Christine Milne (Tasmania, Australian Greens) Share this | Hansard source

Thank you. This amendment from the Australian Greens moves to see that there is no partial exemption for emissions-intensive trade-exposed activities. This is in complete opposition to what the government and the coalition have agreed, which is to provide exemptions to the renewable energy target. I seek some information from both the government and the coalition, if they have any, in relation to this matter. I would like to start with the principle of: why would you want to exempt anyone from having to pay their fair share of a transition to a low-carbon, zero-carbon economy and expand the renewable energy target? Why shouldn’t the price be paid by everybody? As you know, when you exempt sections of the economy from paying, other people have to pay more. In this case, by exempting the aluminium sector—and there are all the other sectors that you have provided exemptions to—the taxpayers, the consumers, actually have to pay more because somebody has to pay for the renewable energy target being achieved and, if those big emitters do not pay, the community will.

We just heard the National Party talking about food processing. It means that the community is going to pay a higher price and so will have less money to spend on the products that the National Party is talking about. In fact, the Treasury gave evidence about this at the inquiry. Treasury’s Ms Meghan Quinn said:

It is the case with all analysis with CGE models that if you restrict coverage of a particular component, whether it be what part of the economy is faced with an emission price or which elements of the economy are covered by a particular scheme, we find typically that narrowing the scope on which the policy acts increases the economic costs to the economy in aggregate. It obviously has different impacts at the sector level, but narrowing the focus on a particular component tends to raise the aggregate economic costs of any policy.

It is actually bad policy to say, ‘We want to have a renewable energy target but we are going to exempt these industries.’ In principle, that is a bad idea. We should be spreading the cost so that everybody has an obligation to see the transition to a low-carbon, zero-carbon economy.

Having said that, I want to go to the question of aluminium. We all know, especially those of us who have lived in Tasmania for a long time, that the aluminium sector has never paid a fair price for energy. That is because the Tasmanian government fell over itself to provide cheap bulk power contracts in order to attract energy-intensive industries to Tasmania. That is the history of why we have Comalco in Tasmania. They came to Tasmania and received secret bulk power contracts, which were give-away power contracts to the aluminium sector. In fact, something like 60 per cent of the energy generated in Tasmania was given as bulk power contracts to energy-intensive industries at very cheap prices, and the rest of the community subsidised that. During the Labor-Greens accord, the Labor Party in Tasmania agreed to make public the bulk power contracts, but of course they reneged on that once we got into government. It is a written part of the Labor-Greens accord that the community be told what those contracts mean.

At the moment, Minister Wong, the mandatory renewable energy target does not, as I understand it, offer exemptions for the aluminium sector. So why aren’t they complaining about having to pay the mandatory renewable energy target? It is because they are not paying it. We know that in Victoria, for example, the Victorian taxpayer pays the share for the aluminium sector. I bet the people in Victoria do not know they are doing that. The Victorian government said that they would subsidise the Portland smelter so that the aluminium sector would not have to pay. The reason the aluminium sector is now wound up about this legislation is that, for most of them, their bulk power contracts will come up for negotiation some time in the next decade. They want to make sure that, when their price negotiation comes up, they are sheltered from having to pay a renewable energy target. If that is the case, they are already not paying. Why are you exempting them in the future when their profits over the last couple of decades have been mega profits? Why are you sandbagging them now? The first question is: which of the aluminium smelters around the country is actually paying the mandatory renewable energy target at the moment?

The second point concerns the actual price that the aluminium sector pay. They claim that this legislation is going to put a huge impost on them, that it is impossible and that they will have to go offshore. We know that that is a load of nonsense. We did not hear any evidence to that effect in the inquiry. None of them said that they would shut up shop and go offshore, because they all admit that what they need is a stable environment in which to work. They need a skilled workforce and a reliable supply of baseload power. That is why they are not going to leave the country. In fact, the best way to put them out of business is to keep on sandbagging them and then let them establish themselves in other countries where there is a large supply of reliable renewable energy. In other words, the only way to make them competitive is to have green aluminium.

We should be expanding renewable energy so that in the future energy-intensive industries generally will be able to insulate themselves against carbon prices by accessing a large and reliable supply of renewable energy. That is a standard case in point. Comalco’s long-term bulk power contract was supplied by hydro, but it may not be in the future. It will be buying from the wholesale market. It may well go away from having hydro power because it will be accessing whatever it gets through Basslink, and that could be baseload coal for all we know. The issue here is that, for energy-intensive industries to be competitive in the future and to insulate themselves from the high carbon price which is coming, they will need large, available and reliable sources of baseload power in the renewable sector.

