Nov 3, 2005

Energy Efficiency Opportunities Bill 2005

Energy Efficiency Opportunities Bill 2005

3 November 2005

Mr ALBANESE (Grayndler) (10.00 am)—The Energy Efficiency Opportunities Bill 2005 establishes an energy efficiency opportunities program, under which corporations that are large energy users are required to assess the potential to improve their energy efficiency and report publicly on the assessment. Under the provisions of this bill, there is no need for the corporations who are large energy users to implement, however, any of the identified energy efficiency measures. Labor believes this bill is half-hearted and does not go far enough. This bill is weak where Australia needs to be strong. That is why the opposition has moved a second reading amendment: (1) calling on the government to introduce energy efficiency to all sectors of the community, including transport and housing as well as business, (2) condemning the government for failing to support the alternative fuel and renewable energy industries and (3) condemning the government for not adopting the bipartisan recommendations put forward by the House of Representatives Standing Committee on Environment and Heritage in its landmark report Sustainable cities.

The measures in this bill were foreshadowed in the government’s white paper of June 2004, titled Securing Australia’s energy future. The energy white paper set expectations low, and with this legislation the government has met those low expectations. While this approach is disappointing, it is not surprising. After all, this bill comes from the same group of government ministers and their conservative supporters who reject the Kyoto protocol—a multinational and operational protocol with 155 countries committed to it. And they have criticised the Kyoto protocol whilst praising the Asia-Pacific climate pact. The climate pact is positive but limited. It is consistent with other multilateral and bilateral agreements under the UN framework convention on climate change, but it does not have targets, it does not have funding allocation and it does not have a market mechanism to drive change. I note the first meeting of the climate pact, which was due to be held later this month, has been postponed until next year.

I am very concerned at this bill’s lack of support or vision for alternative fuel and renewable energy industries. After all, getting serious about Australia’s fuel self-sufficiency should be a pretty high priority for the government in the current circumstances. Two weeks ago, on 19 October, Labor’s leader, Kim Beazley, laid out his third blueprint statement, focused on Australia’s fuel and energy needs. The blueprint makes it clear that Labor supports Australian fuel self-sufficiency and supports Australia participating in the emerging international emissions trading market. Labor’s view is that by ratifying Kyoto and adopting emission reduction targets Australia will adapt more quickly to protect ourselves against the risks of climate change. We will also avoid the escalating costs of adapting our economy years from now. We should be doing much more in these renewable energy sources—its the reason why Labor supports increasing the MRET.

The Howard government should follow the lead of state Labor governments in providing a government fleet market for ethanol blends to set an example and help grow the biofuels market. The government should do more to develop Australia’s vast gas reserves and to convert them into clean synthetic crude oil and diesel. And, of course, the government should increase its support for renewable energy. With the necessary mechanisms and support it is clear that the Australian renewable energy industry can become a focal point for our region. We should be using it as part of our drive for exports. Indeed, our full participation in the global renewable energy market is essential to unlocking environmental and economic growth opportunities. So far the government has failed to take up this opportunity. We have the potential for a stronger renewable energy industry, yet the government’s inaction has instead seen our jobs go overseas and our market isolated.

The bill also appears to ignore many of the positive bipartisan recommendations from the Sustainable cities report. For example, recommendation 17 was:

… that the Australian Government encourage the States and Territories to mandate disclosure of the energy efficiency and greenhouse performance of residences at point of sale and point of lease. Recommendations 26 and 27 are very relevant. They are:

… that the Australian government double the photovoltaic rebate to further encourage the uptake of photovoltaic systems and that the Australian government further develop its commitment to energy sustainability, particularly in the area of increasing the use of renewable energy.

Then there is a very good proposal for a sustainability charter and a sustainability commissioner. I have an eerie feeling that these practical and very good recommendations will just be ignored by the Howard government. The overwhelming evidence that climate change is occurring tells us that even half-hearted measures such as this bill are a small step in the right direction to avoid dangerous climate change. We know the challenge of climate change and, most importantly, we know enough to act now. That is why we need stronger measures. We need to confront the problem immediately, head on. The stakes are just too high. We need to start now, to prepare our economy and the energy sector for a carbon constrained future.

I am very concerned by recent statements by the environment minister that:

"discussing emissions targets for countries after 2012 is a waste of time"

and:

"the concept of getting up another negotiating process for caps, targets and timetables is a terrible waste of time."

The minister did, however, say that the establishment of an effective global carbon market could be a useful tool to fight global warming—but he did not envisage that happening for another 15 0r 20 years. It is appalling that the minister is not interested in talking about targets, timetables or, indeed, playing a role in establishing the global carbon market. It is simply not good enough to say, ‘See you in 15 or 20 years on that one.’

