Clean Energy Future Plan - one year on

This is an edited version of a speech given by Greg Combet, Minister for Climate Change, Industry and Innovation, to the National Press Club on 5 June. A full version of the speech is available here.

Introduction

Two years ago the Gillard government announced its Clean Energy Future plan. Our plan is a comprehensive set of policy measures to deal with one of the most important environmental, economic and moral challenges of our time – climate change.

Our political opponents responded with no serious analysis, no credible alternative policies, and no willingness to accept the reality of climate change. All the Coalition had to offer was a massive scare campaign – full of lies and deceit.

On 1 July last year, the central element of our plan, carbon pricing, came into effect.

It was not the end of the world as forecast by Tony Abbott – and the scare campaign immediately collapsed under the weight of its own mendacity.

Now, on world environment day, as we approach the one-year anniversary of carbon pricing, we can carry out a stock-take of how it has worked. Since the carbon price started on 1 July:

-- Emissions in the National Electricity Market are down 7.4 per cent;

-- Renewable energy generation is up almost 30 per cent;

-- The economy is growing – today’s National Accounts show real GDP has grown at an annualised rate of 2.5 per cent since the carbon price started;

-- More than 150,000 new jobs have been created;

-- Inflation is contained;

-- Millions of households have been assisted with tax cuts, increases in Family Tax Benefits and higher pensions and allowances; and

-- The impact on the cost of living has been lower than expected – which means our assistance has gone further in helping low and middle income earners make ends meet.  

The fact is that the clean energy policies we have implemented are environmentally effective, economically responsible and socially fair.

Reducing the emissions intensity of our economy – the amount of greenhouse gas emissions per unit of economic output – is critical to Australia’s future competitiveness and our trading relationships. As the 12^th largest economy and the 15th largest polluter in more than 190 nations, as well as the largest polluter per capita amongst the advanced economies, Australia will not have a free ride in the international efforts to tackle climate change.

Why Labor is acting

For decades scientists have been warning that rising concentrations of carbon dioxide and other greenhouse gases in the atmosphere are contributing to climate change. The scientists have advised that if we do not reduce emissions of greenhouse gases, the world risks further serious adverse impacts.

When we formed government we were determined to tackle this issue.

Our policy approach is to reduce greenhouse gas emissions at the lowest cost to the economy by:

-- harnessing the power of the market;

-- investing in the future;

-- looking after low and middle income earners; and

-- acting in the national interest, not sectional interest.

This issue is about our quality of life and our responsibility to future generations; it’s about Australia playing its part as a responsible global citizen.

It’s also about securing the economic growth and opportunities of the future.

Australia has some of the world’s best renewable energy resources, ranging from sunshine and wind power to geothermal energy and the tidal power of the oceans which surround our continent. We need to harness these resources to generate energy without polluting the atmosphere. We need to continue to develop the technologies that will make renewable and clean energy commercially successful – here and overseas.

This will not only reduce our pollution, it will give our country an economic edge.

It will enable us to meet not only our international commitments to reduce emissions to 2020, but to meet the deeper emissions reductions which will be demanded of all major emitters as the world moves to conclude a comprehensive, legally-binding climate change agreement by 2015.

Our policies are driving change

The central element of our policy is carbon pricing.

From 1 July 2015 there will also be an annual cap on the number of permits and therefore a cap on pollution.

The current low market prices in the European emissions trading system, with which we will link in 2015, do not detract from the environmental integrity of our pollution cap.

Linking with the EU ETS simply means that Australian businesses may also buy their pollution permits in the EU scheme as well as ours, and that our carbon price will be the same as in Europe.

The lower price forecasts mean that we may achieve our emissions reductions at lower cost to the economy, to businesses and to households.

This is a good thing.

Anyone who looks at the spread of carbon markets in Europe, China, South Korea, California and Quebec knows that carbon pricing is here to stay as the principal mechanism for the world to avert dangerous climate change.

Last week the World Bank estimated that with these current and emerging schemes carbon pricing could be expected to apply in countries with almost half of global emissions.

But our plan was never just a carbon price.

We are also making unprecedented investments in renewable and clean energy.

And the carbon price is supported by important policies like the Renewable Energy Target and Carbon Farming Initiative.

This policy package is:

-- investing in renewable energy;

-- supporting manufacturers to move to clean technologies;

-- helping households, communities and small businesses to improve energy efficiency; and

-- supporting action by farmers and other land managers to reduce pollution on the land.

Cleaner energy is reducing pollution

The electricity generation sector is one of the main sources of greenhouse gas emissions in Australia.

Our policies have made a significant start in transforming our electricity sector.

The carbon price, the Renewable Energy Target and energy efficiency policies are contributing to important changes in the electricity sector.

In the 11 months since the carbon price started on 1 July last year, carbon pollution from the National Electricity Market is down by 7.4 per cent compared to the same period in 2011-12.

That’s almost 12 million tonnes less pollution from the electricity sector.

