Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Primary Industries, Resources, Forestry and Tourism) Share this | Hansard source

I rise this morning to speak on the Energy Efficiency Opportunities Amendment Bill 2006 and, in doing so, I indicate on behalf of the opposition that we support the bill. I say that because the purpose of this bill is to amend the Energy Efficiency Opportunities Act, which appears to have a number of ambiguities that make it unworkable in its present form. It is therefore appropriate that in a bipartisan way we seek to remedy these deficiencies to guarantee its capacity to be implemented in an appropriate way in industry.

The bill has a number of objectives. Firstly, we want to ensure that, as was originally intended, the year in which energy use triggers the obligation to apply the register is properly defined. Secondly, participants in the program will be required to submit their assessment plans within 18 months of the day after the end of the trigger year. Thirdly, assessment plans will be required to cover the five-year period starting on the day after the end of the trigger year, and subsequent plans must start on the day after the end of the previous plan. Fourthly, the requirements for assessment plans will be consistent throughout the act. Fifthly, and finally, the secretary’s powers can be delegated as necessary for efficient administration.

Obviously, as we all appreciate, this bill is about tidying up some administrative problems with the original act, but I also believe we should address some other problems concerning energy efficiency in Australia. I say that because the bill will not address the urgent need for greater energy efficiency across all sectors of the economy, including our homes and the important transport sector, not just business. For that reason at the end of my contribution on behalf of the opposition, I will move a second reading amendment bringing to the attention of the House some of the serious policy matters which we believe need consideration in going forward on the energy efficiency front in Australia. We very frankly believe there is an urgent need for us as a nation to address greater efficiency in our transport fuel use. This means a national focus on the long-term neglect of the policy area of public transport.

For far too long the Commonwealth has not been willing to work in tandem with state and territory governments to do something about improving public transport, especially in our major capital cities. If we were to make some progress on that front, it would lead to huge improvements in energy efficiency and would also have a dramatic impact on reducing emissions in Australia as part of our international global requirements. That is important because, when you think about it, we have become a nation that drives 500 metres to the local shop instead of walking. We have cities that are uncomfortably congested, that waste fuel and time, which is a cost to business, and that are a source of stress to people trying to carry out their daily lives with reasonable ease. Just think about those issues in the context of not only the cost of running business but also the stress on ordinary people seeking to handle issues of work and home and improving their quality of life in terms of stress management.

It is also about time we fronted up to the fact that we have become a nation that switches on an air conditioner the minute the lounge room seems too hot in summer. One of our biggest problems each summer is peak load energy capacity, which is putting huge demands on infrastructure, especially in major capital cities, such as Brisbane, Sydney and Melbourne. Around Australia, we are a nation that assumes that our energy supplies are infinite. I simply say that we can no longer take that for granted, nor can we continue to ignore the greenhouse implications of our energy use.

The challenge to Australians is to get smarter about energy consumption in our homes and in our industries, our factories and our buildings. We all appreciate, given the global warming debate at the moment, that these are very serious policy issues that have to be confronted in the energy efficiency quest that are unfortunately not addressed in this bill. In addition, the bill does not take up the challenge of diversifying our energy supplies, which is part of the energy efficiency debate. The government, as we all appreciate, has been muted in its support for alternative fuels and renewable energy technologies, yet these are an important part of our energy solutions. As I pointed out in October last year, the government also missed a great opportunity to take up the bipartisan recommendations of the House of Representatives Standing Committee on Environment and Heritage report Sustainable cities, many of which deal with energy efficiency initiatives that could make our cities more liveable and also considerably improve the operation of business. Nevertheless, on behalf of the opposition, I welcome the government’s initiatives to address energy efficiency opportunities in the business sector and I look forward to the first public reports arising from this program that will be due by the end of December 2008.

Having that said, can I also say it is about time that we as a nation tried to bring together a consistent approach on this front through cooperation between the states and territories and the Commonwealth government. This is of concern to industry. As we try to further strengthen Commonwealth, state and territory relations, one of the issues we have to think about in the energy efficiency debate is to get a nationally consistent approach, rather than each tier of government seeking to layer onto business additional costs for meeting different requirements at state and federal levels. This is a very serious issue because it also goes to the cost of running businesses. In a tough global market, we have to do whatever we can to relieve industry of the administrative nightmare and additional costs of meeting some of these requirements.