Labor’s view is that establishing targets for greenhouse gas reduction is critical. That is why adapting our current energy use is so important. Using energy more efficiently is not a question of choice; it is an absolute necessity. We should be leading the world in delivering energy efficiency and emissions reductions. We should view the challenge as an opportunity. The pricing of our environment and of our natural resources will be the next major economic reform. It is critical that we establish the real price of production and get that right. We need to better price our energy resources, our water and our timber, so that we can achieve sustainability dividends from our investments.

The proper pricing of energy will help drive energy efficiency, but at the moment the signals are all wrong. The price of the most greenhouse intensive energy sources are the lowest. You can get a tax rebate for cutting trees but not for planting them. There is no incentive to do anything other than go for the option that costs the least. We have to change that and factor in costs to our environment. We need to ensure that our national resources are directed to uses that maximise benefit for the current and for future generations. We need to make sure the technology we develop and apply improves living standards now and into the future.

There is ample proof that energy efficiency can deliver economic growth to the economy and greater profits for business. The recent book, Natural Advantage of Nations, identifies many case studies where companies have reduced their greenhouse pollution and increased production. While increasing production by nearly 30 per cent, Du Pont has cut its greenhouse gas pollution by over 70 per cent in recent years, saving more than $2 billion in the process. Five other major firms, including IBM, Alcan, Bayer and British Telecom, have reduced their greenhouse pollution by 60 per cent since the early 1990s and saved another $2 billion. In 2001 BP announced that it had already met its 2010 target of cutting greenhouse gases to 10 per cent below its 1990 level. BP reduced its energy bills by $650 million over the decade. The Climate Group, a UK based non-profit organisation, recently reported that 43 companies had significantly reduced their greenhouse gas emissions and saved a total of $15 billion. This shows that energy efficiency is good for the environment but most importantly it is also good for the economy.

To illustrate this point, I draw the members’ attention to the fact that the British economy since 1990 has increased by about 38 per cent in GDP terms. Over the same period, the UK has reduced its greenhouse gas emissions by 12 per cent. The UK experience is that investment in energy efficiency and alternative energy sources is likely to boost economies rather than to cause damage through loss of existing assets.

The year 2005 has seen unprecedented new evidence that climate change is occurring, including retreating, arctic sea ice, drought across Southern Europe and floods in India. According to the CSIRO, climate change will only worsen drought conditions in Australia. On 12 October British Chief Scientist, Sir David King, when giving the Magna Carta lecture in Parliament House, made a powerful case for Australia ratifying the Kyoto protocol and joining the global effort to avoid dangerous climate change. Sir David King outlined the measures that 25 EU countries and Russia, Japan and Canada are undertaking to help adapt their economies, most notably the development of successful emissions trading systems. Avoiding dangerous climate change is as much an economic and social issue as an environmental challenge.

Climate change is real and Australia has a lot to lose. I do not want to sound unduly alarmist but, although the science has been acknowledged by the Howard government, when the Minister for the Environment and Heritage stated just last week that the debate was over, you cannot help but be concerned. George Bush has admitted that climate change is happening and that we need to do something. It is his Republican colleague Arnold Schwarzenegger that has been leading conservative thinking on this issue in the US. To achieve this, the ‘Governator’ has put in place aggressive energy efficiency standards for buildings and transport, thereby saving Californians millions of dollars on their energy bills. He has set ambitious targets to increase the contribution of renewable energy to 33 per cent of electricity supply by 2020.

I do not want to pretend that energy efficiency measures that work for California can simply be translated to Australia but to put simply that this is not a debate of left or right in the political system. This is a debate where leading conservative thinkers and politicians are taking strong action in other parts of the world. Here the Minister for Foreign Affairs and the Minister for the Environment and Heritage praise Tony Blair but, compared with the Blair Labour government in the UK, they are doing nothing to address these issues.

Australia is unique in the climate policy debate. Not only are we disproportionately high emitters—the highest emitters per capita in the world—we also have more to lose than most from the impacts of climate change. We live on the driest inhabited continent on earth. Our task is great, and that is why we need to start now. To do nothing will inevitably cost more. There is an opportunity cost of time. With our long coastline, significant agricultural sector and unique animals and plants, we are particularly vulnerable to climate change, so it has been frustrating to watch the Howard government’s failure to take decisive action. Next month, the 155 parties to the Kyoto protocol meet for the first time since the agreement came into force. On 11 October, the Prime Minister said:

Kyoto has always been inadequate for Australia’s interests. It was never right for Australia to sign up to Kyoto.

