senator GREEN: We need to get to the questions.

CHAIR: I will go to the opposition, and you can discuss between yourselves who takes the call.

Senator CANAVAN: Thank you, Chair. I will be very quick. Do we keep tabs on whether other countries have met their obligations under the Kyoto Agreement?

Ms Evans : Yes, generally we keep an eye on how everybody else who has commitments under the Kyoto Protocol and other things is tracking.

Senator CANAVAN: Maybe you could take it on notice to give me the list of countries and whether they've met their targets or not. But, just for the record—if you've got it in front of you—have Canada, Japan and New Zealand? Just go with those three. Have they met their Kyoto targets?

Ms Munro : I'm just double-checking. I don't think I have that with me.

Senator CANAVAN: Okay. Take it on notice, because I don't have much time. That's okay. Next, on our Kyoto targets, I'm just looking at the report—I think it's from just before Christmas—Australia's emissions projections 2020. It was released in December 2020. There's a table on page 13 that has a breakdown of emissions by sector.

Ms Munro : Yes.

Senator CANAVAN: By my reading of this table, if we hadn't had the reduction in emissions from agriculture and from land use change in forestry sectors, our emissions would have gone up, not down. Is that correct?

Ms Evans : Sorry, Senator. I'm just making sure. Are you looking at the projections on page 13?

Senator CANAVAN: Yes, at the bottom of the page—table 2. If you exclude agriculture and you exclude land use change in forestry, emissions actually go up?

Ms Evans : I'm not quickly doing the maths in my head, but I think you may well be correct.

Senator CANAVAN: Well, our emissions go down by 102 million tonnes per annum from 2005 to 2020. The reduction in land use is 91 million plus 18 million—it's already more than that anyway—and agriculture is a bit more on top of that.

Ms Evans : Senator, I think you're just asking me to confirm the numbers in the table.

Senator CANAVAN: Mm.

Ms Evans : I can certainly confirm that all the numbers in the table are correct.

Senator CANAVAN: But I would have thought you'd know the broad strokes of how we're going. Without agriculture and land use changes, we would not have met the Kyoto targets. We can confirm that?

Ms Evans : Land use change has certainly been a very significant contributor for Australia's ability to meet its targets under the Kyoto Protocol.

Senator CANAVAN: Yes. If we hadn't had that land use change in emissions—if that were the only change—

Ms Evans : It's a bit hard to answer a counterfactual, because it's included in the—

Senator CANAVAN: It's not really a counterfactual. It's on the figures you have there.

Ms Evans : The target was set including agriculture and land use change, and so—

Senator CANAVAN: Well, I've just said the land use change. If we hadn't had the land use change, we wouldn't have met—

CHAIR: Senator Canavan, let the witness complete her answer, please.

Senator CANAVAN: I only have limited time, though, thanks to the opposition. So, if we didn't have the emissions reductions from land use changes, we would not have met our Kyoto targets?

Ms Evans : Senator, I'm sorry to keep going back to it, but the Kyoto target includes land use change, so I can't answer the question of what would have happened if it weren't in, because it was both in the baseline and in the contributions to the way things were reduced. So I'd have to take it on notice to go back, and I think it's not even possible to say what our Kyoto target would have been if we weren't including the land use change sector.

Senator CANAVAN: Well, I'm assuming ceteris paribus: everything else is equal except for that one change.

Ms Evans : But then we wouldn't know what the target itself was, because the target is—

Senator CANAVAN: No, that's what 'everything else equal' means. If you just exclude the emissions we saved by stopping farmers from cutting down trees, we would not have met Kyoto.

Ms Evans : Senator, you're doing maths off a table which, as I've confirmed, is correct, but the way that our Kyoto Protocol target is defined includes land use change in the base and in the articulation of the target, so I'm not able to tell you whether or not we would have met a target that didn't include a sector that was inherently part of setting the target in the first place.

Senator CANAVAN: It seems you're a little bit sensitive about it. How much land did we take out of use, so to speak? How much land was converted to forestry—

Ms Evans : I think we might have to take that on notice.

Senator CANAVAN: I think it's in the report. It's three million hectares.

Ms Evans : Then it's in the published report.

Senator CANAVAN: On page 54, it says:

Over the decade 2008-2018, the area of land under forest in Australia has increased by around 3 million hectares …

Does that accord with your numbers?

Ms Evans : If you're reading from our report then it would. Is Mr Sturgiss here?

Senator CANAVAN: It is very complicated. I don't pretend to understand all of how this is calculated. It's all very confusing.

Ms Evans : Well, we have very robust ways of calculating all these contributions.

Senator CANAVAN: I think there might be someone who has more expertise and might be able to answer.

CHAIR: This will have to be the last question, thanks, Senator Canavan.

Mr Sturgiss : You were talking about page 54?

Senator CANAVAN: I will just check. Yes, page 54.

Mr Sturgiss : And your question was?

Senator CANAVAN: How much land area has been changed in use to get the reduction in emissions under the land use category? The sentence there says that, over that decade, there's three million hectares more forest.

Mr Sturgiss : Yes.

Senator CANAVAN: Is that all the land that has changed, or are there other things that aren't included? I know there are a lot of different categories that can qualify. Is that the total amount?

