The Hon. Greg Hunt MP

Minister for the Environment

The Hon. Greg Hunt MP

Minister for the Environment

Planning for the future of our cities and the Coalition Government's plan to repeal the carbon tax and tackle climate change

Paper to the State of Australian Cities Conference, Sydney
27 November 2013

Introduction

Thank you Professor Randolph. It is a pleasure to join you today and I would like to congratulate everyone involved with the State of Australian Cities Research Network for the last 10 years of hosting this important conference.

Australia has long had a reputation as a bush nation, but our cities are as much a part of our national identity as our deserts, coasts and rainforests.

Our cities are home to a large and ever-growing proportion of our population with three quarters of Australians living in the nation's 18 major cities, each with more than 100,000 people.

Cities are our homes, the places we raise our children and meet our neighbours.

Our cities are key contributors to our productivity as a nation; they attract businesses through their commercial and cultural activities.

Just as we help shape them, they shape us in return.

I am speaking now not just as the Federal Minister for the Environment; the future of our cities has been close to my heart for a very long time.

I grew up as the son of a Victorian Planning Minister. My father, Alan Hunt, did his best to teach me the DNA of designing and planning for future generations.

We would sit around the table at night and he would discuss the need to think about how each of our decisions would echo through the ages. In particular he would talk about the need to think in terms of the 30, 50 and 100 year implications of our decisions.

There is great weight in the concept that through good planning we are purchasing advance options for future generations. Indeed, the liberal ideal is that we seek to give future generations the best shot at realising the life of their choice.

In the arena of planning, I believe the Commonwealth has a role in encouraging a broadly agreed long-term vision for the basic shape and structure of each of our cities and in helping to create a roadmap to reach that vision.

As part of that long-term vision, the Government's Plan for a Cleaner Environment-which rests on the four pillars of Clean Air (Direct Action), Clean Land, Clean Water and Heritage Protection-also has a role to play in shaping the future of our cities.

This plan is an essential element of our national policy framework and encompasses simple, practical actions that will achieve real, measurable results.

Clean Air centres on two important reforms: the abolition of the Carbon Tax and the implementation of our Direct Action plan.

Clean Land is based on the Green Army, Landcare reform and approvals simplification, otherwise known as the One Stop Shop.

Perhaps Australia's most important natural asset - the Great Barrier Reef - is a particular focus of the Coalition's Clean Water strategy. Our Reef 2050 plan seeks to tackle the risks to reef health with a $40 million Reef Trust to fund major projects.

Other elements of Clean Water include a 10-point Murray-Darling plan and a national Water Security plan.

The primary goal of the final pillar, Heritage Protection, is to instil a new sense of pride in Australia's heritage. Our major focus is on a new National Heritage Strategy, a draft of which will be released for comment during Australian Heritage Week next year.

Together, these initiatives form the backbone of the Coalition Government's plan for the environment.

We have a strong environmental record and will continue the tradition of practical, on-the-ground work that will protect our unique landscape, marine environment and wildlife for future generations.

Today, I would like to focus on the subject of long-term planning to ensure our cities develop sustainably, and two key elements of our Plan for a Cleaner Environment: the repeal of the Carbon Tax and the implementation of our Direct Action Plan.

1. Planning for sustainable cities

As Australia's population grows the challenge is to create cities that are liveable, competitive, productive, equitable and sustainable.

We undoubtedly have some of the most liveable cities in the world. Each of our capital cities is a revelation to overseas visitors.

Indeed in 2012 the Economist Intelligence Unit rated Melbourne as the world's most liveable city. Using the same measure and comparing the results out of 140 cities, Adelaide was fifth, Sydney seventh and Perth ninth.

And the recent ABS report, Measures of Australia's Progress 2013, found there has been progress in Australia's healthy built environments. This is an extremely positive finding.

I want to be frank, though, and acknowledge there are still challenges facing us, such as creating an equitable environment for both inner city residents and those in the outer suburbs.

It is when there is an imbalance, or at worst a breakdown, between social, educational and economic opportunities that real damage happens to social cohesion in our urban communities.

Against that background we can ask ourselves what is a successful modern city? At its weakest it is simply a place where millions live in cramped conditions. At its best though, a modern city is a series of vibrant, connected communities. This must be our vision.

The role and limits of government

Beyond our natural sense of community, which needs little interference from government, what is the role of government in shaping this vision for a series of connected communities?

Government's role should be, very simply, to ensure that there is a broadly agreed long-term vision for the basic shape and structure of the city and to create a broadly agreed roadmap to reach that vision.

It then has to take steps to ensure that the roadmap can actually be implemented by future governments.

In practice, this is about agreeing and reserving those spaces needed for living and those for recreation. It is about understanding the population trends of the next 30 years and therefore planning and preserving the corridors which will give future generations the options to make their own choices.

