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Speech
Federal Minister for the Environment and Heritage
The Hon Dr David Kemp, MP

Australian Resources and Energy 2003 National Conference, Sydney
Wednesday, 16 July 2003

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Speech to the Australian Resources and Energy 2003 National Conference


Introduction

Thank you Mark and good afternoon to you all.

I'm pleased to be here today, to talk about our efforts to reduce Australia's greenhouse signature.

The evidence is that the world is warming and that human action in the production of greenhouse gases is a factor in that warming. Australia needs to respond to the consequences of climate change, and to the challenge of reducing greenhouse gas emissions.

Earlier this month, the World Meteorological Organisation stated that as global temperatures continue to warm due to climate change, the number and intensity of extreme weather events can be expected to increase.

In 2002 there were record high and low temperatures, and record storms, in different parts of the world.

In June 2002, southern France experienced 40 degree plus temperatures, five to seven degrees above the average; Geneva recorded its hottest June on record.

In May, the United States experienced a record of 562 tornadoes in a month. The previous record was 399 in June 1992.

In India, the pre-monsoon heatwave brought peak temperatures of 45 degrees leading to the deaths of at least 1400 people.

The organisation says that new record extreme events occur every year somewhere in the globe but in recent years the number of such extremes has been increasing.

New analyses of data for the northern hemisphere indicate that the increase in the temperature in the 20th century is likely to have been the largest in any century during the last 1000 years.

Australian data shows that there are measurable long-term trends in our climate, both nationally and regionally. Australia-wide temperature records show a warming of about 0.7C since 1910.

The warmest year on record was 1998. 2002 was the fifth warmest year on record. Since 1910, South-west Western Australia has become 25per cent drier in winter, with annual rainfall well down.

Climate change is a reality, and according to the Intergovernmental Panel on Climate Change, there is new evidence that most of the warming observed over the last 50 years is attributable to human activities.

There has been some conjecture of late about the modelling cited by the IPCC and whether their prognostications on the extremes of temperature increases are precisely accurate.

With the best information and the best science, this is an argument that can really only be settled over time, and the Howard Government does not base its policy on any particular temperature levels.

The Bureau of Meteorology has concluded that the more severe impact of the current drought arises from the relatively higher temperatures during 2002 compared with earlier droughts such as those of 1982 and 1994.

Their figures show temperatures during 2002 were 1.22C higher than the long-term average, compared with the previous record of 0.91C.

This illustrates that even very slight increases in temperature can put great pressure on our communities and producers, our ecosystems and species.

In recognition of this reality, in August last year the Government commissioned research to improve our understanding of likely impacts from climate change, and to explore ways to minimise the effect of those impacts.

The Howard Government's greenhouse response, with substantial funding going to the energy and resources sector is a good indication that we are treating climate change seriously and globally.

I have been encouraged by the industry take-up of our voluntary programs for reducing greenhouse emissions.

In developing Australia's future greenhouse strategy, we are mindful that the nations best placed to tackle environmental problems are those who can afford to do so. Thus, maintaining our competitive advantage is crucial and we are keen to continue to work with industry to ensure that happens.

It is through government's partnerships with industry that we will best meet the challenges posed by climate change and best maximise the opportunities it presents.

For the energy and resource industries, it means considering the impact of climate change when developing business strategies and making investment decisions. This is already occurring and will be critical in preserving competitiveness in global markets that are beginning to factor in the need for a reduced greenhouse intensity.

Some of you will have participated in, or be aware of the Carbon Disclosure Project. For those who are not, it is worth considering. Major investors, representing something like $7 trillion in assets, surveyed the world's 500 largest companies on their responses to the commercial risks of climate change. Whatever your views on this initiative, we can expect more like it. Companies that are not dealing with climate change risks can expect investment repercussions.

Today I'll be looking at how we can maximise the opportunities presented by climate change at the national and international level, now and in the future.

Australia's position on Kyoto and rationale

This government is committed to developing an approach to climate change that is effective in dealing with greenhouse emissions. We've demonstrated our commitment with our $1 billion investment tackling greenhouse emissions.

By the end of this decade, the Government's greenhouse abatement programs will deliver about 60 million tonnes annually in emissions reductions - the equivalent of taking all passenger cars off Australia's roads. This forms a strong platform on which to develop Australia's longer-term strategy and puts Australia within striking distance of its 108% Kyoto target.