The act took effect on 1 July this year, and companies that used over half a petajoule of energy in 2005-06 have until March next year to register under the program. It is my understanding that, to date, six companies—Alcoa, Hanson Australia, New Hope Mining, Queensland Alumina, Rio Tinto and Leighton Holdings—have registered for the program. If that is incorrect then I request that the minister corrects the record for the purposes of ongoing debate on this issue. This is a long way short of the 250 corporations estimated to have an obligation to register. We would appreciate in the response from the minister some comment on these issues. I say that because this is something the government must pursue with greater vigour if the program is to have any credibility at all, not only domestically but also within the international community with respect to how we as part of the global community make progress on trying to encourage industry to be more efficient. I simply say to industry that efficiency in energy use is also smart in terms of reducing costs because throughout the world, as we now appreciate, the real cold war is about who controls energy. And if you can guarantee efficiency in energy consumption then you can assist in maintaining a competitive position, especially with the emerging economies of China and India. For that reason, the opposition will be taking a great interest in the register for the program at the end of next March.

I also point out to the House that registered participants will then need to submit a plan to undertake assessments of energy efficiency opportunities, to then carry out those assessments and to report publicly on the outcome of the assessments. That is about public accountability in terms of the endeavour of the Australian parliament to encourage industry to take this issue seriously. For that reason, firms will be free to make decisions on investments identified by their normal business processes. It is about industry actually accepting its responsibility. Obviously the act is targeted at large energy users to address the perceived energy efficiency gap. If anything, it is important to the Australian community, but there is also a secondary objective, which is about encouraging industry to get smarter in how they run their businesses on the energy front.

In Australia both the level of energy efficiency and the rate of improvement since 1973 are, interestingly and worryingly, seriously lower than in other major industrialised countries. Perhaps the low relative price of energy in Australia might explain some of the difference between Australia with its lower rates of energy efficiency improvements and countries with similar energy prices such as Canada and the US. So perhaps one can conclude that because we are so rich in energy at a relatively cheap cost there has not been pressure on the Australian community, both on us as individuals and on business and government, to pay more serious attention to the issue of energy consumption and waste.

We do not want to get to a situation where there is a campaign from the more extreme in the Australian community—for example, some of the Greens or the environmental NGOs—to force up the price of energy to try to ensure that we take energy efficiency seriously. We should do it for the right reasons. We should do it because it is environmentally smart. Households should do it because it is a cost to the running of their own households. Business sector costs could also be considerably reduced.

More generally, I point out to the House that experience in Australia and overseas has shown that there is often a gap between best-practice energy efficiency and actual practice. Across all aspects of life, as private citizens or in industry, the capacity to improve our performance in energy efficiency is there waiting to be grasped by each and every one of us. Whilst some technically feasible energy efficiency improvements will not be economically viable, there is also evidence that firms often do not take up energy efficiency opportunities that are cost effective. This is known as the energy efficiency gap. The decision to introduce a mandatory assessment measure is aimed at addressing this gap and comes in light of the fact that previous government programs have shown that a significant number of cost-efficient energy improvements have been overlooked by the participating firms.

Obviously this bill is about providing a prod—about getting them to take seriously some of the options that are currently available but have been neglected. In that context we should appreciate that business accounts for over 80 per cent of Australia’s primary energy consumption. However, a relatively small number of businesses are responsible for the majority of this energy use. ABS data suggests that the 250 largest business energy users account for around 60 per cent of all energy used by business. Given the coverage of well over 50 per cent of the emissions, the up-front compliance cost to business of an average $49,700 per firm and recurrent annual costs of $87,600 per firm, this seems reasonable coverage initially. In the longer term, however, Labor would like to see the program extended to cover a greater proportion of emitters. This, if anything, is a start in encouraging industry to get serious about this energy efficiency challenge.

With that in mind, I point out to the House that, with rapidly rising energy costs and increasing concern about the implications of climate change, coupled with one of the most rapid economic expansions in history, particularly in China and India, it has never been more important for us to conserve our energy resources, to get the most out of them and to move to cleaner energy sources and technologies.

As we go through this debate about global warming and try to factor in the cost of reducing emissions, business has to get smarter about how it reduces its cost through energy efficiency, but we as a community also have to be serious about the potential impact of an increase in cost of energy and water on people who are retired and on people who are in low-income households. It is appropriate that the community does the right thing on the better use of water and the more efficient use of energy. Business has a capacity to bear the costs of some of these tough decisions that we as a nation must make.

We also have to be aware at a state, territory and federal level that these tough decisions can actually impose serious cost imposts on ordinary people, especially low-income people and people who are dependent on the pension and trying to live from week to week. I say that in the context that I believe we have to make some very serious decisions on this front in the foreseeable future. But we also have to, as a community, be caring about those who might find it difficult to bear the cost of some of these serious and tough decisions which we have got to make in our own best interests as a nation and in the best interests of the global community. That is important because total energy consumption for Australia is 3,000 petajoules per annum and is estimated to cost $40 billion annually.