Why should they not have to pay, as everybody else pays, to get those energy sectors up and running and expanded all over the country? Overseas, geothermal is already providing baseload power to smelters. Why should not the aluminium sector have to pay something towards the development of, for example, geothermal or solar thermal in Australia so that they have large, reliable sources of renewable energy power in the future? What you are saying is that taxpayers should pay for that development so that the aluminium sector can take advantage of it in the future. I think, in the scheme of things, that it is completely inappropriate not to make them pay.

The third point that I would make is in relation to the actual price. There were four reports done that are in the public arena. One has not been published—the one that was done for the big energy users. I suspect it was not made public because it did not provide the answers on price that they wanted. The argument has been very strongly put that, because you are bringing renewables such as solar into the energy generation sector, they are going to shave off the peaks. What these reports have all argued is that there is going to be downward pressure on the pool price because of the renewables bidding in. That was very clear evidence given, for example, by Mr Upson of Infigin Energy. There were also reports from Rome Consulting and the Clean Energy Council which pointed this out, but the one that the government focused on was the McLennan Magasanik Associates report. It said, ‘The RET is expected to have a modest impact on electricity prices.’ Retail prices are expected to increase on average around 3½ per cent above the business as usual scenario in the period 2010 to 2020.

However, the report said that the average pool price impact is going to be between minus four and plus eight. The position I put to you is that, if the aluminium industry do not have to pay the renewable energy price, the target price, but the rest of us do and, as a result of that, the pool price falls, they then get a windfall gain. They get a windfall gain because they do not have any of the risk—government absorbs the risk—and they get a windfall gain as the pool price is forced down. I would like the minister to tell me whether she believes, and whether her analysis is, that the pool price is going to come down. If it is, why are you exempting the aluminium industry from paying the RET, because it could be strongly argued that the pool price might actually fall far enough to cancel out the renewable energy target price?

There is no doubt that electricity prices are going to rise due to a range of factors. In part, that will occur as a result of a carbon price being established in the future. It will occur as coal, ultimately, has to pay its way—although in this country, the way things are going, coal will always be let off the hook. But, anyway, at some point electricity prices are going to rise. What we are saying here is that renewable energy is going to drive down the wholesale price. Why should the rest of us sandbag aluminium and let them achieve a windfall gain? If they are not paying the RET, why should they benefit from the lower future wholesale price? I am very keen for the minister to explain that and to tell me about the analysis from those other reports that I mentioned—the Roam Consulting report, for example.

There was also a study for the Business Council of Australia. That report estimated that, ‘The RET will make wholesale electricity prices lower than they otherwise would be.’ I repeat: ‘lower than they otherwise would be’. So why would you want to exempt them when the price is going to be lower than it otherwise would be? It is a classic case of privatising the profits and the benefits and socialising the costs. If these companies do not have to pay then, as Treasury has said, everyone else will pay a higher price. They do not pay, but then they get the benefit from the lower wholesale prices. They get another windfall gain after decades of having been sandbagged by consumers and by the government. I think it is really incumbent upon the minister to explain.

The other point I would strongly make is this: the aluminium industry are being exempted because they are supposedly trade exposed. Is that really the case? It implies that smelters elsewhere are not covered by a mandatory renewable energy target. But let me tell you that there are many countries that now have renewable energy targets. Japan has set a target for an additional 16,000 gigawatt hours of renewable energy by 2014. Japan already sources 10 per cent of its electricity generation from renewables—this target is additional to that. So is aluminium from Australia trade exposed to Japan because of this RET? No, of course it is not.

The EU has a renewable energy target of 20 per cent. There is no specific target for the share of renewable energy in electricity generation—the target is across several sectors, including transport. My point here is that the EU has a renewable energy target. The UK has a renewable energy target and Japan has a renewable energy target.

Consider the United States. California has a mandated requirement for 33 per cent of electricity to come from renewables by 2020. The Waxman-Markey bill includes a combined efficiency and renewable electricity standard for the United States as a whole which incorporates a target of 20 per cent by 2020. It also includes energy efficiency measures, as our target is going to do—I was trying to put such measures on top of the target to increase it.

So are we trade exposed against California or the rest of the United States? Are we trade exposed against Japan? Are we trade exposed against any of these places? No, we are not. So if we are talking purely about the impact of a renewable energy target on the aluminium industry, they are not trade exposed. So why are we exempting them when they are not trade exposed? (Time expired)