The roadmap is not a straitjacket, but it needs to set out timeframes for making and implementing the big decisions.

The key to having a meaningful roadmap is broad support. I would be happy to work with each state on a long-term planning process designed by them to fit their own needs. It could involve all three tiers of government and could draw from the planning and social and business sectors.

Most significantly it could be bipartisan. Real bipartisanship is about participation in a genuinely open process from the start - before the answer is known - and with the genuine prospect of influencing the outcome.

The clash of ideas is vital to draw out the best concepts and to ensure accountability - not to mention more than a little fun at times. It is in the planning space that genuine bipartisanship is most needed.

The key to ensuring that any state-based body has the freedom to propose, without being hamstrung by the fear of controversy, is to make the roadmap non-binding. Its work should be a recommendation to state and local authorities but should not usurp the role of government.

It is a matter for each state, but I would be willing to work with them in terms of a 30 to 50 year long-term blueprint for each of our capital cities, lead by the states.

Commitment to infrastructure

At the Federal level, an important element that will contribute to strengthening the productivity and liveability of cities is the Coalition Government's commitment to improving infrastructure in our urban communities.

Inefficient infrastructure networks are one of the key reasons why Australia's productivity has declined in recent years and are also a driver of the cost of living pressures affecting so many Australians.

The Australian Government has an ambitious infrastructure agenda and is committed to a range of actions including developing a 15-year pipeline of major infrastructure projects to be revised every five years based on national, state and local infrastructure priorities.

To begin this process, the Prime Minister recently announced the commencement of a thorough examination of infrastructure costs and financing in Australia with a new Productivity Commission inquiry.

The Terms of Reference for the inquiry provide scope for the Productivity Commission to analyse and report on areas such as:

  • How infrastructure is currently funded and financed in Australia, including by the Commonwealth, the States and the private sector;
  • The rationale, role and objectives of alternative funding and financing mechanisms;
  • The cost structure of major infrastructure projects in Australia, including where infrastructure project costs have increased considerably, compared with other countries;
  • Ways to improve decision-making and implementation processes to facilitate a reduction in the cost of public infrastructure projects; and
  • Other relevant policy measures, including any non-legislative approaches, which would help ensure effective delivery of infrastructure services over both the short and long term.

The overall cost of infrastructure and engagement with the private sector on infrastructure financing are key economic challenges faced by Australia and other countries in our region.

Australia must ensure that private investment is as attractive as possible by reducing the cost of building infrastructure by driving efficiency and removing red tape.

This inquiry will be crucial in identifying how we can lower construction costs and develop a partnership with the private sector to build the infrastructure of the 21st century that Australia needs.

The Productivity Commission will hold public hearings and release a draft report for public comment before delivering a final report to the Government within the next six months, with a draft report to be released in March 2014.

2. Carbon Tax repeal

As we have seen, good planning is about giving future generations choice and this must be founded on genuine bi-partisanship. That does not just mean between political parties and between levels of government, but between government, business and the community.

The private sector has a major role to play in a cleaner environment and a strong Australia. We know that business and sustainability go hand in hand, something that is crucial for the continued planning of our cities.

Fundamental to the future of our cities is, of course, jobs. Delivering a stronger and more prosperous economy that delivers more jobs, higher wages and better services for families is at the heart of the Government's plan for Australia.

The private sector, whether it's agriculture, mining, fishing, housing, energy or waste management and businesses big and small understand better than most the need to think sustainably, to plan ahead and focus on practical, tangible outcomes.

Central to our commitment to working with industry and business is the repeal of the Carbon Tax.

An indication of how seriously we take our commitment to repeal the Carbon Tax was evident in the fact that legislation to repeal the tax was the first item of business introduced by the Government in the new Parliament.

We are repealing the Carbon Tax to reduce costs for households and business and because as an environmental measure, it simply doesn't work.

The Carbon Tax needs to be repealed because at its heart it is an electricity tax. Because electricity is an essential service, it is not merely a tax on big business-it is a tax on families, pensioners and economic activity. Abolishing the tax should flow through to businesses in the form of lower input costs and to households through lower energy bills and cheaper household items.

The price of power is embedded in every cost in the economy. Every small business and every consumer pays the Carbon Tax through higher electricity and gas bills, and through other higher costs.

This was confirmed again recently when the Clean Energy Regulator published details of the huge liabilities inflicted on the Australian economy during the first year of the Carbon Tax.

Electricity companies were liable for 16 of the top 20 Carbon Tax bills. These electricity companies are being slugged over $4 billion, which is being passed onto customers.

Families, businesses, hospitals, schools, aged care facilities, local councils, sports and community organisations are all paying Labor's electricity tax.

An all of this financial pain is for no environmental gain. Under the Carbon Tax, our domestic emissions have been predicted to go up, not down.