Climate change provides growing opportunities to use our world leading technologies to reduce both domestic and global emissions. Many companies represented here have contributed to this. Many of you are operating at world's best practice so far as greenhouse is concerned. Even so, sometimes it is necessary for Australia's emissions to increase in order to create a large decrease elsewhere. That is a good thing for the climate.

The $25 billion LNG contract with China is a good example. The contract will add around one million tonnes of carbon dioxide annually to Australia's emissions, but by replacing coal fired power in China it will reduce China's emissions by around 7 million tonnes a year - a substantial reduction in global emissions.

Australia has not ratified the Kyoto Protocol and at present has no plan to do so, but we are still actively engaged in promoting truly global action. The Protocol is not in our national interest and will remain that way without a clear pathway for the involvement of developing countries, and without the United States.

If Australia were to ratify, Kyoto would create obligations for Australia that are not imposed on many of our regional trading competitors. If these arrangements continued over the longer term, industries could be driven overseas by competitive pressure to countries that have made no commitment to achieving emissions reductions. Such a situation would mean an increase in global greenhouse emissions, not the reduction we are all seeking. That would not be a good thing for the climate.

Even with all the best intentions of all the countries who have signed Kyoto, or who may be signing in the future, estimates are that, it will bring about a modest 1% reduction in global greenhouse emissions by 2012.

Compare this with the need, on the basis of the best current scientific assessment from the Intergovernmental Panel on Climate Change, for a reduction in global emissions by around 60% by the end of this century to stabilise greenhouse gases in the atmosphere.

In the absence of the US, the Kyoto Protocol covers only one third of global emissions. The United States, outside the Protocol, emits around 24% of the world's emissions.

China emits around 13% and India 4% with an increase in emissions of over 50% in the last decade. However their status as developing countries means that they do not have to adopt targets to reduce their greenhouse emissions. Developing countries' carbon dioxide emissions from fuel combustion increased by 30% in the last decade. Some developing countries are reducing the growth in their emissions as the result of the adoption of new technologies. The fact remains however, that they are not legally obliged to do so.

The Government has received a number of inquiries by Australian firms regarding their status vis--vis the Kyoto market-based mechanisms. As a non-Party to the Kyoto Protocol, the Australian Government cannot participate directly in the Kyoto mechanisms.

However, the rules agreed at Marrakech in November 2001 do not discriminate between firms from countries that have and have not ratified the Protocol, meaning that Australian businesses are not precluded from participating in the Kyoto mechanisms.

The Howard Government will address this more closely with the release soon of a paper explaining in more detail the rules agreed in Marrakech in 2001 for the implementation of the Kyoto Protocol.

We are also looking into possible ways to facilitate the involvement of Australian businesses in the emerging international markets for greenhouse technologies and services. Australian industries are world leaders in greenhouse action and have much to contribute to the international effort on climate change response.

We don't need to ratify the Protocol to make a difference, domestically and internationally.

Already there is evidence of Australian success in decoupling economic growth from greenhouse emission growth. Our most recent national inventory showed Australia's greenhouse emission grew by 2.1 per cent in 2000, while the economy grew by 4.3 per cent. Emissions per dollar gross domestic product (GDP) are 24 per cent lower in 2000 than in 1990. By 2010, we expect they will be 41% lower.

Furthermore, we have achieved these gains without sacrificing Australian jobs and whilst maintaining one of the highest rates of economic growth in the developed world.

International efforts

Internationally, we are working for a global approach that will lead to effective action by all major emitters and that will reduce the concern of developing countries that their economic growth is threatened. We know that we need a global solution to this global problem.

There are a number of uncertainties in the global picture at the moment. First we do not know whether in fact, the Kyoto Protocol will enter into force. This requires Russian ratification, and I have seen nothing definitive on that score.

Certainly time is fast running out for Russian ratification to result in entry into force by this year's Conference of Parties to the Climate Convention, COP9. For this to occur, Russia would have to ratify by the end of August.

This uncertainty is affecting preparation for COP9, in which Australia has a significant role - in part, because we chair the Umbrella Group. My view is that there is still plenty of scope for a successful COP9. The COP can be a focus for the practical measures countries are taking to deal with climate change.

Australia has made a proposal to enhance the provision of information through the Convention. This has been well received by other parties. Further discussion of this proposal and exchanges on measures dealing with climate change will add to the practical character of the meeting and the utility of the Convention.

