Wednesday, 28 February 2007
Matters of Public Interest
I want to speak today on climate change and the great missed opportunity that it represents. The government’s push on nuclear power as the solution to climate change would be laughable if the situation were not so dire. I am not talking about the latest revelation that the Prime Minister’s promotion of nuclear power might have come as a result of a deal with the Liberal Party stalwart Ron Walker or the mining giant Mr Hugh Morgan, someone who is on record as being a climate change sceptic from way back; it is the nonsensical mantra from the Prime Minister that he will not reduce greenhouse gas emissions because ‘it will damage the economy’.
Just saying that, in fact, damages the economy. Apart from a handful of coal and big energy users, other industries and businesses, including this week the electricity generators, are screaming for certainty about how the government is going to lead this country into the inevitability of a severely carbon constrained environment. They know that business as usual is not an option; they know that serious structural and infrastructure change is going to be necessary and they want to know what this will look like, how to prepare for it and how the transition to it will occur. Investment in power generation is a very expensive business and it is long term. The global economy is already pricing greenhouse gases, and this means coal is being penalised and low-emission technologies are being rewarded.
It is pointless and unconvincing to suggest that Australia’s emissions are just a small proportion of global emissions. We are in fact the 10th highest emitter of greenhouse gases, just behind the United Kingdom, which of course has three times the population of this country. Claiming that China’s emissions will swamp our efforts not only is exaggerated but also ignores China’s great achievements. China has improved energy efficiency at four times the rate of Australia. We do not need squabbling about who has to make the first move. If everyone took Australia’s line, there would never be global agreement on anything, much less on the threat most likely to decimate our economy.
Australians are now ready to make a change and have a far better understanding of the climate change issues than our Prime Minister, who has denied the science of climate change for the past 10 years. The government’s claims that Australia is on target to achieve Kyoto targets are false. It is not. The government’s own figures show that Australia’s emissions are projected to be about 127 per cent above 1990 levels by 2020.
So where is the plan to stop this happening? Carbon capture and storage, by all accounts, will not be commercial in the next 13 years, and we certainly will not have 25 nuclear reactors up and running by then. So it is a totally irresponsible line to take, both economically and environmentally. The Stern report prepared for the UK government demonstrated that action is needed now, and that is one reason why nuclear power is another bad and much too expensive bet. Acting now, acting early, by providing early policy direction, will mean the cost of responding to climate change is in fact reduced. Stern showed that quite strongly.
Continued investment in high-greenhouse-emissions infrastructure, such as more coal-fired power, poorly performing houses, badly designed suburbs, transport and water infrastructure, ties this country into, in the case of our suburbs, hundreds of years of high greenhouse emissions. Averting dangerous climate change does not mean a commitment to spending hundreds of billions of dollars. It is not about signing on to a single technology such as nuclear power, either.
If costly nuclear power is the answer then it is clear that the wrong question was asked. The question is not: ‘We’ve got 20 years before we start to get reductions in emissions in Australia; Australia has lots of uranium but no wind, solar, geothermal, solar thermal or wave or tidal power available, so what do we do?’ That is obviously a false question.
Climate change is a human rights issue, an ecological issue and a moral issue. That is why leading the country in avoiding dangerous climate change is the responsibility of governments. Acting to avoid dangerous climate change is about doing things differently and early. Either we decide that it is the right thing to do and we align policies, regulation and attitude or we put the blinkers on and head down the ‘business as usual’ track.
With the scale of the climate change challenge, there is no room for complacency. Clear policy direction, regulation, leadership and follow-through by creating an investment climate for a low-emissions economy are absolutely essential. This week, Mr Turnbull quoted the International Energy Agency as saying that energy efficiency is the No. 1 weapon against greenhouse gases. Of course, he has backed himself into a corner on this one, because leadership at the federal level in the field of energy efficiency and building energy efficiency simply does not match the rhetoric.
Energy efficiency and building energy efficiency are not a priority for this government. The building energy efficiency program and the National Framework for Energy Efficiency have become a slow train crash, and action in business is left to voluntary action. The states are leading the agenda with various degrees of success and sophistication, but this results in a second-best outcome and a multiplicity of programs between jurisdictions. While Mr Howard itches to take over water, the states are designing their own emissions, renewable energy and energy efficiency trading schemes, no doubt frustrated by the lack of federal leadership. But these are effectively modern equivalents of different rail gauges and will be a nightmare for business.
