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Wednesday, 18 June 2014
Page: 6405

Mr HUNT (FlindersMinister for the Environment) (09:42): I move:

That this bill be now read a second time.

The Carbon Farming Initiative Amendment Bill 2014 provides the framework for administering the Emissions Reduction Fund. At the recent election the public voted to repeal the carbon tax and to introduce the Emissions Reduction Fund as the heart of an incentive based approach to reducing Australia's emissions and to cleaning our air and land.

The Emissions Reduction Fund is, therefore, a fundamental election commitment and the key element of the government's policy to respond to climate change.

Through the Emissions Reduction Fund, the government will work in partnership with business and the community to achieve a cleaner environment through practical actions that will achieve real, measurable results.

The government accepts fully the science of climate change. However, we reject the carbon tax because it is an ineffective mechanism and an unfair mechanism to deal with the challenge at hand.

The carbon tax was a $7.6 billion hit on the economy in its first year, yet emissions were but 0.1 per cent lower. In short, it fails to do the job. The carbon tax has led to higher electricity prices, higher gas prices and it has increased the cost of living. It is estimated by Treasury that repeal of the carbon tax will reduce average Australian household bills by $550 a year. It is, therefore, an unnecessary burden on Australian businesses, a drag on our international competitiveness and an unfair and ineffective hit on Australian families. For these reasons the government has moved to abolish the carbon tax as a fundamental priority since coming to office. The bills to abolish the carbon tax were the very first bills introduced into this House by the government by no less a person than the Prime Minister.

The Emissions Reduction Fund will therefore be a better way to reduce emissions than imposing a carbon tax that increases energy costs for businesses and households.

In short, the carbon tax is an electricity tax, a gas tax and a refrigerant tax, and in the end the cost is always borne by Australian families.

The Emissions Reduction Fund, by contrast, is a major environmental program with benefits for air quality, land management and agricultural productivity and a program to reduce emissions. It can be supported whatever one's views on climate issues.

Funding for the ERF is already allocated in the budget. This bill sets out the administrative amendments to assist in implementation. Industry and farming groups strongly support implementing the Emissions Reduction Fund through the approach set out in the bill of building on—and streamlining—the existing Carbon Farming Initiative and using other existing government mechanisms and processes.

Unlike the approach under the carbon tax, the Emissions Reduction Fund will provide positive incentives to help Australian businesses and households lower their energy costs, improve their agricultural productivity and increase their efficiency. It will do this by building on the Carbon Farming Initiative approach of supporting practical projects.

This bill will implement the ERF to replace the carbon tax and provide a transition for the Carbon Farming Initiative. It will do this by amending the Carbon Credits (Carbon Farming Initiative) Act 2011 and related acts.

The Emissions Reduction Fund

The objective of the Emissions Reduction Fund is to reduce emissions at lowest cost and help Australia meet its emissions reduction target of five per cent below 2000 levels by 2020.

To put that into context, on the most recent advice I have received from my department, when you look over the period from 1990 to 2020, Australia and the United States achieve an almost identical net reduction over the course of a generation.

The government is therefore making a significant investment in the fund. The 2014-15 budget sets out an initial commitment of $2.55 billion, with further funding to be considered in future budgets. The Clean Energy Regulator, importantly, will be able to commit the full—I repeat, the full—amount of funding in emissions reduction contracts from the commencement of the Emissions Reduction Fund. There will be no barrier to the full amount of contracts being written from day one. We have made a significant change: whereas these had to be phased out over a four-year period, they can now commence in full without restriction from the moment of passage.

Existing Carbon Farming Initiative participants will be well placed to bid in and access these funds to support their existing projects.

Three simple principles have guided the design of the Emissions Reduction Fund. These principles are embedded in the framework that is established by this bill.

First, the fund will encourage projects that deliver lowest cost emissions reductions.

Second, emissions reductions will be genuine and go beyond 'business-as-usual'.

Third, administration of the fund will be streamlined and cost-effective.