Mr Sturgiss : Since the beginning of our records—so from 1972, when we were able to assess changes in forest cover from the Landsat satellite imagery series—I believe about 17 million hectares of land has been converted from forest to another use, and that's mostly agricultural uses in that period.

Senator CANAVAN: That's from 1972?

Mr Sturgiss : From 1972 until now.

Senator CANAVAN: What about over the Kyoto period? What's happened over that period?

Mr Sturgiss : I don't have the precise number there, but it's a fraction of it.

Senator CANAVAN: Okay, please take that on notice. That figure there is only for that decade. That's why I was asking how much it's contributed to the Kyoto.

CHAIR: Sorry, Senator Canavan. We're going to pull it up there.

Senator CANAVAN: Can I just ask officially: can we take it on notice?

Mr Sturgiss : Yes.

Senator CANAVAN: Is that clear?

Mr Sturgiss : Yes.

Senator CANAVAN: Thank you.

[20:51]

CHAIR: Thanks very much. Senator Green.

Senator GREEN: Are we on outcome 3 now?

CHAIR: We are moving on to outcome 3, yes.

Senator GREEN: I have some questions about the Audit Office report Award of funding under the Supporting Reliable Energy Infrastructure Program, if we can get the right people. This report is an examination of the way funding was awarded in relation to a feasibility study on a coal-fired power station in Collinsville. Minister Taylor has said of the program and the grant, 'The grant is focused on delivering for the people of Queensland.' Has the grant delivered a bankable feasibility study yet?

Ms Parry : The grant that was awarded to Shine Energy under the Supporting Reliable Energy Infrastructure Program has been executed as of late last year, and it is delivering the first two stages of a feasibility study.

Senator GREEN: But that's not the full feasibility study, is it? It's not a bankable feasibility study? It won't get there in stages 1 or 2. Isn't that correct?

Ms Parry : Well, it may get there. In essence, if I can just back up for a minute, the government committed $10 million under the program for a variety of activities: for a strategic study, for outcome grants—

Senator GREEN: I'm just interested in this grant.

Ms Parry : I understand that. The government decided to award up to $4 million to Shine Energy to undertake a bankable feasibility study.

Senator GREEN: So that's what the grant was for—a bankable feasibility study.

Ms Parry : Yes.

Senator GREEN: I'm sorry. I don't mean to speak over you, but this is the third time I've put the question to you.

Ms Parry : And I'm trying to answer your question, Senator.

Senator GREEN: Do we have a bankable feasibility study yet?

Ms Parry : The grant was only executed two months ago. I'm trying to answer your question on how the grant is going to get to a bankable feasibility study.

Senator GREEN: The answer is no.

CHAIR: Senator Green, please let the witness answer the question.

Ms Parry : If you'd let me carry on, $4 million was available for the program. Shine Energy indicated that a bankable feasibility study would cost up to $10 million. We worked with Shine Energy to indicate what could be delivered under the programs to still achieve the outcomes of determining whether or not a HELE coal plant in Queensland would be feasible. So the grant funding was determined and recommended by the department to the minister to go ahead for the first two stages of the process to get to a feasibility study. Shine Energy could then use that feasibility study to look to leverage further funding to deliver the full bankable feasibility study.

Senator GREEN: Ms Parry, you know I've got a copy of this report and it's a public report?

Ms Parry : Sure I do, Senator. I have it right here.

Senator GREEN: So I know all about the process that you've gone through.

Ms Parry : Yes.

Senator GREEN: And I know that there is no bankable feasibility study yet, that the grant has provided only for stages 1 and 2, and that it was only executed a couple of months ago.

Ms Parry : Okay.

Senator GREEN: Have any jobs been created in Collinsville as a result of the grant?

Ms Parry : It's for a feasibility study.

Senator GREEN: Yes, none. Will any jobs be created in Collinsville before the next election?

Ms Parry : The question goes to the nature of the grant, and the grant is for a feasibility study to determine whether or not a HELE coal power station in Collinsville is feasible.

Senator GREEN: Yes, no jobs. What are the time frames for the study? When will the final bankable feasibility study be delivered?

Ms Parry : That, according to the grant guidelines, will be in 2023. Sorry—the bankable feasibility study or the feasibility study?

Senator GREEN: Something that we can create some jobs out of—a bankable feasibility study, not a piece of paper.

Ms Parry : A bankable feasibility study, in essence, is what a proponent could take to investors for a final investment decision. Any of these processes will require Shine Energy, as the proponent, to go through and determine, through its four stages that it has laid out—two are in terms of the prefeasibility, stage 2 is feasible, and stages 3 and 4 are the bankable process—to determine whether or not a coal-fired power station would be feasible, and that's what this grant is investigating.

Senator GREEN: This grant covers stages 1 and 2?

Ms Parry : Yes, it does.

Senator GREEN: And stages 1 and 2 will only be completed in 2023?

Ms Parry : No, that will be in 2022. The final report will be delivered, and then it will be acquitted by 2022.

Senator GREEN: How much has been paid out so far?

Ms Parry : It is $1.275 million, and that is GST exclusive. Let me just confirm. That is $1.275 million, GST exclusive. I just needed to make sure I have the GST component correct.

Senator GREEN: What progress has the proponent shown so far in terms of that funding?