The electricity which is being supplied to the grid is becoming cleaner.

In 2011-12, for each megawatt hour of electricity generated in the National Electricity Market, 0.92 tonnes of carbon pollution were released into the atmosphere.

Since the carbon price started, the amount of carbon pollution for each megawatt hour has fallen to 0.87 tonnes.

That represents a 5.1 per cent decline in the emissions-intensity of the National Electricity Market.

This is because renewable energy like wind power, solar and hydro-electricity is making up a larger proportion of our energy mix.

And generation from Australia’s seven most highly-polluting power stations is down by 14 per cent.

These are remarkable changes and they are a direct result of the policies we have implemented.

The Renewable Energy Target and carbon pricing are making renewables, and cleaner electricity generated from natural gas, more competitive.

Investment in renewable energy

Labor’s policies are driving billions of dollars of investment in renewable energy.

This investment is not only creating cleaner energy, it is also creating new jobs.

The Clean Energy Council estimates that 24,300 people were employed directly in Australia’s renewable energy industry at the start of 2013.

In April this year, AGL opened the Macarthur wind farm in western Victoria – this is the largest wind farm in the southern hemisphere.

According to AGL, development and construction of the Macarthur wind farm supported more than 2,700 jobs.

Australian manufacturers, concrete producers, and local quarries all won work on this $1 billion investment – all 140 wind towers were manufactured in Australia.

Macarthur is one of over 370 renewable generators now accredited under the Gillard government’s large-scale Renewable Energy Target.

And more than one million households have now installed solar systems under Labor’s small-scale component of the Renewable Energy Target.

Manufacturers are investing in energy efficiency and clean technology

The government's Clean Energy Future plan is also helping our manufacturing sector to invest in new capital equipment to improve energy efficiency and reduce pollution.

Carbon price revenue is funding the government’s $1 billion Clean Technology Investment Programs.

More than 220 clean technology projects are now under way at manufacturing plants around the country under these programs.

These projects involve total investment of more than $338 million – investment which is modernising our manufacturing sector.

Improving energy efficiency and reducing the emissions intensity of production translates into a more competitive manufacturing sector.

The scare campaign has collapsed

Unable to develop a policy with any credibility, all Mr Abbott has contributed to the climate change debate is lies, fear and deception.

He claimed that the carbon price would destroy hundreds of thousands of jobs.

In fact, since the carbon price started, employment has grown by more than 150,000 – bringing the number of new jobs created since we came to office to 960,000.

Mr Abbott also thought it was OK to frighten people on low incomes about the impact of the carbon price on the cost of living.

He said price rises from a carbon price would be “unimaginable.”

In fact the latest Consumer Price Index figures show the inflation rate was 2.5 per cent for the year to March – in the middle of the Reserve Bank’s target zone for inflation.

Westpac’s economics team has estimated that the carbon price has increased the CPI by just 0.4 percentage points – less than Treasury’s estimates of a 0.7 per cent price impact.

That means the household assistance package the government provided as part of the Clean Energy Future reforms has left many millions of Australians better off.

Treasury and the Department of Families, Housing, Community Services and Indigenous Affairs have reviewed the adequacy of the Household Assistance Package.

They concluded that benefits from the Household Assistance Package, together with growth in wages and other payments, have outstripped increases in the cost of living for typical low and middle income households.

A pensioner couple on the maximum pension rate, for instance, had a gain in net disposable income of $53.55 a fortnight in the year to March 2013.

For a single parent with one pre-school child, the gain was $47.03 a fortnight.

A couple with two pre-school kids and one parent in the workforce earning $70,000 is $56.78 a fortnight better off.

And for a couple with a combined income of $100,000 a year, and two kids in school, the gain in disposable income has been $80.48 a fortnight.

Conclusion

Like the floating of the dollar and the opening up of Australia’s economy by the Hawke and Keating governments, the Clean Energy Future plan is in the great tradition of Labor reforms.

It came as no surprise to me that recent polling has seen a turnaround in support for the carbon price. Essential Media found that support for the government’s carbon pricing policy has increased by six points since January to 43 per cent – at the same time opposition to carbon pricing is down by seven points to also stand at 43 per cent. Another poll found that only 20 per cent of swinging voters wanted the carbon price repealed.

The fact that the policy itself is decreasingly contentious, and demonstrably working, is worth careful consideration in the context of politics in future months and years.

A scare campaign will only take Tony Abbott so far.

He already thinks he has won the next election, but it stretches credulity to contend that a double dissolution election on the issue is already in the bag as well. Tony Abbott knows this. And let’s not forget that he is a first-class political opportunist. His aim is simply to win government. If he does, my contention is that he cannot and will not repeal the carbon price.

Labor will remain committed to it.

Tackling climate change has been in our platform for over two decades, and we will fight for what we believe in and for what we have achieved.

Greg Combet is the Minister for Climate Change, Industry and Innovation in the Australian government.