Minister for Climate Change and Energy Efficiency Greg Combet

12 October 2010 – Minister for Climate Change and Energy Efficiency Greg Combet signalled it’s down to business on the climate change front with his outline today  of three key planks for action, each of which will have a strong impact on the built environment.

Speaking at the  Carbon Expo Australasia 2010 in Melbourne Mr Combet outlined key priorities in the climate change:

  • Strong support for clean energy
  • Greater energy efficiency in industry and households
  • The introduction of a carbon price

The speech came hard on the heels of the Prime Minister’s Task Group on Eenergy Efficiency report released on Friday, which also acknowledged the key role of the property industry in tackling emissions reductions.

Mr Combet said that a carbon price was a major economic reform.

“Passing legislation on carbon pricing was never going to be easy,” he said.

“Major economic reforms never are.

“The reason is that they entail change, which is always resisted. But change we must. If we are to remain internationally competitive over  the long term, our industries must become less carbon intensive. The best and most responsible way of doing this is by establishing a carbon price in the economy.”

Uncertainty could cost $2 billion a year in higher energy prices and opposition to a carbon price would force up electricity prices, he said.

Highlights of the speech

The Clean Energy Initiative

“The key aspects of the Initiative are:

  • The $1.5 billion Solar Flagships Program which provides funding to support construction and market demonstration of large scale, grid connected, solar power stations in Australia, using solar thermal and photovoltaic technologies;
  • The $100 million Australian Solar Institute (ASI) which funds research and development into concentrating solar thermal and photovoltaic technologies;
  • The Australian Centre for Renewable Energy which draws together more than $560 million of renewable energy investment to help commercialise renewable energy; and
  • The Carbon Capture and Storage (CCS) Flagships Program which provides around $2 billion of funding to support the accelerated deployment of industrial scale CCS demonstration projects.

Community based programs such as Solar Cities and Smart Grid Smart City demonstrate energy efficient, low carbon and renewable energy solutions.  The Solar Homes and Communities Plan and the Solar Hot Water program support households that install solar panels and hot water systems.  And the National Solar Schools Program supports schools with the installation of solar panels and energy and water saving devices.”

The speech came hard on the heels of the Prime Minister’s Task Group on Energy Efficiency Report released on Friday which reinforced the need for a price on carbon.

“Last Friday, the Government released the report of the Prime Minister’s Task Group on Energy Efficiency. Importantly, the Report reinforced the Government’s strategy and the need for a price on carbon. This Report is a significant contribution to the energy efficiency debate.

The findings of the Report will also complement other improvements in energy efficiency that the Government is making through the National Strategy on Energy Efficiency and other energy efficiency programs. The Report will help inform the further development and consolidation of the Government’s climate change policy.”

A Carbon Price is the key

“Decentralising the signal to abate, through a carbon price, means that the Government does not have to prescribe to individual firms or sectors how they are to reduce their emissions. A carbon price therefore encourages ingenuity and innovation. It does this through the everyday decisions of investors and businesses.

Alternatives to a market based mechanism, such as regulatory or subsidy based approaches cannot alone operate on the scale required to meet the Government’s targets and would be extremely costly.

Put simply, other approaches, such as that proposed by the Opposition will cost Australians more and will not be able to deliver the emissions reductions of the scale required to meet our targets.”

And Tony Abbott  gets it so wrong

“It is an odd time in Australian politics when an apparently market friendly Liberal party advocates old school Soviet-style command and control measures rather than supporting a market based solution to such a great challenge.

The impracticality of these alternate approaches was confirmed in the advice provided by the Commonwealth Treasury to both the Government and Opposition in their incoming briefs to government. The advice from the Treasury was that:

Direct Action measures alone cannot do the job without imposing significant economic and budget costs…Moreover, many of the direct action measures cannot be scaled up to achieve significant levels of abatement, and for those than can be scaled up, the cost per tonne of abatement would rise rapidly.”

Uncertainty could cost $2 billion a year in higher energy prices

“Let me make this clear, opposition to a carbon price will force up electricity prices.

