Acting on climate change now for future generations (30/09/2011)

Greg Combet speaks about acting on climate change , the subject of this year's John  Button Memorial Lecture.547067-greg-combet.jpg

JOHN BUTTON was a politician and Minister renowned for making hard decisions.

More than that, he was a reformer and a visionary.

He was a man deeply grounded in Labor values who understood implicitly that the future of manufacturing in Australia depended on re-skilling, productivity through capital investment, and competing in the global market.

As the Minister for Industry and Commerce, from 1983 until 1993, John Button carried through major changes in industry policy, lowering tariffs and reducing other forms of economic protection.

Working with trade unions and progressive business leaders, he led the transformation of the Australian manufacturing sector from myopia and insularity to dynamism and export-focused competitiveness.

He was at the heart of government for a decade and was responsible for driving much of the economic debate in this country during the era of Hawke and Keating.

The Button legacy

When this country had to make difficult decisions about opening its economy to the world, John Button was always a voice for reform.

None of the reforms were easy. Precious few of them were popular at the time.

Within the labour movement these were controversial reforms indeed.

One has only to recall the central place of tariff protection within Australia's 20th-century economic history and orthodox labour movement thought.

Tariffs were iconic, and even now they instantly reappear in debate as policy responses to contemporary economic pressures.

But John Button’s reforms made Australia stronger.

He knew that working Australians were better served by embracing economic change, rather than pretending it could be avoided.

He knew that Labor values of fairness and justice were best advanced by building economic strength and resilience, not through economic atrophy.

He helped modernise Australian industry so that it was able to innovate and compete on the world market.

If we are to carry this legacy forward, into the future, then we must again make difficult decisions.

To ensure Australia remains internationally competitive in the coming decades, our industry and economy must change once again.

A central challenge is to transform our economy from one that depends on the highest per capita level of greenhouse gas emissions amongst developed economies, to one that can generate energy, develop products and export goods while reducing carbon pollution. 

Reducing the emissions intensity of our economy is not a transformation to be feared.

It is a future that must be embraced for environmental and economic reasons.

So tonight, in this lecture to honour the memory of a great Labor reformer, I wish to outline the Gillard Labor Government’s plan to secure a clean energy future for Australia.

I hope that, like John Button, we too will leave a legacy for coming generations by making the difficult decisions to tackle climate change and restructure our economy.

The plan

On 10 July the Government announced a comprehensive blueprint to move to a clean energy future.

The foundation of the plan is the climate science. The scientific evidence is overwhelming and clear - the atmosphere is warming, the ocean is warming, sea levels are rising and we are already seeing the social, economic and environmental impacts of a changing climate.

According to the Government's Climate Commission, human activities - the burning of fossil fuels and deforestation - are triggering the changes we are witnessing in the global climate.

In 2009, the American Association for the Advancement of Science, on behalf of eighteen national scientific and mathematical associations representing the relevant climate science disciplines, had the following to say to each US Senator:

Observations throughout the world make it clear that climate change is occurring, and rigorous scientific research demonstrates that the greenhouse gases emitted by human activities are the primary driver. These conclusions are based on multiple independent lines of evidence, and contrary assertions are inconsistent with an objective assessment of the vast body of peer-reviewed science. Moreover, there is strong evidence that ongoing climate change will have broad impacts on society, including the global economy and on the environment.”

This is a critical decade in which we must act. Decisions we make from now to 2020 will determine the severity of climate change which our children and grandchildren will experience. To minimise risk we must reduce carbon emissions.

The Government's Clean Energy Future Plan responds to the science by cutting emissions in the cheapest and most effective way. It will provide a foundation for investment in clean energy.

Just as John Button helped reform the economy in a Labor way, our Clean Energy Plan is Labor through and through, firmly aligned with Labor values.

After all, it is workers and Australians on low and fixed incomes who will be most vulnerable if our economy does not transform to become competitive in a low carbon world.

This is a Labor reform because our plan looks after workers and those on low incomes as we make this structural transformation.

