Sharon Grierson (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Climate Change and Energy Efficiency. Will the minister outline recent analysis of the drivers of increased electricity prices? Will the minister report on how this was received and outline the government’s view of this analysis, particularly in relation to the impact of a carbon price?

Greg Combet (Charlton, Australian Labor Party, Minister for Climate Change and Energy Efficiency) Share this | Link to this | Hansard source

I thank my colleague the member for Newcastle for that question. We both come from the Hunter region, where electricity generation is a very important issue and electricity prices are just as important for consumers there as those elsewhere in the country. Mr Rod Sims, who is an independent expert adviser to the government’s multiparty climate change committee and also a person of extensive experience in energy markets in this country and currently the chairperson of the New South Wales Independent Pricing and Regulatory Tribunal, recently gave a presentation to the government’s multiparty committee about what is driving increases in electricity prices. The committee has made that presentation public. Mr Sims’ main point in his presentation was this: a carbon price is the most efficient method of tackling climate change. He clearly states: ‘The introduction of a carbon price will allow the currently lowest cost measures to be chosen while technological change drives the best longer-term solutions.’ That is the fact of the matter: a market mechanism to establish a carbon price is the most economically efficient way of driving reductions in carbon pollution in our economy.

Mr Sims in his presentation also clearly outlined that electricity prices are currently increasing in the absence of a carbon price mainly because of increases in network costs—the 850,000 kilometres of poles and wires in the transmission and distribution network around the country which delivers electricity to consumers. The fact of the matter is that there have been steep rises in electricity prices over the last three years—by as much as 40 per cent—and they have been driven, as Mr Sims indicated in his presentation, by infrastructure investments that were long overdue and that are now starting to be made. We can be clear about one thing: these price rises are not being driven by a carbon price; there isn’t one. They are driven by the long overdue infrastructure spending that is occurring.

Mr Sims went on to make a further point that is extremely important. The point he made was that it is the absence of a carbon price that is a further risk to increases in electricity prices. That is due, as the Prime Minister has indicated in earlier answers, to the fact that the lack of a carbon price is creating investment uncertainty in the energy market, having the effect of seeing the postponement of important investment decisions about the future generation capacity of this country. Investment decisions into combined cycle gas turbine generation, for example, are being forestalled by the lack of a carbon price. There will be more emissions intensive generation infrastructure because of this.

The OECD in a report released yesterday supports the government’s view about carbon pricing being necessary to provide certainty to investors in the energy sector. That will help mitigate the impact of price increases on consumers in the future. These are facts that the Leader of the Opposition will not respect. The opposition with its scare campaign tactics and through its fear mongering about electricity prices is acting against the national interest.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The minister will bring his answer to a conclusion.

Greg Combet (Charlton, Australian Labor Party, Minister for Climate Change and Energy Efficiency) Share this | Link to this | Hansard source

The simple fact of the matter is that the biggest risk to electricity prices in this country sits there in the chair of the Leader of the Opposition.