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Senator the Hon Robert Hill
Leader of the Government in the Senate
Minister for the Environment and Heritage
22 July 2001
Hill - The Canadians have had a proposal that they've floated around but Hasn't ever really gone anywhere that they should be able to receive some credit for providing clean energy to the United States. And they asked the Europeans if the Europeans would agree to be part of a process to have a look at this and to give it some sort of formal status within the UN processes so they could have a proper consideration for the future. And what I've said is that we would like to part of that but we would like it to be expanded to - they would have looked purely at the unique circumstances they have with the United States - look at it in a broader context in relation to the supply of cleaner fuels and their substitution for (inaudible..) fuels. This has been a debate in Australia for some time as to whether we ought to be able to get some credit for supplying gas to China for example if it substitutes for poorer quality coal and thus delivers a global greenhouse benefit. And if it could develop legs it could in the future - and we're not talking about anything coming out of this meeting or probably even the next but a bit further down the track - it could become part of a solution to our problem of (carbon) leakage, our concern that we cop a carbon penalty that our competitors don't cop and that wasn't really what the protocol was supposed to achieve. And I decided that we would join this process and the Canadians have agreed so we'll see where that develops but I think it's just got the potential to be quite useful to us in terms of a particular problem that we face that's been an inhibition in terms of the protocol but more importantly it's got significant potential to encourage the global delivery of better greenhouse gas outcomes.
Journalist - What was the Euro reaction?
Hill - They agreed.
Journalist - For us would that mainly apply to LNG exports?
Hill - Well it's LNG that I had in mind.
Journalist - (inaudible)
Hill - We get hit because we have some very carbon intense industries but sometimes that industry is producing products that are actually help contribute to a better global greenhouse outcome.
Journalist - Because we have the world's best aluminium process?
Hill - Well it could be aluminium or the new manganese plant in Queensland is a typical example - very greenhouse intense process but potentially huge greenhouse benefits in terms of light-weighting vehicles in the future and that sort of thing. That's sort of running before I crawl here but LNG is the thing that I had in mind but I think as the years go by there'll be a serious global debate about how we can encourage global reductions. He (President Bush) is trying to find more answers through technology and technology transfer.
Journalist - So with LNG what would the argument be, that replaces coal exports or that we would claim credits and that sort of makes us more cost effective?
Hill - Well in production of LNG we suffer a significant penalty because of flaring and the processing of LNG and the transport of the LNG all of those carbon consequences or carbon burdens that we have to bear in our accounting. But what the gas often does is replace a much more carbon intensive fuel in Asia and I gave you the example of Chinese coal, we don't get any credit for that. In terms of a better global outcome, us replacing poor quality Chinese coal with natural gas has to be a global benefit in that so why shouldn't there be some sharing which feeds back into our costs and perhaps can offset the carbon penalty that we now have.
Journalist - You've set us this working group to look at it but how could you potentially add something like this on, can you explain the process of how it might go forward?
Hill - Well it might go forward as a future, next accounting period when people start to design the rules for the second accounting period for example, if there's been work done on this and it comes up as a legitimate argument is one way.
Journalist - So has there been a specific working group established on this issue?
Hill - Yes.
Journalist - The EU and Canada and Australia?
Hill - Yes.
Journalist - And we don't expect a result here or in Marrakesh?
Hill - Well the Canadians would like to get some formal endorsement of the process at this meeting, to get an endorsement for Marrakesh but realistically all you'd be doing in Marrakesh is giving the working group some official status within the COP.
Journalist - (Inaudible)
Hill - Well China doesn't have a binding target. It's a bit like the CDM mechanism basically you'd have to have some arrangement between the host country and the provider of the Australian energy but you certainly would have to avoid double dipping but there are ways in which that can be done and still encourage the development of cleaner alternatives.
But the second thing is we also talked to the Europeans about if there is a new fund set up out of this meeting to support developing countries in abatement, for things like technology transfer or capacity building or the like, whether in the rules that will have to developed for how this new fund will operate we can consult with the EU and obviously the G77 who'll be the beneficiaries on looking for something from the developing recipients in return perhaps probably quite modest in terms of a plan, wanting to see an abatement plan in return for the funding support which we would see as a modest but again worthwhile step toward them ultimately being able to accept commitments, another one of those goals we've been seeking for a long time.
Journalist - Are you hoping to get a resolution on that here?
Hill - No - we'd expect the operational rules will be set subsequently. But the EU seemed quite willing to engage in a serious discussion.
Journalist - And it would appeal to the US wouldn't it?
Hill - They weren't at the meeting but that would appeal to them, yes.
Journalist - So these two things that are now in the pipeline if there are positive indications on them that would be a positive thing on two of the big political sticking points that Australia's had, wouldn't it - carbon leakage and developing nations?
Hill - Well I don't want to overstate it, I'd say they're useful steps in the right direction.
Journalist - It would make it politically easier for Australia to accept an agreement if both those issues were moving in the right direction?
Hill - Well that's a bit premature but in terms of Australia's issues we've been searching for years for ways to overcome these particular problems so today presented a couple of opportunities to engage in some new processes which might deliver progress.
Journalist - And on the second one what was the reaction of the Europeans and what is the process?
Hill - They were supportive of looking at that issue. They've always had a very strong position against any conditionality so they were prepared to look at it seriously, they obviously didn't think it amounted to conditionality but nevertheless it was a step in the right direction. Because they accept that we've got to have a goal to bring the developing world into the process it's just that they've been strongly opposed to linking the first accounting period with conditionality. So if this and perhaps some other opportunities are there to start engaging the parties on the issue of participation even if in the first instance it's just accounting for what abatement activities they are undertaking.
Journalist - But the abatement plan would be voluntary, it would be a voluntary abatement plan it would just be accounted for?
Hill - Well it would be linked to the funding they would receive through the fund.
Journalist - So if they didn't produce a plan they wouldn't get the money?
Hill - It's designed to reduce emissions, that's why they're being funded, technology transfer is supposed to reduce emissions but it's a very modest level of accountability, they are not committed to a total target but they are starting to show how they are using that money to effectively reduce emissions.
Journalist - So to get the money they have to have a plan, or they'd have to put the plan into action?
Hill - It's a step towards a program of abatement and being prepared to present that to the international community in a transparent way. So if the developed world is prepared to financially support them on specific projects that's something we get in return that's a step in the right direction.
Journalist - What did the G77 say about it?
Hill - We haven't got to the G77 yet.
Journalist - Green groups are saying you're trying to take the 1997 estimate of your 1990 land clearing emissions for use as a baseline figure under the "Australia clause" instead of more recent and more accurate calculations?
Hill - Well they're quite wrong. We've got to account. We'll be doing just before the accounting period, about 2006, we've got to do the sums and this base period gets set then on the basis of the best accounting procedures.
Journalist - So you'll accept the accounting procedures at the time you ratify?
Hill - You calculate your base on the best systems that are available at the appropriate time and we've got to account in about 2006. So that's when the base gets determined and there's no way we can change those rules and get any advantage.
Journalist - The 2006 figures would be better than the 1997 figures?
Hill - I've got no idea. The science is getting better, we're developing a very sophisticated system of carbon accounting. What it means is the 1990 figure (as calculated in 2006) should be the most accurate that's ever been produced.
Journalist - So you're not pushing the 1997 calculation of that figure?
Hill - Well I don't know what you're talking about. You've got to do it on the basis of the best available system at the time you've got to account.
Date 22 July 2001
Contact: Matt Brown (Senator Hill's office) 0419 693 515