Australia’s carbon pollution is high because our electricity is mainly generated by burning coal. Transport, mining, industry, farming and deforestation also contribute.

Our carbon pollution is continuing to grow at a rapid rate. Without action, it is expected to continue to grow by almost 2 per cent a year to 2020.

Reducing our carbon pollution means we have to produce and use energy in a cleaner, smarter way.

The Government’s plan for a Clean Energy Future will achieve this through four fundamental initiatives:

  • Introducing a carbon price and using every cent raised to assist households, support jobs and tackle climate change.
  • Promoting innovation and investment in renewable energy.
  • Encouraging energy efficiency in our homes, offices and factories.
  • Creating opportunities on the land to cut pollution and improve productivity, sustainability and resilience.

This is an approach that will provide certainty for investors, and secure a stable and growing economy and environment for future generations.

By acting now, Australians can look forward to long-term prosperity, while protecting our environment for ourselves, for our children and for future generations.

The economics of a carbon price

The Government considered two key questions when it deliberated on how to design the Clean Energy Future Plan:

  1. Can the policy deliver the reductions in pollution we need?
  2. And will it do this in the cheapest and most equitable way?

The first question is crucial for the credibility of any climate change policy.

The carbon price mechanism is an emissions trading scheme (ETS) designed to cut emissions by at least 160 million tonnes in the year 2020, and continue to cut emissions each year to achieve an 80% reduction over year 2000 levels by 2050.

This represents Australia’s fair share of the global effort to reduce emissions. The importance of an ETS is that it allows caps on pollution to be implemented, and targeted reductions to be achieved.

The second question, concerning cost and equity, is essential for maintaining a strong economy, and minimising the cost of adjustment for households and businesses.

This is why the core of the Government’s plan is to implement a carbon price.

A broad-based, market mechanism like a carbon price is the best way to ensure we reduce pollution at the least possible cost to the economy. 

The ability of market-based carbon pricing to minimise costs is widely recognised across the economics profession and by respected institutions, such as the OECD, the International Monetary Fund and the Productivity Commission.

In June this year, the Productivity Commission published its report, Carbon Emission Policies in Key Economies. In preparing this report, the Commission studied more than 1,000 climate change policies in eight key economies. It concluded that market-based mechanisms, like carbon pricing, are much more cost-effective than other climate change policies.

To give a concrete example, the Productivity Commission found that emissions trading in Germany had reduced emissions in that country’s electricity sector at a cost of only A$20 per tonne – by contrast other German polices had cost over A$140 for each tonne of pollution reduced. 

The carbon price is the most efficient policy instrument because it sends a market signal about the pollution content of goods and services consumed.

This signal will be felt most directly by the largest polluters who are directly liable for the carbon price; it will give them a strong incentive to cut their pollution. Any costs they pass through will also send a signal to businesses they supply and consumers.

This means a carbon price creates powerful incentives, from producers to end-users, to search out and adopt the cheapest ways of cutting pollution. 

It will drive a restructuring of our economy, stimulating a move away from highly-polluting technologies and products, toward cleaner technologies and products. And it will do this at the lowest cost.

Economic opportunities over the mid to long term

Major economic reform is almost always portrayed as a negative. 

The temptation is to resist change.

But to leave things as they are risks externally imposed adjustments – perhaps the current debt crisis in Greece and elsewhere in Europe is a case in point.

As with the reforms of the 1980s, present-day economic reform must be undertaken in the national interest, to ensure that we remain competitive in a global economy where prosperity will be driven through technological innovation.

In the low carbon world of the future, businesses, investors, researchers and innovators who find cleaner and more sustainable ways of doing business will secure a competitive advantage.

Investment will be critical. The opportunities will be significant. 

Under the Government's reforms around $100 billion is expected to be invested in clean energy through to 2050.

These investments will create new economic opportunity and new jobs, particularly in regional Australia.

