The Hon. Greg Hunt MP

Minister for the Environment

The Hon. Greg Hunt MP

Minister for the Environment

The Coalition Government's plan to repeal the carbon tax and tackle climate change

Paper to the Clean Energy Council National Conference, Melbourne
3 December 2013

Introduction

It is a great pleasure to be here to address the Energy Efficiency Council's National Conference.

The first 100 days of any new government are critical. This is when a government gets down to the business of implementing its vision and working directly with the people and groups - such as the Energy Efficiency Council - who are fundamental to making it a reality.

I would like to take this opportunity upfront to thank the Council for its valuable contribution to the consultation process on the design of our Emissions Reduction Fund.

I am particularly interested in the Council's submission that end-use energy efficiency alone could deliver 58 million tonnes of abatement in 2020, or 37 percent of the abatement required to meet the Government's emissions reduction target.

While we are not being prescriptive about the sources of emissions reduction under the Emissions Reduction Fund, I believe there is much potential for energy efficiency measures to play a prominent role in meeting Australia's abatement challenge into the future.

I will talk more about the Emissions Reduction Fund later in this speech. But first, I would like to provide an overview of our broader environment plan.

As Minister for the Environment it is my privilege today to outline how with simple, practical and targeted actions we will build a partnership between business, the community and the Government.

Our Plan for a Cleaner Environment rests on four pillars: Clean Air, Clean Land, Clean Water and Heritage Protection.

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, both of which I will detail later in this speech.

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

The Green Army, when fully operational, will see 15,000 young people deployed across Australia to work on local environmental priorities.

This rolling workforce of young people will generate real and lasting benefits for the environment.

In addition, the Coalition intends to place Landcare back at the centre of our land management programmes, based on three principles: simple, local and long term. It is a recognition of the valuable work local Landcare groups undertake.

The third element of our Clean Land policy - the One-Stop-Shop - centres on streamlining environmental approvals while maintaining the same high standards.

A simpler environmental approvals process with a single entry point across jurisdictions could become a national competitive advantage for Australia.

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.

There will be greater focus on support for community heritage projects. We want to help local communities across Australia tell their stories and showcase their local history. To assist in this, $1.4 million will be made available as part of a new Community Heritage Grants program.

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 three key elements of our environment policy that will be of particular interest to delegates here today: the repeal of the Carbon Tax, opportunities for abatement under the Direct Action plan and our commitment to renewable energy.

1. Carbon Tax repeal

Protecting the environment and economic growth are not mutually exclusive objectives, but rather two essential elements of a single goal of a stronger Australia.

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

Legislation to repeal the Carbon Tax was the first item of business introduced by the Government into the new Parliament. The House of Representatives has now passed the Carbon Tax repeal bills and they are currently before the Senate.

We are repealing the Carbon Tax to reduce costs for households and business and to pave the way for our Direct Action plan. 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.

To ensure that the repeal of the Carbon Tax proceeds in an effective and efficient manner, the Government has consulted extensively on exposure drafts of the repeal bills, giving stakeholders and businesses the chance to comment on the details of the repeal process.

Ending the Carbon Tax at the end of the financial year will allow the repeal to proceed with the least disruption possible to the energy and business sectors.

The Government accepts the science of climate change. We have made a commitment to provide an additional $9 million over three years for the National Climate Change Adaptation Research Facility to support practical research and guidance on how to deal with the challenges of climate change.

Alongside the Bureau of Meteorology and the CSIRO, NCCARF plays a vital role in making our world-leading research on climate change actionable.

We are committed to our unconditional emissions reduction target to reduce emissions by five per cent below 2000 levels by 2020.

However, the Government believes there is a fundamentally better way to reduce emissions than through a Carbon Tax.

The Carbon Tax is a multi-billion dollar impost on the Australian economy and it doesn't reduce Australia's emissions. Under the Carbon Tax Australia's domestic emissions will go up, not down.

Rather than the punitive Carbon Tax, the Australian Government will reach its emissions reduction target through its Direct Action plan to efficiently and effectively source low-cost emissions reductions and improve Australia's environment.

There is international support for the Government's position. On 13 November 2013 Mr Paul Calandra MP, Parliamentary Secretary to the Prime Minister of Canada, welcomed the Australian Government's legislation to repeal Australia's Carbon Tax. He said:

"Canada applauds the decision by Prime Minister Abbott to introduce legislation to repeal Australia's Carbon Tax. The Australian Prime Minister's decision will be noticed around the world and sends an important message.
"Our government knows that Carbon Taxes raise the price of everything, including gas, groceries, and electricity. Prime Minister Abbott has said that, in Australia, the repeal of the Carbon Tax will reduce the average household's cost of living by (in Australian dollars) $550 a year, take $200 off household power bills and $70 off gas bills."

2. Direct Action

The Coalition Government believes there is a better way to tackle climate change than by imposing an economy-wide electricity tax that hinders business and does nothing for the environment. In tandem with the abolition of the Carbon Tax, we will implement our Direct Action plan.

