Date: 30 March 2016
Thank you Duncan for that kind introduction and can I also acknowledge the Traditional Owners, the Gadigal people of the Eora Nation and pay my respects to their elders both past and present.I particularly thank the SEI for inviting me to this event and also for the last hour being engaged in a really inspirational discussion with a number of the post graduate researchers of the Institute.
It would also be remiss of me not to recognise that within the audience, there are members of the Labor Environment Action Network or LEAN which in the Labor party is one of a number of substantial policy advocacy groups run by Labor that people are probably familiar with which has been driving a really exciting discussion within the Party about climate change and energy policies.
I want to thank you for the opportunity to talk about Labor’s plans for Australia’s transition to a clean energy future. This really is a very important time to be having this discussion. We are still after all basking somewhat in the warm afterglow of what was a very successful conference in Paris in November and December of last year.
The electricity industry itself, I’m glad to say, is starting to have some very serious discussions about the vast array of challenges that it faces, including the challenge of decarbonisation.
As you know of course, we are now I think about five or six days into what promises to be the longest election campaign in Australian history; a prospect which I’m sure brings unadulterated joy in all of you. But, for the Labor Party, this is also a very timely discussion because over the last several weeks I have been engaged in about 50 different consultation sessions primarily around our position on post-2020 emissions reduction targets in the Paris Agreement - but inevitably, also involved in very deep discussion, not so much about targets, but more about pathways to get to the 2030 target, whether it’s the 26% or 28% emissions reduction target of Tony Abbott and Malcolm Turnbull are proposing or whether it is the Climate Change Authority’s recommendations around 2030 targets, which have been the subject of our consultation. And while I’m obviously not in a position yet to announce where we have landed on those consultations, I hope that I’m able to give you some reflection or some indication of the sorts of things people are talking to the Labor Party about.
But before I go to domestic policy, I thought it would be worthwhile to reflect a little bit on the Paris Conference. I think all observers agree the foundations for a successful conference in Paris in November and December was set well before people started gathering in the French capital. The pressure on nations to announce well before time their proposed targets before the Paris agreement or in the UN lingo the nationally determined contributions or INDC’s meant I think that there was a very clear indication before time how the Conference was going to turn out.
Perhaps, most importantly I think, the United States and China, indicated on a number of occasions for 12 to 18 months before the Paris Conference that they were working very, very hard to make sure that the Conference was a success.
Nowadays, co-operation between the two pre-eminent powers of the world really is very hard to resist, as I think a few nations found at the Paris Conference itself. At the Conference itself, when the national negotiators started to falter or go off track a bit, one of the remarkable things about the conference was the degree to which sub-national governments really did step up and put pressure on those national negotiators to get back on track; very much led I must say by jurisdictions like South Australia, California and others. And unlike many previous conferences of the parties, the business voice in Paris, was largely one I think that was urging action rather than resisting action which has been a significant trend in past conferences.
So, we start the New Year with an agreement from all nations, not just developed nations, but all nations to take action to keep global warming well below two degrees above pre-industrial levels as well as a more qualified commitment around a 1.5 degree threshold.
Very importantly, nations have also agreed to a five yearly ratchet mechanism which will place upward pressure on national commitments to the Paris Conference, because the sum total of the targets that are incorporated into the Paris Agreement take us closer to three degrees of warming rather than well below two degrees.
Given that not much time actually at the Paris conference was spent on the individual targets themselves - the negotiations really were focussed on the overall framework and the end commitment - it is important to note that that process, the ratchet mechanism, starts as early as 2018, which has very important ramifications for the debate we’re having here in Australia about what our targets should be.
Of course the fact that we find ourselves globally in a position that I think most people six years ago would not have imagined possible given the level of disappointment after the Copenhagen conference, is not just down to very skilful management of the Paris Conference itself, although undoubtedly the French did manage the conference very well. It is a reflection instead, I think, that across the world now nations are moving very quickly to harness the opportunities of a clean energy future.
Last year, investment in renewable energy was greater than the combined investment in coal, nuclear, gas and hydro power for the first time ever in our history.
Last year, China invested considerably more in renewable energy than the combined investment from the United States and the European Union. And next year, China will start a national Emissions Trading Scheme very similar to the one, I might say, that was put in place under the last Labor Government covering power generation and big heavy emitting industries. Ernst and Young expect that China will increase its renewable energy targets for 2020 from 100 to 150 gigawatts of solar power and from 200 to 250 or even 280 gigawatts of wind power. Its worth remembering when you think about those numbers that the entire Australian electricity system is only about 50 gigawatts. And it’s not just China that is making the shift; India also has very ambitious investment targets, particularly in solar power by 2022. In the United States, 200 of their 500 or so coal fired power stations have either closed in the last five years or have had a target date set for that closure. And in the United Kingdom, the Tory Government only very recently announced that their last coal fired power station in the home of coal fired power, will close by 2023.