Treasury modelling shows that as a result of the Government’s plan, electricity generation will be transformed away from a reliance on coal and towards cleaner technologies. By 2050, the renewable energy sector (excluding hydro) will be 18 times larger than it is today.

To take just one example, consider a company like Carnegie Wave Energy which is developing and commercialising wave energy technology to convert the ocean’s swell to zero-emission power. Carnegie’s technology is different from other wave technologies – its fully submerged units use the power of the ocean’s waves to pump water to onshore turbines.

There are many other companies like this in Australia that are looking for innovative ways to harness the earth’s renewable resources for economic gain.

Opportunities will open up in existing businesses as they move to operating in a clean energy future, while investment in new industries will create new jobs. 

For example, the Clean Energy Council's Clean Energy in Australia 2010 report tells us that the renewable energy industry already directly employs over 8,000 Australians. The same report predicts that the industry will be employing more than 55,000 full time employees by 2020.

This is the equivalent of growing an entire automotive industry in less than a decade.

To support the growth of this new industry, the Government is introducing a Clean Energy Skills program to provide the new workplace skills that will become more valuable as we move to a clean energy economy.

Funding of around $32 million will help educational institutions and industry  promote clean energy skills. Tradespersons and professionals will develop the skills needed to deliver energy efficiency services, clean energy projects and low pollution products to households, communities and businesses.

The Innovation Nation

Australia has always been an innovative nation. Australians invented

  • the first solar water heater in 1953,
  • the first ‘black box’ flight recorder in 1957,
  • the bionic ear in the early 1970’s,
  • the world’s first multi-focal contact lenses in 1992, and
  • bio-degradable food packaging in 2000.

I think we can also lay claim to the wine cask: something of considerable importance to those of us who appreciate a readily available quaffer!

Our transition to a clean energy future will be a story of innovation.

I am confident that if we put in place the appropriate signals, we will see the innovation and investment necessary to transform the economy.

But achieving this transformation must be driven by more than just a carbon price. Additional innovation programs will complement the carbon price.

The Government is committed to ensuring the equivalent of 20 per cent of Australia’s electricity supply comes from renewable sources by 2020.

Together with a carbon price it is anticipated that this Renewable Energy Target will continue to drive around $20 billion in renewable energy investment by 2020.

To help drive further investment in clean technologies, the Clean Energy Future Plan includes a new $10 billion Clean Energy Finance Corporation. This Corporation will make commercial investments in clean technologies through loans, loan guarantees and equity investments.

Investments will focus on renewable energy, energy efficiency and low emissions technologies, and the transformation of existing manufacturing businesses to re-focus on supplying inputs for these sectors.

The goal of the Clean Energy Finance Corporation is to remove barriers to the financing of large-scale clean energy projects. 

The Corporation will draw on the experience of other nations that have embraced opportunities to finance clean energy.

Before establishing the Corporation, the Prime Minister will appoint a Chair to make recommendations to Government on a detailed investment mandate, risk management policies and governance arrangements. 

We expect the Chair to deliver these recommendations early next year. The Government will move quickly to respond, ensuring the Clean Energy Finance Corporation is ready to start business on 1 July 2013.

In addition, a new, independent statutory body, the Australian Renewable Energy Agency (ARENA), will be created to coordinate around $3.2 billion in existing grant funding programs supporting research, development and demonstration of new renewable energy technologies.

Together, these programs will drive the biggest expansion in the clean energy sector in Australia’s history, building a critical mass of renewable energy, energy efficiency and low-emissions generation projects.

Australian energy producers will lead the way in technological innovation and will be able to market their experience and expertise to other countries.

Energy generation is not the only area that will be required to innovate to remain competitive. Manufacturers will also have to transform their processes and premises to match their competitors.

Manufacturers will be supported through the $1.2 billion Clean Technology Program.

This will provide grants to manufacturers to support investments in energy-efficient capital equipment and low-pollution technologies. It will also support research and development in renewable energy, low pollution technology and energy efficiency.