The previous Government's own modelling from December 2012, which it submitted to the United Nations Framework Convention on Climate Change, shows that our emissions increase under the Carbon Tax from around 560 million tonnes in 2010 to 637 million tonnes in 2020.

The most recent Quarterly Update of Australia's National Greenhouse Gas Inventory report released by my Department reveals that our emissions in the year to March 2013 are estimated to be 557 million tonnes - exactly the same level as the previous year.

This is despite the previous Government estimating that the Carbon Tax would raise an average of $9 billion a year over the first three years.

Let me reiterate that: a multi-billion dollar cost to Australia's economy for no change in domestic emissions and projected emissions of 637 million tonnes domestically by 2020.

Under the Carbon Tax, Australia will not be able to meet its five per cent reduction target at a reasonable cost without relying heavily on internationally-sourced carbon credits. Given that the previous Government's modelling indicates that the price in 2020 will be $38 a tonne, this is an annual purchase of approximately $3.8 billion of international permits in 2020 alone.

There is a simple reason why the Carbon Tax fails in its fundamental task of reducing emissions: it is the wrong market mechanism for this particular problem.

Repealing the Carbon Tax will reduce the cost of living and make jobs more secure. Based on Treasury modelling, household costs in 2014-15 should be around $550 per year lower than they would be with a $25.40 Carbon Tax.

In 2014-15, the average household electricity bill should be about $200 less and the average gas bill about $70 less than they would be with a $25.40 Carbon Tax.

Scrapping the Carbon Tax will also alleviate an annual compliance cost burden for business of around $90 million, as well as removing over 1000 pages of primary and subordinate legislation.

Small businesses will no longer pay the Carbon Tax on their electricity or natural gas use. They will no longer have a Carbon Tax applied to off-road fuel use or refrigerants. We will not extend the Carbon Tax to heavy on-road fuel, as the former Government had intended.

Repealing the Carbon Tax will be good for all businesses, which are the lifeblood of our cities.

The Carbon Tax is an unnecessary impost on the economy. Repealing the Carbon Tax removes that burden.

The Government consulted extensively on the repeal bills, giving businesses the chance to comment on the details of the repeal process.

We are committed to ensuring that all consumers benefit from the removal of the Carbon Tax and expect that businesses will pass through cost reductions.

This is why we will boost funding to the Australian Competition and Consumer Commission to monitor and enforce reasonably expected price reductions. We will amend the Competition and Consumer Act to prohibit carbon-related price exploitation for designated sectors.

Timing of the repeal

As I said, scrapping the Carbon Tax is this Government's number one priority and we are determined to do this as quickly as possible.

On September 7 the Australian people made a clear choice and I believe that ultimately, despite all its posturing, the ALP will have to respect that mandate.

Regardless of the timing, the repeal of the Carbon Tax will take effect from 1 July, 2014, no matter when the bills pass.

The repeal bills are robust to all scenarios and will ensure that 30 June 2014 is the final date for Carbon Tax liabilities.

This simplifies the transition for businesses and gives complete certainty about future liabilities.

Liable entities must still pay all Carbon Tax liabilities incurred up to 30 June 2014.

Carbon Tax liability reporting for the 2013-14 year will also need to be completed. In fact emissions reporting arrangements will continue and will - in the future - support the work of the Emissions Reduction Fund.

No new carbon liabilities will accrue from 1 July 2014 but all outstanding liabilities up to that point will be collected. It is an important principle that the Commonwealth collects all outstanding liabilities.

3. Direct Action

The Coalition Government believes there is a better way to tackle climate change than imposing an economy-wide electricity tax that hinders business and does nothing for the environment.

As I've said many times before, we absolutely accept the science of climate change. We accept that it is real and that humans are contributing to it.

The Australian Government is committed to its unconditional emissions reduction target to reduce emissions by five per cent below 2000 levels by the year 2020.

As the Prime Minister reaffirmed recently, the Government will consider further action and targets in 2015 on the basis of comparable real global action, in particular by major economies and trading partners. This is not a point of dispute with the Opposition.

What we don't agree with the Opposition on is what domestic policy measure is right for Australia in meeting those targets.

Rather than a punitive Carbon Tax, we will employ our Direct Action Plan to reduce Australia's domestic emissions.

At the heart of that plan is the Emissions Reduction Fund.

The Fund will create positive incentives for industry to innovate and invest in new technologies to reduce their emissions.

With an initial allocation of $300 million, $500 million and $750 million over the forward estimates period, the Fund will provide a pool of capital to create a market for abatement, and this will be far more effective at reducing Australia's emissions than the Carbon Tax.

This Fund will be designed to provide a powerful and direct incentive for businesses across the Australian economy to work with the Government to reduce their emissions.