These are all hard-headed decisions by National Governments that are aimed at positioning their people for a large share of the enormous jobs and investment opportunities that flow from a clean energy future. There is also a hard headed recognition that, as the Governor of the Bank of England said in September leading into to the Paris Conference, ‘climate change will threaten financial resilience and long term prosperity. And while there is time to act, the window is finite and it’s shrinking’. So, to those who still argue in this country – in some of our media outlets or the op-ed pages of some of our newspapers, as well as some in the national Parliament that climate action is not necessary or should not be pursued, these trends and the Paris Agreement itself I think send a very clear message and that is it is over. The time for debating whether we should take action is past. The debate around the world and in most corporate boardrooms, has shifted instead to asking what do we need to do and how fast do we need to do it.
None of this is meant to suggest that meaningful action on climate change is going to be easy. For Australia in particular the transition to a clean energy future presents huge challenges as well as very significant opportunities. The challenges largely flow from our highly emissions intensive economy. OECD data confirms that Australia produces more greenhouse gases per head of population than any other OECD country. The Chief Executive Officer of a big Australian company recently came to see me to complain about me regularly using that statistic and said that I should use some other indicator. So I referred him at the time to the emissions intensity of our economy instead; the number of tonnes of carbon pollution that are produced per unit or per dollar of GDP. Within the OECD, we are not on the top of the list, but we are second after Estonia. In fact, Australia produces three times the level of pollution per unit of GDP produced in Japan. We produce more than twice the level of pollution produced in the UK and Germany, almost twice that of the United States and fully 25% more produced in the developed economy that most closely resembles Australia, which is Canada.
In large part this reflects an economy that has been built on coal fired power, as well as the energy intensive manufacturing operations that tend to be attracted to the abundant and cheap power produced by coal.
Of course, Australia’s emission’s profile is heavily impacted by other sectors of the economy; for example, the way in which we use land, our transport sector, our mining sector and the like, but tonight I want to focus particularly on energy.
The truth is that the transition to clean energy around the world is already presenting a very deep challenge to our role in the global energy market, particularly as a major coal exporter. As the world shifts to renewable energy as well as to other low emissions sources of power such as nuclear and gas, coal demand is in very significant decline. Coal demand in the United States has been dropping since 2007. Last year, in the largest coal market in the world, China, thermal coal imports dropped by fully 30%. And in India, often held up as a great hope for the global coal market, thermal coal imports in 2015 dropped even more by a whopping 34% year on year. Unsurprisingly, given that three quarters of coal consumption of the world happens in those three countries, these trends are wreaking havoc on the industry.
The coal price has collapsed. The world’s largest privately owned coal company, Peabody, is on the verge of Chapter 11 bankruptcy in the United States. The Queensland Resources Council reports than more than half of the thermal coal mines in Queensland operate at a loss, and unsurprisingly thousands and thousands of jobs have been lost. But in the domestic market in Australia, coal is still king.
More than three quarters of Australia’s electricity still comes from coal, including some of the very highly emissions intensive coal fired power stations in the Latrobe Valley in Victoria. Not only is Australia one of the most energy intensive economies in the world, we also have one of the most emissions intensive or highly polluting electricity sectors in the world.
Our electricity sector in Australia produces more carbon pollution per megawatt hour than China’s and about 87% more than the OECD average. Electricity generation in Australia is the single biggest source of carbon pollution accounting for 1/3 of our national total and it simply must get cleaner. And herein lies the opportunity.
Because in electricity, unlike many any other sectors of the economy, cleaner technology to produce power already exists, and it’s constantly getting better and it’s constantly getting cheaper.
Australia is also blessed by the fact we don’t just have lots of coal and gas and uranium. We also have some of the best renewable energy resources on the face of the earth. Across most of the continent we have great solar radiation. Particularly across the south of the continent, we have extraordinary wind resources. And especially in the Southern ocean, we have some of the best tidal and wave energy.
And over many years, in particular here in New South Wales, we’ve consistently demonstrated we have some of the best minds and some of the most innovative businesses that are hungry to drive this transition to a clean energy future. And under Labor when we were in Government we had made a promising start down this pathway.
During our six years in Government, we legislated for a 20% renewable energy target, we created the Clean Energy Finance Corporation and the Australian Renewable Agency or ARENA. And in 2012, we put a price on carbon. During that period, wind power in Australia tripled. We went from a position when we were elected in 2007, where only 7400 households in the whole country had rooftop solar.