In short, the Emissions Reduction Fund will not create any significant new government architecture. Instead, it will use existing structures and processes that are understood by industry whilst also streamlining them.

In particular, this bill does four key things to establish the Emissions Reduction Fund.

Expanding the Carbon Farming Initiative

First, this bill expands the Carbon Farming Initiative to enable crediting of emissions reduction opportunities across all sectors of the economy.

Expanding the scope of the Carbon Farming Initiative will allow businesses from all over Australia to bring projects forward and receive Australian carbon credit units for the emissions reductions they deliver through their projects.

Under the Carbon Farming Initiative, farmers and land managers are able to earn carbon credits by storing carbon or reducing greenhouse gas emissions on the land. These credits can then be sold to people and businesses wishing to offset their emissions. The Clean Energy Regulator has registered more than 130 Carbon Farming Initiative projects and issued over 6 million Australian carbon credit units since the program commenced in late 2011.

Under the Emissions Reduction Fund, this Carbon Farming Initiative approach will be expanded so that other parts of the economy can access the system. This includes areas like energy efficiency, waste coal mine gas, cleaning up power stations, the transport sector and large industrial facilities.

The expansion of the Carbon Farming Initiative will be achieved by amending existing legislation, which establishes the Carbon Farming Initiative, and amending the administrative and reporting arrangements that support it, including the National Greenhouse and Energy Reporting Scheme.

In particular, the Carbon Farming Initiative Amendment Bill 2014 amends the Carbon Credits (Carbon Farming Initiative) Act 2011, the National Greenhouse and Energy Reporting Act 2007, the Australian National Registry of Emissions Units Act 2011 and the Clean Energy Regulator Act 2011.

Empowering the Clean Energy Regulator

Second, this bill empowers the Clean Energy Regulator to conduct auctions, enter contracts and purchase emissions reductions.

It provides for the Clean Energy Regulator to run regular reverse auctions or other procurement processes. This will allow the government to simply and efficiently buy the lowest cost emissions reductions across the economy from new projects, as well as existing Carbon Farming Initiative projects.

The projects with the lowest cost per tonne will be selected, and the Clean Energy Regulator will enter into contracts to purchase the emissions reductions from these projects. These contracts will give businesses confidence and certainty about the payments they will receive and provide genuine incentives and support to improve energy efficiency and agricultural productivity.

The Clean Energy Regulator will publish information after auctions about auction outcomes to help businesses understand the opportunities available to them under the Emissions Reduction Fund. This is full public transparency, as it should be.

The competitive nature of this process will ensure that the Emissions Reduction Fund achieves the best value for taxpayers' money. Payments will be made after emissions reductions are achieved, but under a contract for delivery. Therefore, the emissions reduction providers have the bankable certainty of a contract with the Commonwealth, with periodic payments. The taxpayer and the Commonwealth have the security that they need only pay for actual abatement and actual emissions reductions as they occur and are verified.

Streamlining processes

Third, the bill streamlines existing processes from the Carbon Farming Initiative, removing red tape to make it easier to register projects and receive credits.

Fewer project registration steps will see projects approved more quickly.

More flexible reporting arrangements will improve cash flow.

A risk-based approach to audit means that lower-risk projects will have fewer obligations.

The simplified eligibility requirements around property rights will make project aggregation easier.

Importantly, the bill will remove the exclusive 100-year permanence requirement, which has been a significant barrier to landholders increasing carbon stores in soils and vegetation. Landholders will now have the option of storing carbon for 25 years.

Approving estimation methods will be quicker and easier than under the Carbon Farming Initiative.

An independent expert body established under the current scheme will be broadened in scope and renamed the Emissions Reduction Assurance Committee. It will advise the government to ensure methods are consistent with the scheme's focus on genuine emissions reductions. The complex and time-consuming process of assessing every activity against the common practice test under the Carbon Farming Initiative will be removed.