There are other uncertainties on the international front. Nobody knows what will follow the Kyoto Protocol. As I have said, our view is that we need action by all major emitters. At this stage we do not have a fixed view on how that action is to be arranged. But the arrangements must be equitable or they will not work - the Kyoto Protocol is proof of that.

Whatever directions the multi-lateral process may take, it will be accompanied by a growing network of bilateral and pluri-lateral action.

Australia has entered into a Climate Action Partnership with the United States to develop cooperative arrangements and research alliances between our research agencies.

A wide range of projects will see us share information on hydrogen and fuel cell research and advanced clean coal technology research. We will collaborate on geological sequestration of carbon dioxide, and future directions for alternative transport fuels and renewable energy.

And we will cooperate in our management of high Global Warming Potential gases. In this regard I have recently introduced into Parliament legislation to reduce the use of synthetic greenhouse gases.

Both governments are seeking to accelerate the development and commercialisation of aluminium and magnesium technologies that can reduce high Global Warming Potential emissions associated with the manufacture of vehicles.

Australia is also progressing bilateral cooperation on climate change with a range of strategic partners, including Japan and the EU. Last week, Australia announced a partnership with New Zealand to strengthen practical cooperation on climate change.

In tandem with multilateral action, bilateral cooperation offers an effective mechanism for practical actions to reduce greenhouse gas emissions, improve scientific understanding of climate change, and develop opportunities for Australian businesses in international greenhouse-related markets.

Australia is working at the international level to evaluate the potential of geo-sequestration technologies for reducing greenhouse emissions released to the atmosphere. We have signed the Charter for the Carbon Sequestration Leadership Forum when participating at the Forum last month.

The Forum encourages the development of joint projects that bring together government and private sector representatives from member countries. It provides an international venue for planning future multilateral carbon sequestration projects.

Geo-sequestration has potential, but coal gasification technologies combined with carbon capture and storage technologies must operate effectively and at a competitive cost; carbon dioxide monitoring and verification protocols must be developed; and the long-term environmental impact of large-scale sequestration must be monitored and evaluated.

Geo-sequestration should only be considered as one component, alongside renewable energy and other technologies, in the range of strategies used to address climate change.

Current national efforts

Government funding for emissions reduction through programs such as the Greenhouse Gas Abatement Program (GGAP); the Greenhouse Challenge Program; the Generator Efficiency Standards Program and the Greenhouse Friendly Program is a kick-start, if you like, towards developing a greenhouse consciousness within all industries.

GGAP targets large-scale, cost-effective and sustained abatement opportunities only supporting projects that will result in quantifiable and additional abatement beyond business as usual.

To date, approximately $145 million has been offered to successful proponents, to support projects with a total value of $724 million. With projected emissions cuts equivalent to 27.5 million tonnes of carbon dioxide during the Kyoto commitment period - 2008 to 2012, it's equivalent to removing 1.1 million cars from the road per year over the same period.

The energy and resource sector has been a prominent participant in GGAP with projects including German Creek colliery, Origin Energy, Queensland Alumina, and Envirogen.

Round 3 of GGAP was announced in May and registered proponents will have until 21 August 2003 to submit their applications. More than 230 potential GGAP projects have been registered and I trust that there will be some excellent proposals from the resources and energy sector.

The Government has also introduced voluntary programs, such as the Greenhouse Challenge to encourage abatement; improve greenhouse gas management; and strengthen information sharing between government and industry. Many of you are among over 800 members of the Challenge, which covers over half of Australia's emissions in key areas across the Australian economy including electricity generation, the aluminium industry, integrated clinker and cement supplies and oil and gas extraction as well as mining and manufacturing sectors. Industry has taken the lead with members continuing to reduce their emissions intensity.

The Generator Efficiency Standards (GES) is another voluntary program, encouraging fossil fuel electricity generators to increase their efficiency to world's best practice standards. So far 14 companies generating 90 per cent of Australia's electricity have come on board with the 4 remaining sizeable generators expected to join soon. The GES program aims to reduce greenhouse gas emissions from electricity supply by up to 4 million tonnes of carbon dioxide by 2010. It is worth noting that these Greenhouse benefits also bring with them a bottom line benefit.