When we left Government six years later that number was 1.3 million and it’s continued to climb. And with the support of the CEFC and ARENA, we were able to approve the largest windfarm in the Southern hemisphere, down in Victoria, and the largest PV solar farm in the Southern hemisphere, here in New South Wales. Jobs in the renewable industry tripled, during the period that included the Global Financial Crisis. And it wasn’t just jobs most people commonly associated with that industry. In my own State of South Australia, in northern Adelaide, a venerable old company IXL, a 150 year old family company decided to set up a factory to diversify from their 150 year history of building electrical appliances and car parts. Using Australian steel, they built 100,000 steel frames to support the 2 million solar panels that made up the world’s largest PV solar farm in New South Wales, creating dozens of jobs in a very traditional manufacturing prism.
In the first 12 months of the carbon price, with those other policies also having an impact, carbon pollution levels in the National Electricity Market reduced by 7%, with renewable energy increasing its share of the market by fully 25% in that 12 month period, all at the expense of coal. And by 2013 Australia was rated in the global index run by Ernst and Young, the big renewable energy index for business, Australia was rated as one of the few most attractive countries on the face of the earth in which to invest in renewable energy with the big powerhouses of the United States, China and Germany. A significant reason why investment flowed to Australia from these big global companies was because there was bi-partisan support around the renewable energy target, not around carbon pricing I can assure you, but there was around the renewable energy target. It gave investors confidence that they could come and invest in long term projects that would be durable beyond changes of Government.
Now, of course, that all came crashing down in one infamous radio interview, the then Prime Minister Tony Abbott did with one of your local radio identities, a fellow called Alan Jones. Within a few short months in 2014, the Prime Minister then withdrew support from the Government for the Renewable Energy Target and appointed a very sceptical panel to review the target. The CEFC and ARENA were targeted for abolition in the 2014 budget and a barrage of confidence crushing commentary started to flow from Senior members of the Government. The Treasurer described a windfarm you see driving from Sydney to Canberra as “utterly offensive”, again on Alan Jones’ radio show as if he was judging a confronting sculpture in a community art show. And the Prime Minister’s description of his experience of riding a bike near a wind turbine on Rottnest Island was told with the same sense of horror with which Homer describes the passage Odysseus took between Scylla and Charybdis in the Odyssey. Now it would be all funny if it wasn’t so serious. But it was very serious and it had very real consequences in this industry with over 2000 jobs lost in a very short period of time.
Investment in renewables in Australia utterly collapsed by as much as 88% in 2014, a year when renewable energy investment around the world soared. Understandably and unsurprisingly we lost our place in the top four of renewable energy investment destinations, losing that place to India and collapsing to 13th place on the Ernst and Young index. We had been the 11th largest investor in dollar terms in renewable energy. In one year we dropped 39th, lower than Myanmar, lower than Honduras and a number of other countries. Apparently the Burmese Generals got clean energy even if Tony Abbott didn’t. And as coal fired power stepped in that breach as renewables started to recede, carbon pollution levels in our electricity sector started to rise again, by as much as 5% in just the 18 months after the carbon price mechanism was repealed in 2014.
Last year I and Federal Labor took the view that we needed to find a way to restore a level of investor confidence back into the renewable energy industry; to prevent those companies that had flocked to Australia over the previous years from simply packing their bags and leaving our shores in Australia for more friendly investment environments. We were very strongly urged to take that approach by the renewable energy industry itself. While a revised bipartisan target as well as frankly the change in Prime Minister from Tony Abbott to Malcolm Turnbull has lifted confidence again in the renewable energy industry, actual delivery of renewable projects remains far too slow and confidence won’t have been helped much by Malcom Turnbull’s decision last week to cut all of the grant funding in the renewable energy agency (ARENA) for research and development, and commercialisation in emerging renewable energy technologies.
Now this crisis, and it is a crisis, in Australia’s renewable energy industry is set against a background of an electricity sector that is confronting profound challenges across a range of different fronts. There is a pressing need to start a very difficult process of decarbonising our electricity sector. But the most basic rules of the National Electricity Market don’t reflect that imperative at all. The National Electricity Objective, the law and the market rules are all based exclusively on the reliability of electricity and affordability; they say nothing about the third pillar of modern electricity policy which is carbon. The implementation of policies directed at decarbonisation, like for example the renewable energy target, end up feeling like trying to bang a square peg into a round hole. And there is a myriad of other challenges in the electricity sector; flat or even declining demand for electricity over the last 7 years has meant that there’s an oversupply of electricity generation in the market. Our generation fleet is starting to age. By 2020 about half of our generators in Australia will be more than 40 years old. By 2030 that figure will be as high as two thirds. So even leaving aside the imperative of decarbonisation, the nation would be, in any event, having to have the discussion about how we retire and then renew our generation fleet.