Ms Parry : The proponent has delivered a project plan. The project plan was delayed slightly because the proponent requested some variations to the grant agreement to reflect some changes that they had requested as part of their project plan. That took some time to go through, but now the project is back on track in terms of its time frames, and it has reached stage 2 of its milestone payments. The first milestone payment was $770,000, GST inclusive. That was on the execution of the grant. The second milestone payment of $575,000, GST inclusive, was paid to Shine in March of this year.

Senator GREEN: This audit report details the process that the department went through to essentially recommend the grant?

Ms Parry : Yes.

Senator GREEN: Just remind me. There was sort of an election announcement that this feasibility study would take place. Did that announcement occur before the department had a chance to look at whether this was an appropriate proponent?

Ms Parry : Senator, as you would be aware, the government made the commitment to the project under the Supporting Reliable Energy Infrastructure Program. It also took to the election a feasibility study for a HELE coal plant in Collinsville. As part of that process, the government undertook a strategic study to look, in essence, at how we could be looking at sources of generation in North and Central Queensland and match that to the customer needs in the same area. As part of that study, Oakley Greenwood was commissioned by the proponent to deliver that part of the study. Phase 1 of that report was delivered to the department, and the department made some recommendations based on the initial findings of that study which indicated that an influx of renewables in Queensland had reduced system strength within that region—again, not an uncommon thing in the NEM—and that synchronous generation in the north could help counter that. That initial phase 1 of the report identified potential synchronous projects within the region, including a HELE coal facility in Collinsville. So the department looked at—

Senator GREEN: Hang on a sec. I recall, before the election, a media conference with this proponent and maybe then Minister Canavan and probably the member for Capricornia. They stood up and made an announcement that this was going to happen, and then the department had to go through the work of assessing whether it would be an appropriate grant to make.

Ms Parry : That's the way—sorry.

Senator GREEN: It's a really simple question. Did they announce it and then give it to you and say, 'Can you have a look to see if these guys are worth giving the money to'?

Mr Sullivan : It's important to get the timing right. I think, from memory, the program was announced just before the budget. It was announced just before the election.

Senator GREEN: Yes. Oh, we know.

Mr Sullivan : It was during the campaign that Shine and Collinsville were pointed to—that component of the program. The program itself is not an election commitment, but the commitment to look at a coal-fired power station in Collinsville was an election commitment.

Senator GREEN: This is what I'm getting at. Thank you.

Mr Sullivan : From that, it's not our job to question government's election commitments. Our job, regardless of who—

Senator GREEN: Well, the audit report actually goes through whether you did your job or not.

CHAIR: Order! Senator Green, let the official finish his evidence, please.

Senator GREEN: In table 3.6—let's move on to this, because there's a lot to get through this report; it is a damning one—

Mr Sullivan : Sorry, did you say table 3.6?

Senator GREEN: Table 3.6. I think that's on page 41 of the audit report. We'll go through the process a bit later, but I want to get to this as the first point of discussion. This is a table that shows the merit assessment that the department undertook, and it compares the two proponents that the department was looking at under this program. One of them was Shine Energy, and one of them was Blue Hydro.

Ms Parry : That's right.

Senator GREEN: There were some concerns raised by the department about value for money, weren't there?

Ms Parry : That's right. In the course of the application from Shine Energy, they submitted, as is normal practice, an application against the guidelines that were developed. The department requested and went through an iterative process with Shine to understand some of the costs that were being put into their grant application, but then ultimately the department recommended to the minister that not all of the costs that were in their grant application were eligible, and it recommended to the minister a funding amount of $3.3 million, which the government accepted.

Senator GREEN: One of the assessment comments that the department makes is:

Shine does not seem to have any other source of income.

Ms Parry : The grant was the source of income for the feasibility study, and Shine has indicated as well, through their grant process, that they would need to take the feasibility study that was funded through this grant and look to leverage that to increase revenue opportunities to deliver a full bankable feasibility study.

Senator GREEN: But you've noted that there's no other form of income for this proponent, and the department's also questioned the cost—the administration cost. I think that's what you're referring to.

Ms Parry : That's right. That was the amount that was reduced in the grant—or it wasn't reduced; it was just the amount that was deemed ineligible as part of the grant process.

Senator GREEN: And there was a debt of around $70,000.

Ms Parry : That's right.

Senator GREEN: They weren't going to pay that off?

Ms Parry : No. The department undertook and worked with Shine to ensure that none of the grant money would go towards paying that debt.

Mr Fredericks : Senator, this is the department ensuring value for money.

Senator GREEN: Excuse me?

Mr Fredericks : That's what we're doing. Their claim came in for $4 million. We actively assessed elements of what they were asking for that weren't consistent with the guidelines and therefore wouldn't give value for money, so we reduced the amount of payment to them in order to ensure value for money. That's exactly what we did.

Senator GREEN: Okay. One of the comments in this section, where the department actually said that the grant didn't provide value for money at that stage, is:

If Shine is unable to source additional contributions following completion of Stage 1 and 2, then this will mean the outcomes will not be achieved and would not constitute value for money.

So there was evidence that there wouldn't actually be any funding after stage 1 and stage 2 were completed to be able to finalise the feasibility study so that there would be a bankable feasibility study.