The CEO of the Energy Supply Association of Australia, Brad Page, has stated that the uncertainty related to domestic climate change policy will result in a rash of smaller capacity, open-cycle gas turbine generators being built to meet incremental rises in energy demand, rather than fewer but more cost and emission efficient baseload combined cycle gas plants.

This is supported by analysis undertaken by AGL and The Climate Institute. They estimate that uncertainty caused by a delay in a carbon price, could cost the economy and consumers up to $2 billion a year in higher electricity prices or around $60 per household in 2020.

Let me make this clear, opposition to a carbon price will force up electricity prices.”

Business supports a price on carbon

The CEO of BHP Billiton, Marius Kloppers, recently called for a clear price on carbon to be established in Australia.

The CEO of AGL Energy, Michael Fraser, has stated that it is “inevitable” that Australia will introduce a price on carbon emissions.

The President of the Business Council of Australia, Graham Bradley, has stated that part of a multifaceted approach will inevitably include the need for a market based mechanism that will give us the lowest cost approach to reducing the carbon intensity of our industries.

If we are to remain internationally competitive over the long term, our industries must become less carbon intensive. The best way of doing this is by establishing a carbon price in the economy. Inaction is the economically irresponsible course, leaving us with a legacy of heavy polluting investments that will be increasingly unable to compete as time passes.

The carbon price mechanism

“There are several ways of creating a carbon price. The two broad options are a carbon tax or an emissions trading scheme. There are also “hybrid” options that combine features of both. Within the broad family of emissions trading schemes, there are cap and trade schemes, baseline and credit schemes, and variants on these themes.

There are key differences between a carbon tax and an emissions trading scheme. A cap and trade emissions trading schemes places a limit on emissions and allows the market to set the carbon price. In this way, emissions trading provides certainty about the amount of emissions reduction, but less certainty about the carbon price.

A carbon tax, by contrast, provides certainty about the price, but the amount of emissions reduction delivered by a tax at a particular price is uncertain.”

Don’t assume we will end up with a market mechanism

“Regardless of the mechanism, it is the price on carbon that is central to transforming our economy. It is the carbon price that creates a commercial incentive to find better, cleaner ways of producing goods and services.

While a potential carbon tax has received a lot of media and public commentary in recent times, it would be incorrect for people to assume that this is the market mechanism that will be inevitably selected.

In its search for a common view on the best carbon pricing arrangement for Australia, the Climate Change Committee will be examining a broad range of options, with no versions of a carbon price being ruled in or out at this stage.”

The Multi-party Committee to establish a Carbon Price

“If we are to remain internationally competitive over the long term, our industries must become less carbon intensive. The best way of doing this is by establishing a carbon price in the economy. Inaction is the economically irresponsible course, leaving us with a legacy of heavy polluting investments that will be increasingly unable to compete as time passes.

The Committee is starting from the position that a carbon price is an economic reform that is required to reduce carbon pollution, to encourage investment in low emissions technologies and complement other measures including renewable energy and energy efficiency.

It will consider mechanisms for introducing a carbon price including a broad based emissions trading scheme, a broad based carbon levy, a hybrid of both, and economy wide and sector based approaches.  We will consider issues such as coverage, international linking, implementation issues, assistance measures for households and businesses and review provisions.

The Committee will also play an important role in establishing community consensus for action on climate change. We are also establishing two roundtables that will inform the Government’s approach: one for the business community; and one for non government organisations. This is an important recognition that when we are talking about economic reform of this kind we need to work closely with business, environment groups, unions and the social services sector.”

What The Greens said

Greens deputy Christine Milne said the speech was encouraging.

“I am very pleased that the government is positioning itself to adopt the Greens’ timeline to legislate a carbon price to come into effect as soon as possible, not post-2013 as was their position at the election,” Senator Milne said.

“We need to send a very clear signal that all energy investment in Australia from now on must work to prevent climate crisis not make it worse and a strong, effective carbon price introduced as soon as possible is part of that signal” Senator Milne said.

However, she said Mr Combet’s mention on the carbon pollution reduction scheme was best left “dead, buried and cremated” that Professor Ross Garnaut called it “one of the worst examples of policy making we have seen on major issues in Australia.”