Future directions

Looking to the future, the Government is presently developing a Climate Change Forward Strategy. This is a key measure for Australia's greenhouse future. It will produce a plan to reduce greenhouse gas emissions to meet the 108% target and firmly position Australia for the longer term.

The Strategy will take full account of our particular national circumstances such as a rate of economic growth among the fastest in the developed world, and a significant natural resource base to the economy.

Four elements underpin the development of Australia's forward climate change strategy:

As most of you would be aware, through the Government-Business Dialogue on Climate Change, Energy Minister Macfarlane and I have sought business perspectives on how we can achieve further abatement. We're especially interested in business views on technological solutions and foundations for longer term response, as well as cost effective abatement opportunities; economic adjustment issues; how to avoid long term emissions lock-in; and balancing policy flexibility with a reduction in investment risk.

The Dialogue's working groups have broadly supported voluntary measures and financial incentive approaches with a focus on innovation, research and development and strategies to promote investment in new and improved technologies.

They generally agreed that market-oriented approaches could deliver greenhouse objectives at a lower cost than more prescriptive regulatory approaches and may represent an effective longer-term policy instrument once a comprehensive global framework is in place.

The Government will be looking to make a decision in coming months about broad policy and will take on board your informed views, and those of businesses, States and Territories and the wider community.

The second factor in the future of greenhouse policy that I want to talk about today is the Statement on Energy.

The Prime Minister has identified the development of a sustainable energy policy as a key priority for the Government's third term agenda, and chairs the Energy Committee of Cabinet. Issues being considered include the findings of the Parer Review of Energy Markets; the current development of a Climate Change Forward Strategy; fuel excise; and the Mandatory Renewable Energy Target Review.

The Energy statement will aim to provide the policy framework within which long-term investment in Australia's future energy needs can be undertaken with confidence.

The Committee will ensure that all policies related to energy, including environmental issues, are strategically considered across government to ensure consistency and coherence.

It will be in this context that the important role of renewable energy in Australia's energy future will be considered.

This Government is committed to increasing the uptake of renewable energy as a key means of meeting Australia's future energy needs without adding to our greenhouse gas emissions. The Mandatory Renewable Energy Target, known as MRET, is a cornerstone of the Commonwealth's strategy for growing the Australian renewable energy industry.

It is a world first in creating a national renewable energy market that is backed by legislation, using an innovative market-based system of tradeable certificates. Indeed, other countries are now replicating the program because it is seen as an effective mechanism to deliver industry development for the renewable energy sector.

Industry has taken up the challenge of delivering new renewable energy projects. MRET is just over two years old but is already delivering significant investment and jobs - a situation that we hope to see continue. Around 170 power stations run on renewable energy are being accredited across Australia, covering a wide range of technologies.

The development of renewables in Australia means increased opportunities. Increased opportunities for greenhouse gas abatement and for regional development and employment growth.

The rapid deployment, under MRET, of mature renewable technology such as wind power, provides an important counter-balance to technology risk inherent in other areas.

A challenge for the Government is to ensure that as much of the technology deployment as possible is sourced from Australian industry. A recent Deloittes study of wind development in South Australia, conducted jointly between the AGO and the SA Office of Economic Development, estimated that replacing $1 billion worth of imported wind turbines with Australian manufacture could be worth $2.2 billion in direct and indirect benefits to our economy.

The success of Government initiatives such as the Renewable Remote Power Generation Program demonstrates that multiple objectives can be achieved. Renewable energy in remote areas has provided clean, quiet and reliable power to many Australians, improved energy services and employment growth.

To this end the Government launched a Renewable Energy Action Agenda to provide a strategic policy framework for the development of renewable technology. This Action Agenda aims to increase annual industry sales to $4 billion by 2010 but also sets out the major strategies for boosting the training of service providers, the development of appropriate standards for equipment, developing the export industry and so on.

The Howard Government has also been driving innovation and technology development. A Renewable Energy Technology Roadmap has now been completed and outlines a long-term research and development plan that defines the industry's collective future and establishes the pathways forward.

And what of the more distant future? Could hydrogen provide a long term pathway ensuring energy security with low greenhouse emissions? What would we need to do to achieve a hydrogen economy? Could hydrogen derived from coal gasification technologies combined with geological sequestration provide a pathway towards the hydrogen economy? Or are we better off backing natural gas to produce hydrogen as an appropriate transitional path? Or even renewable energy?

In May, I participated in a Commonwealth-sponsored hydrogen conference in Broome that explored these issues.