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

And we are absolutely committed to our target to reduce emissions by five per cent below 2000 levels by 2020.

At the recent UNFCCC talks in Warsaw, Australia agreed with other countries that we will move together to contribute to climate action under a new climate agreement - setting up a process for all countries, including the major economies, Australia's major trading partners and competitors, to play their part.

The Prime Minister has also previously made clear the Government's intention to consider further action and targets in 2015 on the basis of comparable real global action, in particular by major economies and trading partners.

International Direct Action

While the ALP might claim that carbon taxes and emissions trading schemes are the only way to tackle climate change, this is simply not correct. A look at the international situation reveals a very different picture.

I have previously covered the limited role carbon taxes play in reducing emissions. Today I want to discuss the world that is, not how some would imagine it to be.

There are a variety of active international approaches to directly reducing emissions. Countries around the world are showing that there are many policies the help reduce emissions. Here are just a few examples.

First, there is direct abatement purchasing. The Norwegian Carbon Procurement Program purchases abatement credits worth millions of dollars through a competitive tender process.

Japan is establishing its Joint Credit Mechanism which will help it to meet its emissions reduction targets by purchasing direct abatement and funding low-carbon technology diffusion through bilateral agreements with developing countries. Agreements to purchase abatement have been made with Bangladesh, Ethiopia, Indonesia, Laos, Kenya, the Maldives, Mongolia and Vietnam.

Further, the United Nations Clean Development Mechanism (CDM) operates as an abatement procurement scheme. It has registered over 7,000 projects and generated over 1.4 billion tonnes of abatement for market-based purchase.

Second, the European Union, Russia, South Africa and the United States, among many others, all employ energy efficiency measures to abate carbon emissions.

In the United Kingdom residential building sector, all new homes built from 2016 will need to have zero emissions for heating, hot water, cooling and lighting.

Under the Korean Target Management Scheme, around 500 large-emitting entities are required to meet energy efficiency targets.

Third, there are renewable energy targets in Europe, and countries as varied as China, India, Russia, Brazil, Indonesia, Mexico, South Korea, Vietnam and New Zealand, as well as over 30 US states.

Mexico has a goal of 35 per cent of electricity from renewable energy sources by 2024.

There are energy intensity and efficiency targets and schemes in countries such as China, India, Indonesia, Japan, South Africa, Mexico, Russia, New Zealand, Thailand, Turkey and the US.

New Zealand has an economy-wide energy intensity improvement target of 1.3 per cent annually to 2016.

Fourth, to tackle vehicle emissions, the US, the EU, and Canada all rely on emissions standards. The EU emissions standards for cars aim for a fleet-wide average of 130 grams of carbon dioxide per km in 2015 and 95 grams of carbon dioxide per kilometre in 2020. Fleet-wide emissions are currently on track to meet the 2015 target.

Meanwhile Canada is progressively implementing regulatory fuel economy and emissions standards for new cars and trucks (mirroring US rules).

In the power generation sector, regulatory standards for power stations have been tightened in the US and Canada. Regulatory standards for coal-fired power plants in Canada will start from 2015 and are expected to reduce emissions by 31 million tonnes of carbon dioxide in 2020 from 2005 levels, according to Environment Canada.

Last but not least, forest emissions reduction programmes have been implemented in Brazil, Indonesia, and Mexico. In addition, Indonesia's Presidential Regulation on the National Action Plan requires each Province to create mitigation plans in the forestry, peatland and agriculture sectors, among others.

The Coalition Government's Direct Action plan is entirely consistent with the direction taken by many overseas countries.

Direct Action is a genuine, light touch, market-based solution that will reward innovation and enable Australia to play its part in solving this global problem.

Emissions Reduction Fund

Most of you here today will already be familiar with the components of our Direct Action plan.

You will know that 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. 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. Auction processes are a well-established market mechanism and 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 an auction process and has proven effective in allowing the Government to minimise its cost, while achieving additional water flows.

The design of the Fund will be guided by three overriding principles:

  • Genuine - Emissions reductions must be genuine and beyond 'business-as-usual'.
  • Low cost - The Fund will be designed to encourage projects delivering lowest cost abatement.
  • Simple - Administering the Fund should be streamlined and cost-effective.

Opportunities for industry under the ERF

I'm often asked where the emissions reductions will come from. The reality is we are not being prescriptive about the source of potential abatement. 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 that emission savings are 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 - 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 emissions reductions that we want the Fund to unlock.

Consultation on the Emissions Reduction Fund

As you are aware, over the past weeks we have been consulting widely on the design of the Fund and have received a strong and considered response to our invitation to provide input.

We received more than 280 submissions in response to the Terms of Reference we released in October. And we have had in-depth discussions with business, environment and community representatives from across the Australian economy.