In that context can I point out that in the foreseeable future, especially on the east coast of Australia, there are some very serious energy generation decisions that have to be made. I simply say to some of those state governments on the east coast that in the next 18 months to two years you have to make these tough energy decisions, including on fossil fuel, otherwise by 2010 or 2015 we are going to have serious energy problems in terms of adequacy of supply and security of supply.

We as a community can no longer avoid these tough decisions, not only on energy consumption but also about guaranteeing our future access to energy at a reasonable price, by running away from the tough decisions on generational capacity. For far too long the Commonwealth and state ministerial councils have failed to solve some of the issues which are barriers to these investment decisions, and I simply say that time is running out. If we do not make these decisions in the foreseeable future then there is a capacity in some of our major capital cities to see the lights go out by 2010 or 2015. I raise these issues because they are seriously related to the debate about energy efficiency. On the east coast it is no longer a question of energy efficiency alone; it is also a fundamental problem of baseload capacity.

In that context, it is made worse by the fact that industrial energy consumption is 40 per cent of the overall cost, giving an energy bill of $16 billion per year. As we all understand, although many firms now achieve impressive economic returns by using energy more efficiently, numerous studies continue to uncover significant potential. Experience in Australia and overseas has demonstrated that it is possible to save 10 to 15 per cent of this over a five-year program. That can assist in the next couple of years because of our tardiness in making some of these energy generation decisions in the immediate past years. Making these improvements—that is, a 10 to 15 per cent reduction in energy use over the five-year program—would result in reduced costs of up to $2 billion annually, would strengthen Australian industry and would make it far more competitive in the tough world markets that we seek to make progress in.

It is very clear that there is an economic imperative as well as an environmental—greenhouse—and resource conservation imperative to get more out of our energy use in industry and business. But it is not just energy efficiency that is important. We have to, as I have said, do more about a reliable and cost-effective energy supply for Australia’s industries and consumers. In particular, we have to provide a national energy framework that will deliver—and this is a very serious issue—the $35 billion of investment in this sector that is needed over the next 10 years, and that goes to generational capacity.

The truth is that we in Australia today have a national energy market in name only. We have gone backwards on the issue of microeconomic reform in more recent years in Australia. It was started by the Hawke and Keating Labor governments, but it is almost as though it has come to a sudden halt, a very serious halt, in the energy market. I say that because I believe that the Prime Minister is doing nothing on this front except conducting a futuristic debate about nuclear power that is nothing but a diversion from the real issues and the decisions that have to be made today.

I acknowledge that a few weeks ago Ziggy Switkowski released the Prime Minister’s nuclear energy report—and I must say I think this is a very important contribution to this debate. It is a thorough analysis of energy capacity and opportunities in Australia. For the first time, in an objective and constructive way, it starts to factor in the relative cost of carbon across all energy opportunities. To my mind that is important, because we are going to have this debate. Businesses already are starting to factor into their investment decision the cost of carbon, which can be anything from $7 to $10 or $15 to $20 per tonne. That is part of the Ziggy Switkowski report. He factors in, given different costs of carbon, at what point nuclear power might actually stack up in Australia economically. So obviously this is part of the debate that we have to have about the energy decisions we make in Australia.

As shown in the Prime Minister’s report, and as I have been saying for some time, whilst nuclear power is important beyond Australia in places such as China, India and France, for example, where 75 to 80 per cent of power is already generated from a nuclear capacity, it simply does not stack up in Australia economically on the basis of all the available evidence today. I predicted that. That effectively means that a futuristic debate about whether or not nuclear power becomes viable in Australia is way outside the time frame that requires us to make decisions on the energy generational front at the moment—which goes to immediate decisions about investment in electricity today.

The Switkowski report represents an important contribution to the debate, but it is not going to keep businesses running this summer, nor is it going to deal with the increasing number of air conditioners that Australian consumers desire at this point in time. National emissions trading is about trying to force us to start thinking about some of these investment decisions.

That takes me back to the COAG Energy Market Review, also known as the Parer report, which recommended some four years ago a national emissions trading system. From my frequent discussions with industry, both peak industry councils and individual employers, not only in electricity generation but in industry generally, they now accept that we will have to develop an emissions trading system in Australia. They are simply saying they require the Commonwealth, in association with state and territory governments, to get serious about this debate.

Some months ago, a discussion paper was released by state and territory governments. It was originally going to be a green paper, but because of a lack of support across all state and territory governments it is merely a discussion paper. It sets out a framework to try and pursue some discussion. What is now required is national leadership to try and bring this together. Ordinary people, as a result of the global warming debate that has intensified over recent weeks, are expecting something to be done.