Ms Parry : The department took into consideration a variety of factors. To pick up Mr Fredericks's points, we were determining (a) looking at what the outcome of the grant was trying to achieve. If we go back to the outcome the grant was trying to achieve, it was to determine whether or not a HELE coal plant in Central Queensland was a feasible proposition.

We assessed the application and determined that a feasibility study, phases 1 and 2, giving honour to the election commitment, giving honour to the program outcomes and going back to the value-for-money proposition to determine that stages 1 and 2 of the grant would deliver a feasibility study—at that point, Shine could take that feasibility study and look to leverage increased funding in order to deliver it to a bankable feasibility study. If they were unable to do so, that, in essence, answers the question of whether or not a HELE coal plant in Queensland is feasible.

If we go back and look at what the outcome is that we are trying to achieve here, that also answers a question—that is, we determined that that was consistent with the policy authority. It was consistent with the intended outcomes of the grant. We felt that it would achieve an outcome, and we made that recommendation to the minister.

Senator GREEN: So you're saying it was always intended by the government that this bankable feasibility study might never come to fruition because it will get to stage 1 or 2.

Ms Parry : No that was not the intention. The intention was for Shine to be able to take the feasibility study and use that as leverage to garner more investment, to deliver it to a full bankable feasibility study. If that does not happen, in essence, that is also a legitimate outcome. Is the market open to its—it's been 14 years since a coal plant has been built in Australia. This is a market sounding to determine whether or not the market thinks this is a worthwhile investment. To deliver a feasibility study, to make those initial assessments, is part of the intended outcome of the study.

Senator GREEN: One of the other comments the department made was: 'Shine have also noted that if they are unable to source funding' for further stages, past 1 and 2 'they will seek additional funding from the Australian federal government.' Have they sought additional funding past stages 1 and 2?

Ms Parry : No, they have not. We're only in the initial stages of the grant.

Senator GREEN: And if they can't get additional funding, if this leverage doesn't happen, will the government give them additional funding?

Ms Parry : That will be a future consideration of government.

Senator GREEN: Has any consideration been given to that, Minister?

Senator Seselja: You're asking for a hypothetical, so I can't really—

Senator GREEN: Not really.

Senator Seselja: You are. So I can't really add much more than what the official has outlined.

Senator GREEN: Members of your government have promised people in Queensland that there'll be a bankable feasibility study. This proponent says that they might need extra funding to be able to deliver that. So there's been no discussion or consideration from the government about whether they might need to provide the additional funding, to get to that point, to basically deliver on your election promise?

Senator Seselja: As I said, the official has outlined the process and that's the process we're following.

Mr Sullivan : Senator, I think you were referring to the last part of the bottom of that table 3.6. Yes, it does say that Shine thought that if they couldn't source funding there's an option of coming back to government. They also were talking about expressions of interest from other companies about being potential investors post the feasibility stages 1 and 2. So it wasn't just a given that they would come back to government. The idea, as Ms Parry said, was to get to this point where they could garner the interest to take this through to a bankable feasibility study and potential final investment.

Senator GREEN: The other proponent that's examined in the same grant process didn't have any of these issues. But their application presented relevant value for money and the applicant justified the amount requested. So did they have any issues getting through, past stages 1 and 2?

Ms Parry : It's a different process. It's pre-feasibility for Blue Hydro, and the grant that was awarded to Blue Hydro covered the full expenses as part of their project plan.

Senator GREEN: We have discussed some of the merit assessment that the department made, and the department then made recommendations based on that assessment to the minister, the decision-maker, in this case. Page 52 of the report says that information on the value for money of the grants was removed from the finalised brief after a draft of the brief had been provided to the minister's office. When did that happen?

Ms Parry : I'm going to the actual line—on page 52, did you say?

Senator GREEN: Yes, it's note a to table 4.1. It's at the bottom of the table. It says:

Additional information on the value for money of the two proposed grants, by way of an attachment to the briefing, was removed from the finalised brief after a draft of the brief had been provided to the Minister's Office. The Office had suggested the draft brief was too long and included too much information.

So you just took the value-for-money stuff out?

Ms Parry : That's not true. In the final briefing that went up to the minister, it had quite an extensive risk table as part of our risk plan. The key recommendation in the brief was that the minister needed to go through the risk plan, which clearly identified the value-for-money criteria and how the department had assessed that. The brief went through step-by-step in terms of how the department had made that evaluation. The audit also notes that the minister requested a meeting where he had further questions about some of the risks that the department identified and the recommendation that the department had made, and in fact requested further briefing in that regard, which the department followed up with. So the department sent out one brief; that was the final brief. That was not changed nor did the minister's office request it to be changed. We held a meeting with the minister and it was followed up by an additional information meeting on both grants.

Senator ROBERTS: Thank you, all, for attending tonight. I was going to ask a lot of questions to do with energy programs and energy advice because that's one of your main functions. I thought though I'd get back to basics because it's really staggered me going through the costs. Dr Moran, I think, was a senior official in the government—several departments, a highly respected economist. He has estimated, compiling the government's own data, state and federal governments, that intermittent energy subsidies, renewable energy subsidies and support cost $6.9 billion for the 2018-19 year, and that, in addition to the total costs, without those of around about $10 billion, that's a 70 per cent cost impost. What I see, going through the questions I had organised for tonight, is that we have subsidies and then we have counter programs costing millions of dollars to offset the effects of the subsidies. We've got a real nightmare going on. Australians have gone to the top of the pack when it comes to investment in so-called clean energy. We're now four times the global average per capita, in US dollars. These are the figures from a Bloomberg's graph that Minister Taylor used and cited,—No.2 behind us—we're streets in front of everyone. We've gone from the lowest cost electricity in the world to close to the highest now. I just want to come back to basics for a minute. On what scientific basis are these energy policies, renewable targets and all the rest of them, being implemented?