You will be able to read the submissions, covering sector-specific matters, on my Department's website, but allow me to briefly highlight some of the common themes:

  • Significant opportunities exist for reducing domestic emissions, which will also deliver valuable environmental benefits and cost savings.
  • The following design features will be important in unlocking these opportunities:
    • developing simple ways to calculate genuine emissions reductions
    • keeping transaction costs low
    • building on the Carbon Farming Initiative and the National Greenhouse and Energy Reporting System.

This mirrors the design principles we have set for the Fund.

It gives me great confidence that the Fund, true to these principles, will be well-supported and a highly effective, low-cost mechanism to meet our emissions reduction target.

We will shortly be presenting the approach we have arrived at through our discussions with industry, business and the community and the many submissions on the Terms of Reference in the form of a Green Paper.

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.

I wish to thank everyone who has given so generously of their time and expertise to bring us to this stage of the Fund's design. I hope that we can build on the relationships that have been established through the remainder of its development.

The door is wide open to any of you here today to still play an active role in finalising the design of the Fund through consultation on the Green Paper, which as I said will be released shortly, before the end the year.

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 businesses and it's our intention to draw from that experience so that the Fund can operate as efficiently and effectively as possible.

One Million Solar Roofs, 20 Million Trees, Solar Towns and Solar Schools

The Fund will not work in isolation but rather work together with a range of other initiatives under our Direct Action plan to achieve our emissions reduction goals.

Ongoing developments in solar power technology provide enormous opportunities for Australian households and families to take direct action to reduce energy consumption and household emissions, while at the same time delivering real savings for family budgets.

Our Direct Action plan therefore encompasses support for solar power through our One Million Roofs, Solar Towns and Solar Schools programmes.

These initiatives are in addition to support for renewable energy through the Renewable Energy Target and the Australian Renewable Energy Agency, which is funding projects and research across the spectrum of renewable energy sources, including bioenergy, hydropower, geothermal, ocean energy and wind.

The Government will provide $500 million for the One Million Solar Roofs programme and a further $50 million each for the Solar Towns and Solar Schools programmes.

The Solar Roofs programme will provide $500 rebates for installing one million rooftop solar energy systems over the next ten years.

This rebate will be in addition to the support already provided through the RET. Eligible systems will include small-scale photovoltaic systems, solar water heaters and heat pumps.

Priority will be given to low-income households and solar water heaters. In addition, the energy needs of remote indigenous communities will be carefully considered under the programme.

The potential for including energy storage linked to photovoltaic systems will also be examined. Around 10 per cent of the rooftop systems will be allocated to not-for-profit organisations as part of the Community Solar programme.

The Solar Towns programme will support at least 25 projects with a maximum of $2 million per town.

The Solar Schools programme will support a minimum of 100 schools with a maximum grant of $500,000 per school.

Each of these new programmes is being prepared for implementation and will commence in the 2014-15 financial year.

The final Direct Action measure I want to mention is our commitment to plant 20 million trees by 2020 to 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.

The 20 Million Trees programme will be complemented by a range of other new government initiatives, including the Green Army and the National Landcare programmes, which will help the community to look after their local environment.

3. Renewable Energy Target

The Government believes renewable energy has an important role to play in reducing Australia's greenhouse gas emissions.

In addition to the investment we are making through the solar programmes under the Direct Action plan, the Government is committed to undertaking a review of the Renewable Energy Target in 2014 to ensure the scheme is operating efficiently and effectively.

The RET is a key element of the Government's agenda for reducing emissions in a sustainable and broad-based manner.

Since the Coalition Government introduced the RET in 2001, the scheme has supported over 1.1 million small-scale solar PV systems - adding nearly 3 Gigawatts of new renewable generation capacity.

Furthermore, the RET has also supported over 830,000 solar water heaters and heat pumps. Each of these systems, as you know, is helping families and businesses save money on electricity and reduce emissions.

The RET is helping to transform our electricity generation mix to cleaner and more diverse sources, while also supporting growth and employment in the renewable energy sector.

The Government is mindful of the need for policy certainty for the renewable energy sector and will seek to complete the review well before the end of 2014.

The review will be an open and transparent process. Arrangements for conducting the review will be announced shortly.

Conclusion

To conclude, I'd like to reaffirm the Government's commitment to helping business and industry be innovative leaders in our society.

Our Direct Action plan to tackle climate change will harness market-based approaches through the Emission Reduction Fund to provide incentives and options for business to cut emissions.

We will not work in isolation in shaping the Fund's design, and that is why we have maintained our commitment to consulting as broadly as possible. We want to give business confidence and security that this policy will be efficient and effective.

To stand the test of time, a plan to address climate change must protect Australian industry's competitiveness. Protecting the environment and economic growth are not mutually exclusive objectives, but rather two essential elements of a single goal of a stronger Australia.

Thank you.

1 E3 Committee (2013) Electric motors product profile

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

Greg Hunt

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