‘Taking Action on Climate Change’

Thank you for your welcome and for inviting me to speak to you here today. 

Today I’d like to discuss the politics and economics of climate change, and what we as a Government are doing to respond to that challenge and chart a course towards a low carbon economy.

I’d also like to talk about the importance of establishing a carbon price as a necessary and responsible economic reform, which will drive investment in renewable energy and low-emission technologies, and create the incentives required to reduce pollution.

The Case for Action on Climate Change (the scientific basis)

The reason for taking action to tackle climate change is clear – it is in our best interests, and that of our children.

As Professor Will Steffen of the Australian National University pointed out to the Government's Multi-Party Climate Change Committee recently, there is 100 per cent certainty that the Earth is warming, and there is about 95 per cent certainty that human action is the main cause.

Notwithstanding uncertainty about the specific consequences of climate change in future years, we know that there are big risks to our economy, society and environment, and that those risks will grow as time passes.

A prudent person acts where risk are identified.

The Size of the Problem – Emissions projections

On 9 February 2011, the Minister for Climate Change and Energy Efficiency, Greg Combet released a Government report on our annual projections of emissions.

The report provides a detailed account of more than 30 policies and measures to assess the contribution of existing policies to reducing Australia’s carbon pollution. It predicts that without further action, emissions will continue to rise.

The data focuses on Australian emissions on three time scales:

First, during the Kyoto commitment period (2008 – 2012), where projections show we are tracking at 2% below our international target;

Second, in 2020, without a carbon price we are projected to be emitting 690 million tonnes per annum of carbon pollution, or 24 percent above 2000 levels. The Government’s target for 2020 is actually to cut pollution by 5 per cent below 2000 levels by 2020;

And third, in 2030, where we may be 44 percent above 2000 levels.

This has serious implications for our domestic policy debate. To reach even the unconditional target of a 5% reduction below 2000 levels we need to reduce annual emissions by 160 million tonnes of carbon pollution in 2020. That is equivalent to reducing the electricity sector’s emissions to a quarter of their current level.

And if the world moved further on these issues – which they might - and we were to be aiming for a 25% reduction from 2000 levels we would need to cut 272 million tonnes of carbon pollution in 2020. This is equivalent to removing almost all our electricity and transport emissions at their current level.

This is an exceedingly difficult challenge. And what is clear is that we will not drive the necessary change across the economy without significant structural reform.

What’s happening at the international level?

The scientific evidence underpins the process that is occurring at the international level under the United Nations Framework Convention on Climate Change (UNFCCC).

The most recent meeting of the UNFCCC was in Cancun in December last year. Before that the UNFCCC met in Copenhagen and this year they will meet in Durban in South Africa. 

It’s important to consider that not one of the delegates at this international conference sought to question or debate the science – upon which the weight of international scientific evidence is now clear.

Cancún

At the Cancún conference which I attended late last year, some important progress was made in the international negotiations dealing with climate change.

In summary this progress can be described as follows:

·          all countries that pledged to reduce pollution under the Copenhagen Accord have anchored these pledges in the formal UN process. The countries covered by these commitments including China, the United States, India and Japan collectively represent more than 80 per cent of global carbon pollution emissions. It is the first time that major developing economies, as well as the developed economies, have together made commitments to mitigate carbon pollution under the UN process;

·          countries agreed to make substantial improvements to the emissions reports that all countries must undertake;

·          agreement to provide strong and practical support for vulnerable developing countries to manage and adapt to unavoidable climate impacts;

·          on clean technology, there was agreement to establish an expert network to coordinate support for the development and deployment of low emission technologies;

·          on forests, countries agreed to protect forests in developing countries as part of the overall effort to tackle climate change;

·          this is important because deforestation currently accounts for around 18 per cent of global emissions; and

·          countries agreed to establish a new Green Climate Fund to mobilise $100 billion per year by 2020 to assist developing countries adapt to the impacts of climate change, and to reduce their own carbon pollution.

These steps essentially put the international climate change negotiations back on track. But it’s important to be clear. These commitments only go so far - they establish goals, not outcomes. Many of the commitments are in-principle in nature and will require far more negotiation and development.

Cancún did not deliver us the binding international agreement on emissions reductions that the world ultimately needs, but nonetheless progress was made. With negotiations back on track Australia will continue to push towards achieving our principal objective - a legally binding agreement involving all of the major carbon polluting countries.

International action on climate change

While Cancún did not deliver us a binding international agreement, there is rapid progress being made by nations.

·          China is leading the world in low-carbon energy investment. According to the World Economic Forum (2010), China last year boosted spending on low-carbon energy by 30 per cent to US$51.1 billion, “by far the largest figure for any single country”.

·          In the United States and Canada, a number of states and provinces already have emissions trading schemes, or have such schemes in the pipeline.

·          New Zealand is coming up to the first anniversary of the expansion of its emissions trading scheme to cover transport, electricity generation and industry (New Zealand’s scheme commenced in 2008).

·          Europe enters the 7th year of operation of its ETS this year and South Korea has announced their intention to introduce legislation for an emissions trading scheme in the early part of this year.

·          Other world cities -Tokyo for example, has introduced a cap and trade scheme to reduce its emissions by 20 per cent on 2000 levels by 2020.

These countries see the advantage of being a first mover in the great economic transformation to a low carbon economy.

Next steps in Australia

Australia cannot risk its economy being stranded as a high emissions rustbelt of the future.

That’s why the Australian Government is committed to reducing carbon pollution, and is pursuing three key mitigation strategies:

·          First, strong support for renewable and low-emission energy production. The key measure is the establishment of the Renewable Energy Target;

·          Second, greater energy efficiency in industry and households, and

·          Third, the introduction of a carbon price.