The truth is that industry is crying out for us to sort this out. They want it sorted out because they need certainty so that they can make investment decisions. They expect us to make serious progress as part of the ongoing dialogue about Kyoto. They want us to put in place in Australia a framework by about 2012 to 2015 which would enable us to give certainty to the private sector for the purposes of making these tough investment decisions.

I use this debate to highlight these matters because they are obviously part of the debate about energy efficiency. Energy efficiency is also intimately related to the debate about generational capacity. In that context, I simply say that there is an urgent requirement for us to try and work out, in partnership with industry and state and territory governments, how the Commonwealth can take us forward on the emissions trading front. As I said, investment certainty in the national energy and gas markets hopefully will eventually deliver lower electricity costs than the current variety of well-intentioned but unsuccessful ad hoc state and Commonwealth schemes already in existence. We need a national system that rolls those well-intentioned state and territory measures into a national outcome which is about neutrality across all energy options in the national market.

As I said previously, the impact on the Australian economy from the shift to an economy-wide emissions trading scheme and away from the current approach equates to a benefit of just over $1.2 billion in five years net present value terms through to 2010. So here we have, from this Parer report and other constructive contributions to the debate, an important statement. Here we are four years later and, in the Energy Reform Implementation Group report by Bill Scales released a couple of weeks ago, we see another important contribution to this debate. He said:

... ERIG has been struck by the significant concerns raised by market participants about market uncertainty in relation to possible future greenhouse gas abatement initiatives.

That statement obviously means that industry wants something done. He then said:

Market participants have indicated to ERIG that greenhouse risk constitutes one of the most important barriers to investment in the energy industry, particularly to new base load coal investments. ERIG notes that most market participants desire a coordinated and sustainable policy approach to greenhouse.

That is a cry from industry for national action, and it can only be achieved by a Commonwealth government working in partnership with the private sector and state and territory governments. As I have said today, the east coast needs to make baseload and peak load decisions on energy generation within the next two years. But, unfortunately, today no-one is prepared to invest because of the Howard government’s failure to introduce national emissions trading that would give investors certainty about carbon pricing in the future. As a result, Australians are paying more for electricity because of the ad hoc measures currently in place at a state and territory level and arbitrary hedging by market participants to offset unknown greenhouse risks in the future.

The simple fact is that the Prime Minister’s refusal to adopt national emissions trading is costing Australians money on their power and gas bills today and also making Australian industry less competitive in the tough global community that they have to operate in. I also believe that his failure to push ahead with some of the reforms necessary to deliver a truly national energy market, including both gas and electricity, is not good for Australia. In my own mind, I think the Prime Minister believes that he can get off the political hook with international debates about global emissions trading and nuclear power. That is only part of the jigsaw. We have to get serious about what we also do at home.

So I simply say on behalf of the opposition that our government at a national level at the moment needs to get on with the serious job of implementing a national emissions trading scheme and to allow the national electricity market to decide on the lowest cost abatement technologies. Let the market decide it. Government cannot pick winners. There is no doubt in my mind that nuclear power just does not stack up, but gas and renewables will. In particular, geothermal energy has enormous untapped potential in Australia. It is interesting to note that, in the future plans for the expansion of Olympic Dam in South Australia, potentially one of the largest uranium mines in the world, it is close to where very serious work is actually being undertaken at the moment with respect to accessing geothermal energy capacity.

For that reason the opposition will take to the next election, as we took to the last election, a national emissions trading policy. That has to be about establishing, in consultation with the private sector, the principles which go hand in glove: guaranteeing our energy future in terms of access but also creating certainty for investment in Australia. Alternatively, we believe, the Howard government will be about picking technology winners and debating a futuristic international energy emissions trading scheme that will do nothing to solve investment uncertainty at home in Australia at this point in time. It will also do nothing to deliver the $35 billion worth of investment needed to meet the sharp rise in Australia’s energy demand over the next 10 years. Energy consumption in the world will double over the next 30 years and we are part of a huge growth in energy demand in Australia which requires us to make these decisions today.

In conclusion, on behalf of the opposition, as the shadow minister responsible for the bill I indicate our clear support for the proper endeavours in the bill to tidy up some of the administrative difficulties embodied in the original legislation. But I also call on the government to address energy efficiency opportunities in other sectors of the economy as a matter of urgency, while asking that they seriously turn their attention to how we go forward on the emissions trading front. With that in mind, I commend the bill to the chamber and move the following second reading amendment on behalf of the opposition:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House:

(1)

calls on the Government to introduce energy efficiency to all sectors of the community, including transport, and housing, as well as business;

(2)

condemns the Government for failing to support the alternative fuel and renewable energy industries; and

(3)

condemns the Government for not adopting the bipartisan recommendations put forward by the House of Representatives Standing Committee on Environment and Heritage in its 2005 report on Sustainable Cities”.

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