That was not what he said when Kyoto was signed by Australia in 1997. On 19 December 1997, John Howard said:

"We end the year having achieved this … absolutely stunning diplomatic success at the Kyoto conference. That was an extraordinary achievement, that Kyoto summit—an absolutely extraordinary achievement—and it was against all the odds. I mean, what we were able to do at Kyoto was, both, make a massive contribution to the world environmental effort to cut greenhouse gas emissions but also to protect Australian jobs … thanks to the superb negotiating job that Robert Hill did at Kyoto, we achieved a win for the environment and a win for Australian jobs. "

There was nothing equivocal about that. There was total unequivocal support for Kyoto and praise for his environment minister, yet five years later a complete reversal. The Prime Minister was right then—he was right to praise Senator Hill, who made a terrific effort in negotiating Australia’s deal there—but then we walked away from it. The Prime Minister was right then, but he is wrong now.

Labor believes that we do need to be part of the international effort. Labor believes the climate pact that the government is a part of is positive, but it is limited. Technology transfer and working with our Asia-Pacific neighbours is absolutely critical to delivering outcomes; there is no debate there. But we need to be serious about making real progress and not simply rebadging old commitments. Those who suggest there are opportunities for Australia through technology transfer are absolutely correct, but they miss the main point. You cannot transfer technology without the technology to transfer. New technologies evolve from new markets, not new documents.

The question is how you drive change. Technology transfer by itself cannot achieve the outcomes we need. We need targets, funding and market mechanisms. We need both. This is increasingly becoming the reality throughout the world. The European parliament recently adopted a report calling for increased use of renewable energy sources from a current level of about six per cent to 20 per cent by 2020. It is simply incoherent for a string of Howard government ministers to argue Australia should and will meet our Kyoto target, yet to ratify the protocol will destroy our economy. You cannot have it both ways. No-one believes the Kyoto protocol is perfect—Labor does not argue that—no international treaty ever is. But the Kyoto protocol is real. It is in force now, and we are missing the economic opportunities that come from taking early action to cut our greenhouse pollution.

The external costs of climate change are currently not factored into many if not most of our energy investment decisions. Without clear direction from the Howard government, many companies are complacent about energy efficiency and future carbon costs. Protecting industry from real risks is not good policy. We need to better define the risks and how best to minimise the uncertainties. Given the long life of many infrastructure projects, investors need to start now to consider the carbon liabilities associated with each decision they make.

Companies investing now are doing so in the full knowledge of the science of climate change and the likely order of magnitude of global emission reductions required to stabilise atmospheric concentrations of carbon dioxide and other greenhouse gases. Over the last decade there has been a growing understanding of the need for ecological productivity as well as economic productivity, but the Howard government has been arrogant and complacent.

We want the environment on the energy sector balance sheet as a basis for securing a low emission economy for Australia and a low emission future as the future for fossil fuels. We have to give the right signals in the market. This was acknowledged by the Minister for Foreign Affairs, Alexander Downer, on the Insiders program when talking about the climate pact. There are only two sorts of price signals you can make to get the market involved: the first is emissions trading, the second is a carbon tax. I am not sure what the foreign minister was talking about when he spoke about the need for price signals, but Labor know what we stand for. We stand for support for emissions trading, because the external costs of climate change are currently not factored into many if not most of our energy investment decisions.

The bill before us today will do little to address this matter. Labor believes the key to driving change is emissions trading, and it does seem obvious. Create an incentive for efficient, cleaner technologies and a flexible market mechanism to drive least-cost emission reductions. Allow the market to do the job it is best at doing: allocating resources. In fact, emissions trading is such an obvious, uncontroversial tool that federal cabinet considered a joint submission from four departments—Treasury, foreign affairs, environment and industry—supporting a national emissions trading system for Australia, but it got knocked over by the Prime Minister. Instead, he maintained the status quo, focusing on voluntary programs that—although some are worth while—have failed to adequately price the cost of carbon or to adequately slow the rate of growth, let alone start reducing emissions. Australia is on target for 123 per cent of emissions, on 1990 levels, by the year 2020. That is the figure of the Australian Greenhouse Office. It is untenable at a time when the rest of the world are reducing their emissions, that is what we are on target for. It is simply not good enough.

In August this year, the nine north-east US states moved to freeze greenhouse gas emissions by 2009 and then cut them by 10 per cent by 2020. How will they do that? They will establish an emissions trading scheme. California, Washington and Oregon are looking at a similar deal. These initiatives are being led by two prominent Republicans—Arnold Schwarzenegger and New York Governor, George Pataki. In Australia, all state and territory governments are working together to develop a national cap and trade emissions trading scheme. Of course, it would be best for the market and for the environment if the federal government established a scheme rather than leaving the hard work to state governments.

Labor stands for a strong economy, creating wealth and security for all Australians. We understand that environmental progress is a necessary component of that economic prosperity. That is why Labor supports putting in place the mechanisms to actually drive energy efficiency and greenhouse emission reductions. I support the amendments before the House.