Ms Parry : That's a really long question.

Senator ROBERTS: Well, I had to give the context because we're in a mess.

Mr Sullivan : We could probably take all night answering where we have got to and where we're at now. In terms of prices, governments—

Senator ROBERTS: Excuse me for interrupting. I'm sorry I wasn't clear. I was trying to paint the context. I set those questions aside; I'll send them to you on notice. I want to know: what is the scientific basis on which these policies are being implemented—the specific source, location, page number of the data and the framework that proves causation and that quantifies the effect of human carbon dioxide on climate and temperature.

Mr Sullivan : That's a very different question.

Senator ROBERTS: It's essential, though.

Mr Sullivan : It's going back to things we have rehearsed many times with you around climate change. But I do need to go back, because you did say we've now got some of the highest energy costs in the world. I don't think we can let those statements stand because that's not true. Where you did point to our performance with respect to renewables, yes, we lead the world in rooftop solar, by streets ahead. In terms of our renewable uptakes, yes, we are a country that has space and sunshine and wind. I think others have talked about the potential for that.

With respect to the use of renewables and how that relates to hydrogen, how that relates to a potential export economy moving forward, there's no single answer as to how the energy system today and the science underpinning, where we're headed with respect to energy. We are in the midst of a transition. That transition is accelerating. We are not alone in terms of that transition. How we manage that transition, particularly with respect to how we look to dispatchable power firming renewables, is something that we are challenged with and we'll be challenged with in terms of the post-2025 energy market design work that the Energy Security Board is doing. It's a challenge that all countries are having to go through, and often they are looking to Australia with respect to how we're managing that transition.

Senator ROBERTS: No-one has been able to answer this question. I've asked it of many, many people, including ministers. To have sound policy we need to know the relationship between carbon dioxide from human activity and the impact on climate. We need to have the specified, quantified impacts. That's essential for policy. No-one's been able to give it to me. That is essential for monitoring the effectiveness of your policy. You can't tell me, without that, whether or not your policies are effective. Thirdly, it's necessary to assess the cost-benefit of any policies and the economic destruction or economic benefits of any policies, but no-one can answer that fundamental policy, as you've shown right now. You can't answer it either.

Mr Sullivan : Can I reframe?

Mr Fredericks : Senator, to assist, in fairness to you, we might have a stab at answering that question on notice, because I think it deserves an opportunity to reflect on what you've said and answer on notice. We'll take it on notice, thanks.

Senator ROBERTS: I'd appreciate that, but let me be specific on what I'm after. I want the specific location within a report, journal, publication, title, the specific location within that of the data and within a framework that proves causation of human carbon dioxide affecting climate. I want to know how much carbon dioxide from human activity has so much effect. What is the effect? I want it measured and I want it specified and quantified. Then I want to understand what you're doing and why you are doing it related to that; what measures you're using to assess the cost-benefit, and then what measures you're using to track your effectiveness. Because you're spending billions of dollars—that's the first thing—and I believe you're destroying the economy. Energy is the number one thing for impacting competitiveness. It's the number one thing for driving human progress, and we have reversed the human progress of the last 170 years.

CHAIR: Thank you, Senator Roberts. I think you've expressed that very clearly.

Mr Fredericks : We'll take that on notice.

Senator RICE: I have a few questions that I want to continue with about the Collinsville proposed coal fired power station grant and the ANAO report. One of the key concerns of the ANAO report was that projects had been selected prior to completion of a strategic study designed to identify appropriate projects. According to the ANAO report, the department received a final report of the strategic study in June 2020, but as of January 2021 the minister hadn't been briefed on the final report of that strategic study. So I'll start with asking, has the minister now been briefed on the final report of that strategic study?

Ms Parry : Yes, he has. I would also note that that report has been submitted to the minister, but that report was also with the department so that we could consider some of its findings and implications for the government's gas led recovery in terms of customer needs, again, in terms of generation, customer needs that the government was considering in terms of COVID and its response to COVID. We also had some additional work done on top of that study. We requested some input from AEMO, we've done some additional modelling and now the study has been submitted to government for consideration.

Senator RICE: Did that strategic study report raise concerns about Shine Energy or their capacity to deliver the project?

Ms Parry : The report is with the government now. I am not at liberty to go through the contents of the report, but I can say that, based on the phase 1 findings of the report, again looking at the synchronous generation needs, looking at the assessment of the department, the department has made that recommendation—

Senator RICE: I have very little time, Ms Parry. My question was pretty straightforward. You don't have to go into all the detail of the report. All I want to know is whether the report raised concerns regarding Shine Energy or their capacity to deliver the report.

Mr Fredericks : The report is with the minister.

Senator RICE: You can't answer that question.

Mr Fredericks : Correct.

Senator RICE: Who are the consultants undertaking the Collinsville feasibility study?