The Commonwealth has commissioned the National Hydrogen Study to gain a better understanding of the issues and potential for utilising hydrogen as an energy carrier to improve energy security and reduce environmental impacts.

The study will also assess whether the general optimism for hydrogen is justified and examine strategies and actions that may be appropriate for governments and key stakeholders.

Any shift towards a hydrogen economy will require technical, policy, regulatory, educational and economic issues to be addressed. Australia plans to focus on its competitive advantages and areas of expertise and the Study will inform our forward thinking. The Study is due to report by September this year.

Challenges for the resources and energy sector

Let's talk about the challenges for the resources and energy sector. How are we going to maintain Australia's competitive advantage while reducing greenhouse gas emissions?

I believe these challenges offer opportunities. Indeed, a move to cleaner production may enhance our competitive edge. Government will work in partnership with industry, but ultimately it is up to industry to identify the opportunities and take them.

Overseas markets are already factoring-in a less greenhouse-intensive future. Our trading partners will expect imported energy and resources to be produced with fewer greenhouse emissions.

In Australia, the challenge of developing new technologies may lead to the development of niche technologies with export potential. Partnerships between government and industry may assist with the development of such technologies.

The partnership between the coal industry and the government has led to the establishment of Coal 21. Initiated by the Australian Coal Association, Coal 21 will develop a national clean coal strategy. It will support research and development of low emission technologies for coal power generation in Australia.

The Government is working with the coal industry to develop niche markets. It has provided more than $50 million for Cooperative Research Centres to investigate the cleaner use of energy. This funding will assist with the development of efficient and cost competitive power generation technologies that utilise Australia's vast reserves of low cost brown coal; strategic options for the use of black coal in sustainable development; and the development of greenhouse technologies that capture and geologically store carbon dioxide from a range of sources including natural gas, coal fired power generation and energy intensive industries.

Let me give you an example of another industry that is recognising the benefits of voluntarily reducing greenhouse gas emissions. Under the Greenhouse Challenge Program the aluminium industry has reported a 12% reduction per tonne of product in refinery emissions and reductions of 15 % per tonne of product in smelter emissions. Emissions reductions of 73% in high Global Warming Potential gases per tonne of product have been achieved and the industry continues to explore ways of further reducing emissions intensity.

The cement industry has reported a 7% reduction in total emissions under the program whilst increasing production by over 6.5%. This has been achieved by sourcing alternative fuels and industrial by-products to replace natural raw materials in many stages of the cement production process.

The petroleum exploration and production industry has also been active in emissions reduction under the program reporting significant savings by utilising previously flared or vented waste gases for use as a fuel in the production process. Such actions have reduced emissions by 6% at Woodside's onshore gas plant at Karratha.

Government and industry partnerships are helping to kick-start a movement towards lower greenhouse intensity in the energy and resources sector. However it is only a kick-start and industry should recognise that it must generate its own momentum. Strategies for addressing greenhouse emissions need to be automatically incorporated into business strategies and investment decisions. Many of you are already doing so.

In the uncertain future that we face the Government recognises that as far as possible what is needed by business is certainty about the policy framework with which Australia, and Australian business, will tackle the future.

That is what we intend to do when we announce our new climate change and energy Strategies. We shall make it clear how we intend to achieve the two goals we have established for the Strategy in the long term; reducing our country's greenhouse signature and at the same time, maintaining our competitiveness.

Conclusion

There are both challenges and opportunities in reducing greenhouse emissions. The Government is working, and will continue to work, with industry to address the challenges and make the most of the opportunities. It is providing the funds required to research and develop varied industry approaches to reducing greenhouse gas emissions.

It also encourages industry to continue to work towards a greenhouse response at the micro level: all businesses should consider greenhouse issues when striving to preserve their competitiveness. It is the most innovative of businesses that will prosper from the opportunities presented by climate change.

Australia's energy policy must continue to support economic growth and development, while contributing to reduced greenhouse emissions, and developing new technologies. The Government will continue to listen to industry as it develops its policies.

The delivery of competitively priced and secure energy sources is an issue for all Australians, as is a reduction in greenhouse emissions.

The Howard Government has made this a high priority, and industry has a critical part to play. We are at an important point in the history of energy and climate change-related issues, and we must continue to engage on these and work closely together into the future.

Thank you.

Commonwealth of Australia