Transitioning the Carbon Farming Initiative

Fourth, this bill provides transitional arrangements for existing participants in the Carbon Farming Initiative.

Landholders and businesses with existing CFI projects will be able to transition smoothly into the Emissions Reduction Fund.

Existing Carbon Farming Initiative projects—such as projects to manage savannahs, plant trees or capture methane from piggeries—will be automatically registered under the Emissions Reduction Fund and will be well placed to secure contracts at auction, subject to lowest cost, that will deliver them a guaranteed revenue stream from their existing projects on a bankable, periodic basis.

Existing Carbon Farming Initiative projects will also benefit from less red tape, and simplified reporting and audit processes under the new scheme.

Finally, the bill defines the roles and responsibilities of the Clean Energy Regulator. The regulator has established a genuine reputation as an effective, fair and independent body since its establishment, and has the required expertise to administer the Emissions Reduction Fund.

Safeguard mechanism

The fund also includes a safeguard mechanism to ensure that emissions reductions paid for by the government are not displaced by a significant rise in emissions elsewhere in the economy.

The safeguard mechanism will commence on 1 July 2015 and its detailed design will be subject to extensive consultation by industry and will, after that, be given effect by a final legislative package.

Consultation and opportunities

In preparing this bill, the government has consulted widely with business, environment and community representatives from across the Australian economy. I know, in my own case, over the course of the period since 2 February 2010 I have held over 250 meetings with industry, community, environment groups and experts.

I would like to acknowledge the more than 300 organisations, businesses and individuals who have taken the time to contribute their expertise and ideas on the design of the Emissions Reduction Fund.

This feedback has made it clear that there are genuine, significant, low-cost emissions reduction opportunities across Australia that can be unlocked through simple, positive incentives from the Emissions Reduction Fund.

The fund is, therefore, both an emissions reduction program and—I want to stress this—a major environmental program. It is also about substantial co-benefits to improve both economic and environmental outcomes.

It can be supported as an environmental program whatever one's position on climate issues and the need to reduce emissions.

There are many types of projects that, for example, could be supported under the Emissions Reduction Fund. Possible examples include:

Cleaning up Australia's waste sector by capturing the methane for flaring or generating electricity, thereby improving local air quality.

Emissions reductions from the transport sector—covering air, sea, road and rail activities—from technology activities, low-emission vehicles and operational changes—

only last evening, I spoke with a former member of this place and close personal friend, Pat Farmer, and he inquired about the potential for the fund to engage with low-emissions transport opportunities. I can specifically confirm to Mr Farmer and to others that are interested that it is expressly designed to offer opportunities for emissions reduction in the transport sector. Again, this offers real opportunities to improve local air quality and reduce dangerous particulate pollution.

The capture of coal mine gas, which could be flared or used to generate electricity.

Using alternative waste treatment facilities to stop the waste being deposited in landfills in the first place. This is an approach widely supported in many places across Europe for generating clean electricity while avoiding noxious fumes. It has a significant local community benefit.

Capturing methane from waste water facilities, whether it is at abattoirs or chemical processing facilities, with, again, significant air quality benefits for neighboring landholders and residents.

Improving industrial energy efficiency at large energy-using facilities through large-scale changes—such as installing more efficient process heating and the replacement of boilers and furnaces—or pulling together smaller incremental improvements that aggregate up to large savings at power stations, cement and aluminium production facilities, and oil and gas extraction plants.

Energy efficiency improvements in the commercial building sector, including offices, retail chains and educational facilities. This could include partial and full retrofits of existing commercial buildings, installation of energy efficient lighting or fans, or the installation of co- and tri-generation—

this is a particular opportunity for state and local governments, with the large administrative, educational and medical facilities which they own and operate—

Improvements in the efficiency of household electricity consumption through aggregating up individual changes across a large number of households, thereby reducing household energy costs and electricity bills.

Projects to destroy the methane that is generated from manure in piggeries and dairies—

again, with local air quality improvements for neighbours—

Projects to reduce emissions by feeding dietary additives to milking cows, with productivity benefits.