Ms Parry : Shine has a number of consultants assisting them in undertaking their study. They are using Findex, WSJ and some legal advice from Bill Williams, and they are carrying out some of the project management activities themselves. They're using an engineering firm, getting some environmental approvals, assessments and legal advice.

Senator RICE: The ANAO noted the lack of conflict registers, probity audits, inadequate due diligence and that the Shine Energy application was submitted late, was incomplete and didn't meet all the eligibility criteria. What further work has been done now that we're going to the next stage to identify and manage conflicts such as those that were outlined in the ANAO report?

Mr Fredericks : We did a response to the recommendation about that. In fairness, we recognised that we operate on the basis of probity advice, as you would expect us to. That probity advice was from the AGS. I think it's fair to say, and we're frank about it in the report, that we applied our probity advice too narrowly. By that I mean that we applied that probity advice very strongly vis-a-vis the direct decision-makers. What the ANAO was saying, with some fairness, is that we ought to have applied that probity advice also to our SES, which we did not. The reason we didn't was that we took the view that our departmental SES conflict of interest register would do the job. I accept that the ANAO has pointed out that in the current case that was not right. Our intention is to change our approach to probity to ensure that that approach is applied consistently to all of our officers.

Senator RICE: I want to ask about the Kurri Kurri gas plant and how we're tracking towards the 1,000 megawatt capacity that the government has decided needs to be met in New South Wales by April. How large is the gap that's left, in your eyes?

Ms Parry : As you're aware, the government has laid out a challenge, in that they're very keen that when Liddell exits the New South Wales market that dispatchable capacity is replaced. The 1,000 megawatt target has indicated that companies have until the end of April 2021 to reach final investment decision on new projects and to make sure that those projects can come in time for the Liddell exiting, so 2023. Insofar as at this point we have seen very little dispatchable capacity committed reaching final investment decision in New South Wales, the only thing that has been firm to date is a 30 megawatt upgrade to the Mount Piper coal powered station. The government remains committed to stepping in should the private sector not step up and commit to building that 1,000 megawatt themselves, if the private sector doesn't come forward.

Senator RICE: In the last few months we have seen 2,400 megawatt battery proposals for the New South Wales grid, including Origin's 700 megawatt proposed battery at Eraring, Neoen's proposed 500 megawatt battery at the old Wallerawang site, and CEP Energy proposing a 1,200 megawatt battery at the same Kurri Kurri site as the Snowy's planned gas plant. Are those New South Wales based battery technologies eligible to contribute towards the 1,000 megawatt capacity gap?

Ms Parry : There are two parts to that question. One, batteries would be considered if they meet the requirement of reaching FID by the end of April and operable by 2023, but also, critically, participating in the energy market. And I would note that roughly 80 per cent of battery revenue is actually made through the FCAS market, not the energy market. Batteries tend to make their money in a separate market. The government is very keen to ensure that it has dispatchable capacity to replace a very large load that is leaving the New South Wales market, so that's why they are targeting dispatchable capacity in their 1,000 megawatt target.

Senator RICE: But batteries are dispatchable.

Ms Parry : That are, certainly, and as long as the battery was participating in the electricity market, not just the FCAS market, the government certainly would be willing—

Senator RICE: They'd be eligible towards that 1,000 megawatt gap.

Ms Parry : Yes.

Senator RICE: Where we're currently at, has the final size been decided on for the Kurri Kurri plant?

Ms Parry : No, it hasn't, because we're waiting to see if the private sector is going to fill that gap. They have until the end of April. But the Snowy board is still considering the configuration. They've got some options. It could be a modular approach, if it was required. So the final configuration has not been determined.

Senator RICE: Is the department doing any work looking at financing options for Snowy, for construction of the plant?

Ms Parry : Yes, we are.

Senator RICE: What options for financing are you considering?

Ms Parry : We're considering a range of options. That is all we can say, at this point.

Mr Sullivan : That's all we can say. It would be a matter for government and, ultimately, it would be a cabinet process.

Senator RICE: Will the department or Snowy be responsible for developing the business case for the investment?

Ms Parry : The Snowy, as you're aware, has a board. They go through and evaluate the business case. The board would sign off on that business case and make a recommendation to government.

Senator RICE: Do you know when that business case is likely to be completed?

Ms Parry : It will be sometime soon because of the end-of-April deadline.

Senator RICE: Will it be public?

Ms Parry : That will be a matter for government.

Mr Sullivan : It'll be subject to cabinet consideration. Realistically, they're not the only player in the thousand-megawatt target.

Senator RICE: If it's subject to cabinet consideration, that raises my alarm bells about it ever being public, because it will then be, if the government wants it to be, a cabinet-in-confidence document. If it doesn't stack up, we don't get to know about it.

Senator GREEN: Can I go to the Shine Energy grant? I just want to understand one thing. Of the evidence you've given, Ms Parry, around what the grant was for, what were the proposed outcomes of that grant?

Ms Parry : I want to be able to walk you through the stages and content of the feasibility study. I'll just find it in my notes. As I've said, the grant is for stage 1 and stage 2, a pre-feasibility study and a feasibility study. The kinds of activities that would be undertaken in those stages are things like mapping out community and stakeholder engagement, looking at the network capacities, looking at preliminary capital estimates, looking at project model developments, looking at project model contracts, looking at the types of approvals and the commencement of those approval processes, looking at the risk register and the project execution plan.

