Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Hansard source

by leave—I move opposition amendments (3) and (1) on sheet 6154 revised together:

(1)    Clause 3, page 2 (lines 7 to 11), omit the clause, substitute:

        (1)    Each Act, and each set of regulations, that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

        (2)    The amendment of any regulation under subsection (1) does not prevent the regulation, as so amended, from being amended or repealed by the Governor-General.

(3)    Schedule 1, Part 2, page 80 (after line 4), at the end of the Part, add:

Renewable Energy (Electricity) Regulations 2001

138  Paragraph 22ZA(4)(a)

Repeal the paragraph.

These are amendments that seek to ensure that Australia’s trade-exposed industries that are extremely reliant on and heavy users of energy are not significantly disadvantaged by the renewable energy scheme that is being put in place.

This is something that was discussed at length when this legislation was considered last year. At that time, of course, it was discussed in the context also of the government’s CPRS legislation. At that time the government considered, argued for and put into the legislation a formula for the protection of those trade-exposed industries that was reliant upon the passage of the CPRS. Now, of course, we know in this place that the CPRS did not pass, and there is no need for us to revisit all of those debates. Indeed, its future is now quite uncertain as to when or if it may pass. But the issue for these trade-exposed industries remains quite true, and the issue is that they face paying a significantly disproportionate amount of the cost of subsidies through the renewable energy scheme because they are high electricity users, yet they operate—as we have recognised across the chamber—in a globally competitive environment. They are usually price takers rather than price setters and, as a result, they are unable to adapt their pricing to take account of the higher energy costs that a scheme such as this passes through to them.

As a result, negotiations around the expanded target last year increased or provided for an exemption from part of the requirement to purchase or redeem certificates. That started only for the expanded part of the target—that above 9½ thousand gigawatt hours. For the original MRET, below 9½ thousand gigawatt hours, the government said that it would provide compensation where the price of certificates went above $40 but only commensurate upon the passage of the CPRS. As I have noted, that legislation has been withdrawn; it appears nowhere in the government’s forward estimates and we do not know if or when it will be coming back. But the reality of what we have done here and are doing today in separating the renewable energy target and putting in place the LRET and the SRES schemes is that in providing that certainty to the proponents of major renewable energy developments we expect that the price of certificates—especially over the early years and, indeed, potentially in the late years if targets are not being met—could rise quite significantly. In particular, they could rise above that $40 mark regardless of whether a CPRS exists in the marketplace or not.

Why $40? It is $40 because that was, essentially, the level that companies were paying under the original MRET, when it was a five per cent mandatory renewable energy target. At that stage they were paying about $40; there was no compensation and that was a reasonable level it would seem. The target has been increased to 20 per cent—and now 20 per cent plus because of the establishment of the SRES—and we think it is reasonable to maintain the compensation above 9½ thousand gigawatt hours but to ensure that the exemption above $40 for that first 9½ thousand gigawatt hours is no longer dependent upon the passage of the CPRS. We know that the structure of this scheme means that it will go above the $40 mark.

I note that in debates last year even the minister acknowledged this, and said in this place:

… if the renewable energy certificate price increases above the level of around $40 then the increased renewable energy certificate price increases the cost impact of meeting the current mandatory renewable energy target liability of 9,500 gigawatt hours.

That was her statement in setting the $40 benchmark as a reasonable benchmark. Given that it is highly probable that the LRET price will move above $40, it is reasonable to provide these trade exposed industries, which cannot adjust their prices because of the global market in which they operate, the certainty of knowing that they only face a $40 price on that first 9½ thousand gigawatt hours, plus the 10 per cent or so that they are not exempted from, and the certainty of the exemption above that.

That is the approach that the coalition takes. It is about protecting jobs and industry in Australia, and that is the primary reason for doing this. It is about ensuring that the aluminium and alumina sectors, as well as other sectors that are emissions-intensive trade-exposed price takers, are fairly protected. We urge the chamber to support these amendments to provide those sectors with some certainty going forward and to not leave them dependent on the potential passage of a CPRS that may or may not come before this place. The price is likely to go above $40 and, if it does, for that first 9½ thousand gigawatt hours they deserve the same type of treatment—up to $45 and beyond.