Projects to manage fires in savanna grasslands, supporting Indigenous land management and communities.

Revegetating land to improve water quality, and reduce erosion and salinity—

part of the long process of reversing land degradation in Australia, as we adapt our farming practices to the needs of this continent after two centuries of settlement; a fundamentally important approach to improving land management, land health and the recovery of degraded areas—

Replenishing the carbon content of soils to improve the health and productivity of Australian farms.

This is a major opportunity with profound implications for productivity and soil health over the coming decades and generations, and one which I believe will be fundamental, going forward.


In conclusion, I wish to make a series of thank yous. I first want to thank, amongst my colleagues, the Prime Minister for his support over a period of four years. He has been unwavering in his view that we need to take action to reduce our emissions and, in particular, to have the co-benefits to clean up our environment. I also want to thank the minister at the table, the Minister for Trade, Andrew Robb. He has been involved in this project from the outset and was fundamental in design issues prior to the release of the first policy. He has provided tremendous personal support throughout the last four years; it is a very strong, personal thank you. And I want to thank my parliamentary secretary, Senator Simon Birmingham, who is in my view a future cabinet minister in waiting. His capabilities are extraordinary.

Within industry, I want to pay particular thanks to Danny Price and David Green who are the two co-chairs of the Expert Reference Group. They have brought together an outstanding team under the Expert Reference Group, as well as having consulted widely. There are two members of the Exigency economic management and modelling firm, Stuart Allinson and Adrian Palmer, who have been fundamental guides throughout the past four years. I could not have done this without them.

Within the department, I want to acknowledge the secretary, Dr Gordon de Brouwer, who has engaged deeply in this process, and officers, Tas Sakellaris, James White, Kristin Tilley, Shayleen Thompson, Hilton Taylor and the rest of the Emissions Reduction Fund Taskforce within the department. I particularly want to acknowledge the absolutely indispensable advice and the countless hours of work from the senior officers: Maya Stuart-Fox; Trevor Power, who has been the head of the Emissions Reduction Fund Taskforce; and Dr Steven Kennedy, who is a deputy secretary within the department and who is really one of the shining lights of the Australian Public Service.

Within my office, I would like to thank my chief of staff, Wendy Black; senior adviser, Patrick Gibbons; adviser, Alex Caroly; the DLO who has helped work with the department on this, Nick Godden; and to make a special thanks to the adviser responsible for the Emissions Reduction Fund, Temay Rigzin, whose understanding of Treasury, of the Emissions Reduction Fund and of industry, and literally hundreds of hours of work, has been fundamental to reaching this point.

Ultimately, the government knows that the protection of the environment and pursuit of economic growth are not mutually exclusive objectives.

They are two essential elements of a stronger Australia.

That is why we do not agree with the proposition that the only way to protect the environment is by destroying Australia's competitiveness.

And that is why we have moved to abolish the carbon tax as our first legislative act as an incoming government. It does not work. It is not fair. The Australian people rejected it.

There is a menu, therefore, of approaches available to reduce emissions in different economies and societies.

For Australia, an approach that directly purchases emissions reductions through an Emissions Reduction Fund is a better way than an approach that raises prices for all Australians.

By building on the successes of the Carbon Farming Initiative, this bill supports positive action by farmers, businesses and households.

This bill will use positive incentives to reduce emissions, unlock economic activity, boost energy efficiency and improve agricultural productivity.

The bill makes economic sense for Australia. It makes environmental sense for Australia. It can be supported, wherever one stands on climate change, because of the profound co-benefits to the environment, and it was endorsed expressly by the Australian people at the same time as they rejected expressly a carbon tax which had no mandate and does not work. The government therefore stands for practical actions that will achieve real and measureable results for the economy and the environment.

This bill will deliver these results through the Emissions Reduction Fund, and I wholeheartedly commend the bill to the House.

Debate adjourned.