Stage 2 of the feasibility study would be looking at finalising or scoping more narrowly some of the costs that they would be looking to incur. They would be progressing the approvals, looking at some of the regulatory requirements, whether that is environmental approvals, whether that's ash dams or hydrology. Those are all the kinds of components that would go into a pre-feasibility and a feasibility study.

Senator GREEN: When did the department decide that the outcome of this grant was just to achieve stage 1 and stage 2?

Ms Parry : The department didn't decide that it was just going to achieve stages 1 and 2. The outcome of the grant is to deliverable a bankable feasibility study. That's the intention of the outcome.

Senator GREEN: Let's stop there. That's what the outcome of the grant is for, a bankable feasibility study, yes?

Ms Parry : Yes, that's the intended outcome. The grant is funding stages 1 and 2 to deliver a feasibility study that can then be leveraged by Shine to increase or obtain further funding to deliver it to a full final bankable feasibility study. The department made that recommendation based on the fact that it felt the feasibility study would still deliver outcomes and it was still within the policy authority and the intended outcome of the grant and could be delivered within the time frames and the budget that Shine had proposed.

Senator GREEN: I'll put this to you: did the department make that recommendation because they became aware that Shine wouldn't be able to deliver past stages 1 and 2?

Ms Parry : Shine was very clear that, in order to deliver a full bankable feasibility study, it would be roughly in the order of $10 million. The government had made a decision to fund up to $4 million, so we worked with Shine to determine what would be deliverable both in the time frames and in the funding envelope. In working with them to determine that, in fact, they could deliver the first two stages of that feasibility approach, we determined and made the recommendation to the minister that that outcome was still a legitimate outcome, and we made that recommendation to the minister, also based on the findings of the phase 1 strategic study.

Senator GREEN: What you actually said was:

If Shine is unable to source additional contributions following the completion of Stage 1 and 2, then this will mean outcomes will not be achieved and would not constitute value for money.

So, in regard to the outcome, did the department mean that it wouldn't be able to achieve a bankable feasibility study?

Ms Parry : The $4 million was not going to be able to achieve a bankable feasibility study, so, again, the department recommended to the minister that, for up to $4 million, what it could achieve was the first two stages, and we then made the recommendation to the minister that we felt that, on balance, that still represented value for money because it still could achieve the program objections and outcomes in determining, in essence, a market sounding and a market scoping.

Senator GREEN: They're two different things, though, aren't they? What you're describing the outcome of the grant to be now is different from a bankable feasibility study.

Ms Parry : A bankable feasibility study may still be delivered at the end of this, Senator. You're assuming that they won't get any funding for phases 3 and 4. They may.

Senator GREEN: In some hypothetical land, I'm asking what the outcome of this grant will be, and you're telling me that now the outcome will be, possibly, a bankable feasibility study. But at the beginning of the process the grant was for a bankable feasibility study, so I started the questions, and I'll hand over to my colleague in a second, by asking: when did it change? At first, the outcome was meant to be a bankable feasibility study. Then somehow it got to the point where we'd decided only stages 1 and 2 were sufficient, and then, maybe one day, there might be a bankable feasibility study. Was that decision made because Shine wouldn't have been able to deliver parts 1 and 2 without additional funding?

Ms Parry : As I've previously indicated, we felt that the intended outcomes of the project, whether this is in terms of the bankable feasibility study and the four stages that would need to be delivered and the up to $10 million—we still felt that the up to $4 million that the government had allocated to Shine could deliver a solid outcome in terms of a feasibility study that Shine could then use to leverage further funding to deliver its bankable feasibility study. As I've said, the department, on balance, in terms of looking at what the grant was trying to achieve, what the outcomes of the strategic study were, honouring the election commitment and ensuring value for money, made the judgement and made the recommendation to the minister that delivering those two stages of the feasibility study still represented value for money.

Senator GREEN: So it was the department's decision?

Ms Parry : It wasn't the department's decision; it was the department's recommendation.

Mr Fredericks : I can add, too, Senator, that, in making our recommendation, just to be clear, we were acting consistently with the Commonwealth's grants rules and guidelines.

Senator GREEN: I've got the audit report in front of me.

Mr Fredericks : There's a specific provision in the guidelines.

Senator GREEN: I've read it; it's right here. It doesn't say—

Mr Fredericks : Would I be able to finish?

CHAIR: Order! Senator Green.

Mr Fredericks : In making the change that we've just been discussing for the last 10 minutes, we've been acting completely consistently with the guidelines, which allow a department to waive or amend selection criteria while ensuring the decision to approve the grant is still consistent with the policy authority for the opportunity and the published objective. All of the evidence that Ms Parry has been giving has been explaining to you our view that the change that was made that we've just been discussing—

Senator GREEN: So there was a change.

Mr Fredericks : Of course; we've been discussing that.

Senator GREEN: That's what we needed.

Mr Fredericks : And that change is entirely consistent with the published objectives and the policy authority for the opportunity; therefore, it is consistent with the guidelines.

CHAIR: Senator Green, I understand you are going to pass to Senator McAllister. We were due to go to a break at 9.30. Do you have a bracket of questions, Senator McAllister, that would lead us naturally to a break, before moving on to ARENA and others? That would be my preference, if you have a short chunk of questions to lead us into that.