There is a need for national consistency and national leadership. The government’s response so far has been to throw out red herrings and make ineffective the only policies and programs it has in place. I refer to red herrings such as saying that renewable energy cannot meet baseload energy. What is needed is a diversified energy portfolio and load management, not baseload. It is about providing energy at the point, time and size that is needed through distributed generation, and a move away from a complete reliance on large, central, baseload generation with transmission lines crossing the country.
A diversified portfolio and load management is about using solar water heaters instead of electric hot water systems that are powered by large power stations hundreds of kilometres away. It is about designing buildings well so that the heating and cooling load can be met through passive means and reduce the high demand for air conditioning. A five-star energy house is a low-energy using house and a more comfortable house. The cost differential between a five-star house and a three-star house is minimal at the time of construction but the environmental impact of a three-star energy house is almost twice as much as a five-star house, and will remain so for 100 years. A five-star house will result in an energy bill reduced by $200 per year and associated growth in the economy and in jobs.
What is required is coordinated action at all levels of government. It requires coordinating building regulation, energy market reform and removal of disincentives for distributed generation and renewable energy and energy efficiency. This needs to be supported by clear targets and market mechanisms such as carbon emissions trading, renewable energy trading and energy efficiency trading—that is, the black, green and white certificate trading systems. That is the direction in which Australia needs to head.
Renewable energy—green certificate trading—is already underway with the mandatory renewable energy target. This government has wasted 10 years on what looked to be a promising mandate for renewable energy, but the promised two per cent target was so watered down that not only was it met within three years but renewable energy, which had a 10.5 per cent market share before MRET, now, in 2007, has decreased to a nine per cent market share. We are going backwards.
Renewable energy has enormous potential to meet our energy needs, with solar, bioenergy and geothermal opportunities barely explored. The renewable energy target could be doubled and industry could respond without even a groan. Trade in carbon emissions—black certificate trading—will drive the change that is necessary to seriously shift from coal power to gas and bioenergy in the first instance and then to bring in solar thermal, geothermal, wind, wave and other renewable technologies.
A national emissions trading system is needed for the most cost-effective, efficient and comprehensive abatement of greenhouse emissions. Energy efficiency—white certificate trading—is more challenging to deliver, but it has enormous scope. Government economic modelling shows that, for a mere one per cent energy efficiency target, 28 million tonnes of CO equivalent could be saved with a three-year payback investment of an extra $586 million. That would also lift GDP by $1,582 million and cut wholesale electricity prices by 19 per cent.
European estimates of cost-effective energy efficiency opportunity and savings are that in the order of 27 per cent in households, 30 per cent in commercial buildings and 25 per cent in manufacturing are possible. Unfortunately, the potential for Australia has not been estimated, but it would be a similar potential. If the Prime Minister will not force big power users to make this investment then he should at least talk up the benefits. These mechanisms, properly designed, need not be anywhere near as expensive as the Prime Minister claims and would certainly not wreck the economy. A domestic emissions trading scheme would cost as little as 40c a week for each householder—nowhere near as expensive and economy wrecking as the Prime Minister claims. Combined with white certificate trading the costs of supporting renewable energy can be offset.
But this does not mean that the government is off the hook and can say, ‘Just leave it to industry and the market to deal with.’ There needs to be strong regulation of minimum energy performance standards for infrastructure, appliances, buildings and equipment and a complete reversal on the energy market which penalises distributed and renewable energy generation and energy efficiency, and results in inflexible options of ‘just build another power station’ outcomes.
The message is clear. Governments have to work together with the common objective of greenhouse pollution reduction with the least disruption to the economy. This means greater take-up of already available technology. Our industry needs support to transition to a carbon-constrained future and it needs unambiguous government policy leadership. Infrastructure takes five to 10 years to build, so the targets and planning must be long term. Greenhouse emission impacts need to be considered and embedded in every planning and investment decision. Action on climate change will not cost billions. There are many low-cost and no-cost actions that can be undertaken. But inaction will cost the earth.
This government is out of step, particularly on coal and nuclear. Doing things the old way is a commitment to ever-increasing greenhouse emissions and tying our economy to greenhouse-intense ways. A shift in thinking is required. No more rhetoric or silly demonising of wind turbines or coal mines—it is time to put in place carefully designed, robust systems for this inevitable move to a globally carbon-constrained future.