Joel Fitzgibbon (Hunter, Australian Labor Party) Share this | Link to this | Hansard source

I rise tonight to reflect on the Climate Change Authority's draft recommendations on the Renewable Energy Target. The Renewable Energy Target, of course, seeks to deliver on the government's commitment to ensuring that by 2020 the equivalent of at least 20 per cent of Australia's electricity supply comes from renewable sources.

Originally a Howard government initiative, the scheme operates by requiring entities that purchase wholesale electricity to source a proportion of their electricity from renewable sources. Alternatively, they can purchase tradeable certificates which provide a return for investors in the renewable energy sector. As such, the returns to renewable energy generators are funded by existing electricity users either through direct participation in the wholesale electricity market or by the costs passed through from their electricity retailers, who of course bear, in the first instance, the Renewable Energy Target obligation.

When the Howard government first commenced the scheme, its target was some 9,500 gigawatt hours of renewable energy by the year 2020, but of course in 2009 the current government changed the target to some 45,000 gigawatt hours. In percentage terms, John Howard's target was around five per cent. In percentage terms again, the current government's target is 20 per cent.

The Climate Change Authority has indicated in its preliminary report that it does not intend to recommend any major changes to the scheme other than what I would describe as minor red-tape type adjustments to improve the efficiency of the scheme and the administrative cost, if you like, to business. While I respect and acknowledge the expertise of those who serve on the authority and do the research and the modelling, this is a preliminary recommendation which comes as somewhat of a surprise to me. It surprises me for a number of reasons, and I will name just a few of them.

Since the introduction of the original Mandatory Renewable Energy Target, we have seen a number of major changes in our economy and a number of major changes in government policy. I will name four—there are more. First, we now have a $23 per tonne fixed carbon price, a significant market mechanism designed to drive down energy consumption and to do something about our carbon emissions. Second, our economy, as a result of events out of our control, events taking place around the rest of the world, is slowing and our energy prices are rising.

Third, our persistently high dollar is affecting the international competitiveness of our manufacturing and other sectors. Indeed, according to the Aluminium Council, since the inception of the MRET and, later, the Renewable Energy Target, its later cousin, the industry estimates that it has paid approximately $300 million in renewable energy target payments.

Fourth, energy demand is falling, which means that the 20 per cent target is now possibly going to 25 per cent, possibly 26 per cent. As energy demand falls, because it is a fixed amount—45,000 gigawatt hours—as a percentage of our consumption it is actually rising. Have a think about that for a moment. I ask all members to think about that. Fossil-fuel-rich Australia is now seeking to source one-quarter at least of its energy consumption from renewable sources.

Of course, it is our abundance of fossil fuels which in part makes us economically competitive as a nation.

Members of this place hold various levels of conviction on the question of climate change—some very few do not believe in it at all; the majority, I think, believe we are facing some form of radical climate change. They might not believe in man's contribution but there are many in this place who do believe that. However, the overwhelming majority of people in this place agree that there is a risk and we should be acting. I welcome the fact that both the major parties in this place have the same commitment to reduce greenhouse gas emissions by five per cent—that is a given. But I do question the $23 per tonne fixed price on carbon running concurrently with a renewable energy target that now goes through a quarter of our total energy consumption. I am tempted to say we should not have a renewable energy target at all, that we should stick with one market mechanism for dealing with this issue to reduce our carbon price and to encourage investment in renewable energy. But I will not say that because the reality is that the RET is here to stay and businesses have made very important investment decisions based on the fact that we have a renewable energy target. It would be a mistake for government to suddenly say that we do not need it any longer. But I will say that there is cause for reviewing the design of the scheme. There is cause for contemplating, at the very least, whether we should be maintaining the target at 20 per cent of energy consumption. In other words, as energy consumption falls, the 45,000 gigawatt hour target should be reduced to maintain the level at 20 per cent. It is interesting that when John Howard introduced a five per cent target, he was criticised because at that time energy consumption was rising and of course the five per cent became more like something between two and three per cent. We have the opposite situation in place now: as energy consumption falls, the percentage is increasing. I think that is something we all reflect on now.

I have read at least in part what the Climate Change Authority has written—I am not claiming to have read everything the authority has written. I can see the caution and I can see the commitment to business certainty. Entrepreneurial risk is what makes us strong. With some exceptions, where market failure is obvious it is right that government should intervene in the market in those cases. And we do have market failure here in a sense and it is right for government to intervene through a market mechanism like the carbon price. Risk and reward must continue to underpin our business model, our economic model and our entrepreneurial spirit. The Climate Change Authority's main justification for, if you like, a business as usual recommendation is that the renewable industry needs certainty. Reward should always reflect risk. We have to be really careful here that we are not just subsidising what some might describe as the rent seekers and have consumers subsidising those who are investing and making big returns in the renewable sector.

Much of what we say in this place reflects our local electorates, and that is only natural and that should be the case. I represent an electorate where coalmining forms a very important part of our economy. I represent an electorate where coal fired power generation represents an important part of our economy. More importantly, like all of us, I represent consuming businesses and consuming households. Those households and those businesses are really concerned about cost of living issues. They are very concerned about the rising price of energy, and we all know in this place that there are many reasons for that—the carbon price is only a small part of it. Big network investments, particularly in states like New South Wales, take the lion's share of the blame. I am somewhat critical of the former Labor government in New South Wales for creating that situation.

But all of us in this place should be ever-vigilant about the costs on some of those more traditional industries and on households in our electorate—and I think that, as energy consumption changes, when the dynamic changes, it is appropriate to have a look at the renewable energy target. Business certainty is important but no-one deserves a guaranteed high return on an investment without the risk that business usually takes—and should take—and we should challenge the authorities' preliminary recommendations, have a rethink, acknowledge that things are changing in our economy, forget about the ideology and contemplate the idea of reducing the fixed gigawatt-hour commitment so that the percentage falls with it.