On renewable energy, the Government’s primary mechanism to provide long term support for the uptake of renewable electricity is the Renewable Energy Target (RET), which designed to deliver the Government’s commitment to achieving a 20% share of renewables in Australia’s electricity mix by 2020.

The Government’s other key strategy is on energy efficiency.  We have implemented a number of programs to support action by businesses and households.

These include the $100 million Energy Efficiency Trust, managed by the Australian Carbon Trust, which promotes energy efficiency in the business sector.

One of Australia’s most successful energy efficiency measures that helps households reduce their energy bills is the Equipment Energy Efficiency Program. This program uses energy efficiency standards and the well known red and yellow energy label to drive down the energy consumption of equipment, appliances and lighting products use in our homes and businesses.

Total electricity savings from the Equipment Energy Efficiency Program are projected to exceed 32,000 gigawatt hours per annum by 2020. By 2020, abatement resulting from this program is projected to be in the order of 20.3Mt CO2-e per annum, approximately 3% of Australia’s projected total emissions, saving the community $5.2 billion.

Community based programs such as Solar Cities and Smart Grid Smart City demonstrate energy efficient, low carbon and renewable energy solutions. 

New initiatives like the Tax Breaks for Green Buildings program are a part of the Government’s broader push to encourage the uptake of energy efficiency measures across all sectors, from industry, to communities and households. 

Carbon Price

Our renewable energy and energy efficiency measures make a valuable start. But more is needed.

To transform our economy in the long term, we need to build carbon-consciousness into everyday business decision-making.

We need incentives that last beyond the next round of a grants program.

We need to make low emissions choices more profitable than high emissions choices, and we need to do this in a systematic, across-the-board way.

Recognising the need to act quickly and responsibly, in our last term the Government introduced legislation that would have put a price on carbon.

After winning the 2007 election the Government went to work on designing the Carbon Pollution Reduction Scheme (CPRS).

The Government undertook an extensive consultation process through a comprehensive Green Paper and White Paper with industry, business, the community sector, and the general public to get the balance right between meeting the environmental objectives of the CPRS and maintaining economic growth and prosperity.

The Government also undertook the most extensive economic modelling exercise ever undertaken in Australia to model the potential economic impacts of reducing emissions.

And the Government commissioned Professor Ross Garnaut to conduct an independent study of the impacts of climate change on the Australian economy. In November 2010, the Government commissioned Professor Garnaut to provide an independent update to his 2008 Climate Change Review. Professor Garnaut is also an independent expert adviser to the Multi-Party Climate Change Committee.

The CPRS legislation was first introduced the CPRS legislation to parliament in 2009 – the Senate voted it down at second reading.

In November 2009 the Bill was re-introduced into the Senate and negotiated in good faith with the Opposition. Two Liberals crossed the floor to vote with us for a price on carbon.

If the Coalition and the Greens had not voted down the CPRS legislation, we would be moving towards a price on carbon already – like our neighbours in New Zealand – having started the necessary transformation of our economy.

The lack of consistency and bi-partisan support cannot be enough to stop progress towards putting a price on carbon because business wants certainty and because it is the most responsible and reasonable course of action.

A carbon price is a major economic reform

Passing legislation on carbon pricing was never going to be easy. Major economic reforms never are.

Australia’s economy has evolved without regard to the costs of emitting greenhouse gases. Reforming and restructuring our economy towards a low carbon pollution future means that emitting greenhouse gases should no longer be free. 

A carbon price is an economically responsible way of reducing our emissions. Economists such as Professor Paul Krugman, Professor Ross Garnaut, Dr Peter Shergold and Sir Nicholas Stern all advocate a price on carbon as the key mechanism for achieving substantial emissions reduction in a responsible and flexible manner and at the lowest possible cost.

By decentralising the incentives for abatement through a carbon price, the Government does not have to prescribe to individual firms or sectors how they are to reduce their emissions.

This approach encourages ingenuity and innovation through the everyday decisions of investors and businesses.

Consultations and the model so far

Over three years, the Government closely consulted with business, industry, environmental groups and the broader community in developing a design for a price on carbon through the CPRS.

The message is clear – business requires investment certainty for the move towards a low carbon economy that is widely seen as inevitable. 

The important work the Government has achieved so far in the design of a carbon price will not be thrown away. All of these consultations will contribute to the development of legislation in what the Government has said will be a year of decision.

A New Political Environment (Minority Government) – Role of Climate Change Committee

Labor governs as a minority Government with the support of the Independents. This means that more than ever, action on climate change will require a broad cross-party consensus.

The Government has brought together a multi-party Climate Change Committee and is working through options for the introduction of a carbon price.

On the Committee sits the Prime Minister, Deputy Prime Minister Wayne Swan, the Minister for Climate Change and Energy Efficiency, along with Greens Leader Bob Brown, Senator Christine Milne and independents Tony Windsor and Rob Oakeshott.

Mr Adam Bandt MP and I also attend as members assisting the Committee. While an open invitation has been extended to the Coalition, Tony Abbott and his team have so far refused to attend.

The Committee has met three times since its inception and made important progress. To date the Committee has agreed the policy principles and constraints for the development of a carbon price, and discussed different carbon pricing mechanisms and design choices, including sectoral coverage and international linking issues.

While discussions are continuing, I can tell you that the Government’s ultimate priority will be the approach that provides the greatest certainty that Australia will meet its emissions reductions targets.

Conclusion

In conclusion, if Australia is to remain internationally competitive over the long term, we need to embark on an economic transformation that provides the right incentives towards a low carbon economy.

The Australian Government recognises that the road ahead will be tough – both in steering the changes required through our own Parliament and working with the international community towards a global approach - but the future for us and for the world is a low carbon future.