Design of the ERF

Allow me to briefly outline the model for the Emissions Reduction Fund.

The Fund will 'buy back' abatement via a reverse auction. This is a well-established market mechanism that will allow the Government to achieve its environmental outcomes while minimising costs.

By buying up the 'abatement cost curve', we will provide powerful incentives for businesses to bring forward the lowest cost emissions reduction projects.

The Fund will create a market for abatement in the same way that the National Water Market System has created a market for water. The latter system also relies on a reverse auction and has proven effective in allowing the Government to minimise its cost, while achieving additional water flows.

Opportunities for businesses from the ERF

I'm often asked where the emissions reductions will come from. We are not being prescriptive about where the emissions reductions will come from. In fact, we are keen to unlock abatement opportunities across all of the Australian economy.

The lowest cost abatement may involve projects to clean up waste coal mine gas, clean up power stations or capture landfill gas.

It may be a mix of energy efficiency improvements in Australian buildings and industrial facilities.

It may be reafforestation of marginal lands, or revegetation, or improvement of soil carbon.

The important thing is not where the abatement is achieved, but that it is real, measurable and additional to business-as-usual.

What I can say, however, is that the Fund will offer a range of opportunities for industry and businesses - not only to reduce emissions but to increase productivity as well.

I've often provided the example of Linfox as a case study of how reducing emissions can have enormous benefits for a company's bottom line.

Linfox, one of Australia's largest transport and logistics companies, has reduced its energy costs by cutting its carbon emissions intensity by 37 per cent through improved practices, technologies and staff behaviour.

Similar opportunities exist across industry to achieve productivity gains through energy efficiency.

Consider this - electric motors exist in homes, hospitals, office blocks, plants and factories. In the industrial sector, they are absolutely integral to virtually every process. Motors control everything from pumps to compressors, drives to fans. Over half of Australia's electricity passes through an electric motor.1

The International Energy Agency believes that it's possible to cost-effectively improve the energy efficiency of motor systems by roughly 20 per cent to 30 per cent using technology that already exists. Such an outcome would reduce total global electricity demand by about 10 per cent.2

In other words, there are massive opportunities to reduce energy use and emissions from targeting the upgrade of just one type of industrial system.

This is exactly the sort of innovation that we want the Fund to unlock.

Consultation on the Emissions Reduction Fund

As many of you are aware, we have begun consulting widely on the Fund. Before the end of the year, we intend to seek submissions on a Green Paper on the Fund's design.

The Green Paper will set out the Government's preferred options for design of the Fund.

A White Paper will follow in early 2014, which will outline the final design of the Fund.

It is my earnest hope that some of you here today will play an active role in this consultation process.

We are serious about this process being a full, honest and open consultation, where all ideas are welcome. We want and value your input.

We know that considerable experience and expertise in this area resides among Australian industry and academia and it's our intention to draw from that experience so that the Fund can operate as efficiently and effectively as possible.

Clean Land

Our environment plan also encompasses initiatives that will mean continued progress for our cities and how sustainable they are into the future.

This includes the establishment of a Green Army to work on local environmental priorities, measures to boost Landcare and plans to green our urban areas through our 20 Million Trees initiative.

The Green Army, when fully operational, will see 15,000 young people deployed across Australia to work on local environmental priorities, including cleaning up our urban parks, reserves and open spaces, rehabilitating creek banks and urban waterways and revegetating coastal foreshore areas.

This rolling workforce of young people will generate real and lasting benefits for the environment and improve the natural amenity for all urban dwellers.

In addition, the Coalition intends to help communities look after their local environment by placing Landcare back at the centre of our land management programmes.

The National Landcare Program will be based on three principles: simple, local and long term.

It is a recognition of the valuable work local Landcare groups undertake. We must ensure that they are part of the decision-making process with funding allocated at a local level, rather than in distant Canberra.

Our 20 Million Trees initiative will re-establish green corridors and urban forests on both public and private land. Revegetation projects will garner economic benefits such as preventing soil erosion and other land degradation.

Conclusion

Talking to you today, I am extremely positive about the future of our cities, and am pleased to share the Government's environmental vision centred around long-term planning and investment in infrastructure while supporting a greener, cleaner urban environment.

The issues you will be discussing during this conference cut to the heart of what we as a nation need to think about for the future of our cities and urban environments.

Progress means a true partnership between Government, the private sector and the community.

And above all else, the Government's Direct Action Plan will reward innovation and sustainability in the development industry, particularly in energy efficiency, and offer positive opportunities to help shape the future of our cities.

1 E3 Committee (2013) Electric motors product profile

2 IEA (2011) Energy-Efficiency Policy Opportunities for Electric Motor-Driven Systems

Greg Hunt

Connect

Subscribe

Media contacts

Minister's Office
02 6277 7920