All of this in our view demands a comprehensive strategy to modernise Australia’s electricity sector. We must explicitly recognise decarbonisation as a central policy imperative in electricity. And there must be real ambition again in this country to grow renewable energy. Labor is committed to delivering policy that will ensure that at least 50% of Australia’s electricity by 2030 comes from renewable energy sources.
If elected this year, we will commission advice on the best policy mechanism to deliver on that commitment. That mechanism may not well be a simple extension of the current renewable energy target. Overseas experience over the last several years reveals a strong shift to different mechanisms, a shift that we are very keen to explore. By contrast, at this point in time at least, the Turnbull Government has no plan at all for renewable energy beyond 2020. So when we asked Malcolm Turnbull in Question Time whether his Government will join with Labor to make the 50% renewables target a bipartisan commitment, instead he described our policy as “reckless” and announced that his Government will focus on other abatement opportunities, to use his words such as “clean coal”.
Now my consultations over the summer, including with the electricity industry, have also revealed a widespread view that a national policy is needed to deliver an orderly process of closing down the more heavily polluting older coal fired power stations in this country. We are considering those views very closely at the moment as we finalise our election policy. We also heard very broadly from the business sector, environmental groups and other stakeholders a demand for much more ambition around energy productivity and energy efficiency. Again, we are considering those demands very closely as well. And, as I hope you would expect from the Labor Party, we are heavily focussed on ensuring strong supports for the regions, the communities and the workers that would be most directly impacted by this transition to a clean energy future.
Over the summer as I was taking these consultations, I spent time in the Collie Valley, the Latrobe Valley in Victoria, as well as the Illawarra and the Hunter Valley in New South Wales, talking to unions, the local councils and businesses about those impacts, some of which frankly have already hit them. Support for those communities I want to stress, will be utterly at the centre of Labor’s policy around modernising our electricity sector.
Before I close I want to say just a few words about the broader task of reducing Australia’s emissions profile or about carbon pollution levels beyond just the electricity sector because while electricity is the largest piece in our jigsaw puzzle, it is at the end of the day only one piece.
Now unlike most other developed countries, actually almost all developed countries I can think of, Australia’s emissions levels at the moment are going precisely the wrong way, they’re going up. During our term in office, emission levels or carbon emission levels in Australia were reduced by 8% largely on the back of our climate change and renewable energy policies, but also frankly because of tough land clearing restrictions that were put in place by State Labor Governments in previous years - particularly Queensland but also here in New South Wales.
Unsurprisingly perhaps, the repeal of all of our policies on climate change and significant parts of our renewable energy framework, as well as Campbell Newman’s decision in Queensland to trash the land clearing laws that were put in place there, have meant that emissions in Australia have started to rise for the first time in a decade.
The Turnbull Government’s own data which they held back during the Paris Conference but were released a couple of days before Christmas last year project that emissions will rise by 6% between now and 2020 under the existing Direct Action policy framework that they have in place. So, by 2020, Australia’s emissions levels will be 6% above 2000 levels not the 5% below 2000 which was a bipartisan commitment as part of the Kyoto Protocol. And all available modelling indicates very clearly that beyond 2020 under the Direct Action policy, emissions will just continue to rise.
Now Australia along with 195 other nations has just signed an agreement to keep global warming well below 2 degrees Celsius - a commitment that demands very deep reductions in our carbon pollution levels here in Australia. But we simply won’t get those deep cuts, or frankly any cuts really at all, under Direct Action with no renewable energy policy beyond 2020 and the return to broad scale land clearing in Queensland.
We all have a very long election campaign ahead of us. Labor intends climate change and renewable energy to be right at the centre of this campaign. It takes two to tango in these things, and I’m pretty confident Malcolm Turnbull doesn’t really want to turn up for this debate at this stage, but even if he doesn’t show up we intend to speak very loudly and very clearly about our ambitions. Because the next Parliament simply must do better than the last three have done in this area. And although this is primarily a challenge for the Parliament, the broader community, including the business sector have a critical role to play in raising their voice in a clear and resounding demand for Australia to get back on the path to a clean energy future. I hope all of you will be shouting that demand on each and every one of the 100 or so days that we have left of this very long election campaign. I really want to thank you for all coming along tonight and to the SEI for the invitation to be with you.
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