And it’s not just existing industries that will change.

Jobs will also be created in new industries such as renewable energy generation, carbon farming and sustainable design, to name just a few.

This Government will leave a legacy for generations to come.

Our vision is for Australia to be at the forefront of the development of the innovative technologies, the new industries and the new job opportunities that will deliver a clean energy future.

The nature of future partnerships between Government, industry, academia

With a major economic reform and industry transformation, now is the time for government, industry and academia to build stronger partnerships to foster a culture of innovation.

Helping turn new ideas into reality will be important.

An example of this collaboration will be Carlton Connect at the University of Melbourne. This is a large-scale innovation hub that aims to bring together the University, government and the private sector to undertake cross-disciplinary research and develop solutions, in particular in energy and climate change.

It will target innovation in low emissions technologies as well as geo-engineering and will be focused on basic through to pre-commercialisation research, where there is currently a real gap.

By concentrating public and private resources, it addresses the fragmentation of the research effort that has characterised Australian efforts in recent years. 

These partnerships will be crucial to building our vision of a clean energy future.

The courage to change  

I would like to conclude by reflecting on the long hard fight the Government has had in developing this policy.

We could have taken the easy option, and done nothing – which is Tony Abbott’s approach.

Or we could have tinkered at the edges. But the science tells us this isn’t enough.

While measures such as planting trees and managing soil carbon will make a valuable contribution, these alone are not enough.

Real structural change to our economy is required.

We know that without action to reduce carbon pollution, Australia and the world will face impacts that will fundamentally alter how we live.

With rising temperatures we can expect to see more extreme weather events, including more frequent and intense droughts, floods and bushfires.

Impacts on infrastructure, agriculture and water security would challenge our social and economic systems.

But the science also tells us that we can avoid the worst of these impacts if we act now.

Our plan for a Clean Energy Future is the cheapest and most efficient way to deliver this for Australia.

It will allow future generations of Australians to benefit from a diverse, vibrant and prosperous, low carbon economy.

It will secure Australia’s natural and social heritage for future generations.

None of us want to be accused by future generations of failing the challenges which face us as a nation.

Just as John Button could never have been accused of cowardice, nor will we stand accused of doing nothing in the face of mounting international scientific evidence of the impact of carbon pollution on our climate and environment.  

We are looking to deliver for our children and their children a strong economy with diverse job opportunities and innovative new industries as well as a country with a rich and abundant natural environment.

The economy that we will leave to our heirs, and they to theirs, will be one that has decoupled prosperity from pollution, delivering quality of life in a clean environment.

While I have no doubt that Tony Abbott and his band of naysayers will continue to oppose progress, I am confident we will prevail.

Once the Clean Energy Future legislation passes the Parliament and a carbon price is introduced in July next year, the task of reforming our economy, reducing pollution and maintaining future security, will have begun.

And just as we look back on the reforms of the 1980s, and honour John Button for his vision, leadership, tenacity and political courage, so we should take inspiration from his legacy for the challenges of today.

The modern Labor reform legacy was built on two fundamental concepts.

Firstly, delivering economic growth through open international trade and market-based reforms to the domestic economy.

And secondly, a commitment to equity and fairness, to ensuring that all people secure a fair share from the economy’s growth.

I am proud tonight to be able to locate the Gillard Government’s plan for a clean energy future squarely in the Labor reformist tradition which John Button helped to forge a political generation ago.

Our plan is pro-growth: an efficient carbon price, linked to international carbon markets, to drive a restructuring of the domestic economy.

Our plan also ensures equity: households will be assisted through tax cuts, increases in family benefits and higher pensions, targeted at low and middle income earners. It includes an important reform to the income tax system – the tax-free threshold will be lifted from $6000 to $18,200 in 2012 – which will improve the rewards to people from participating in the workforce, especially for those on low incomes.

If John were with us tonight, I believe he would be relishing the fight just as much as he would approve of what we are doing.

That is what inspiration is all about.

Thank you.