Senator McALLISTER: I don't really have a short chunk of questions, but I have a range of questions that could be—

CHAIR: Compressed to about five minutes with a bunch of notice?

Senator GREEN: No.

Senator McALLISTER: No, because what is being described by the department is an exercise in sophistry in terms of compliance or a weird rejection of the ANAO report. I would like to go through it—perhaps five minutes of that—and then we can go to a break and have a talk collectively about how we will use the balance of the time. I would like to go to the ANAO report, which, I imagine, you would concede as a reliable account of what happened within the department, or are you disputing the facts that are laid out in the ANAO report?

Mr Fredericks : What will you put to us?

Senator McALLISTER: I will put to you what's in the report. But I'm wondering what is your general disposition is towards the report.

Mr Fredericks : That's not fair, with the greatest respect.

Senator McALLISTER: Were you asked to provide comment on it before it was published?

Mr Fredericks : In fairness, you obviously have the right to put to us factual material that is reported by the ANAO and we will, at that point in time, give you a judgement about our view on it.

Senator McALLISTER: Alright then.

Mr Fredericks : To be fair, there are instances where we've already gone and accepted some of the conclusions that the ANAO have made, so we've been very forward-leaning. We worked very closely with the ANAO in this report. If you ask the ANAO, they will give you that evidence. We worked very constructively, very proactively. There were some lessons in this for us which we've taken and I personally will ensure are carried out. But to be fair, it has been a very constructive approach to this report from us.

Senator McALLISTER: Page 52 of the report sets out a series of administrative steps that were taken to brief the minister in the lead up to the report. It refers in particular to a risk-management briefing on 5 June 2020. It indicates that that briefing discussed the value-for-money implications of Shine Energy not delivering a bankable feasibility study. In footnote a at the bottom of that table, it says:

Additional information on the value for money of the two proposed grants, by way of an attachment to the briefing, was removed from the finalised brief after a draft of the brief had been provided to the Minister's Office. The Office had suggested the draft brief was too long and included too much information.

Is that a correct description of the advice that was given to you by the minister's office?

Mr Sullivan : We've already been through this. I mean, we can go there again.

Senator McALLISTER: I don't believe we got a satisfactory answer. I'm asking a yes/no question: does that characterise the advice?

Ms Parry : As I indicated to your colleague, we provided a finalised briefing with recommendations to the minister, which included drawing attention to not only the risks but the selection criteria, as well as our recommendation. That brief was sent to the minister in a finalised form. The minister requested a meeting with the department to further understand the briefing. He had some questions, which, again, is not unusual. That briefing remained finalised. The minister, as a result of that meeting, requested further information, not less but more. He wanted a further briefing, looking at, again, some of the risks of ad hoc grants, some of the risk ratings on other grants programs, so the department provided some further follow-up advice.

Senator McALLISTER: Are you disputing the sequence of events that are laid out in table 4.1?

Ms Parry : No, I'm not disputing; I am simply reiterating that. That's exactly what happened. We briefed the minister.

Senator McALLISTER: On what date?

Ms Parry : On 5 May or whatever day it has in the report.

Senator McALLISTER: Well, there is a range of dates. Are we looking at the actual report, because it is quite difficult, isn't it?

Ms Parry : Yes.

Senator McALLISTER: Here is the table. It doesn't refer to a briefing on 5 May, in fact.

Ms Parry : If you just give me a minute, I can go to the time line where we did brief the minister. We briefed the minister on 5 June. Sorry, that's wrong; I beg your pardon. On 28 May, we briefed the minister. He then requested a follow-up meeting, so that's the 28 May briefing that is referred to in the table on page 52. He then requested a meeting, which we held the next day via telephone with the department because he had some questions, so we met with the minister the very next day after we had submitted the briefing. He then requested some further information and that was the briefing of 5 June.

Senator McALLISTER: The Auditor-General's note in relation to that briefing that was provided on 5 June indicates:

Additional information on the value for money of the two proposed grants, by way of an attachment to the briefing, was removed from the finalised brief after a draft of the brief had been provided to the Minister's Office. The Office had suggested the draft brief was too long and included too much information.

I ask again: did the office suggest that to the department?

Ms Parry : It wouldn't be unusual. Again, we sent up a draft brief to the office to see whether or not the brief covered off on the concerns that the minister had from the evening before. They indicated that some of the information needed to be more specific, which we did, and we finalised the brief. So briefs can appear in draft and final form.

Proceedings suspended from 21:40 to 21:56

CHAIR: Senator McAllister, You have the call.

Senator McALLISTER: Sorry, Chair, I just walked in as you were communicating something to the witnesses.

CHAIR: I was releasing the witnesses. Do you need to move something?

Senator McALLISTER: Yes, it's the view of, certainly, Senator Green and myself that we would like a spillover to resume discussion about outcome 3 with the witnesses, but we accept that, given we have a range of other witnesses waiting to be questioned, that is not going to be possible this evening.

CHAIR: Under the standing orders, if any three senators require a spillover—and I have had three indicate that they do—it will occur. We will notify you, Secretary, of when that will occur. For this evening, thank you to you and your officers. That will end our examination of outcome 3 for this evening.