Perspective article

Emissions trading taskforce should focus on opportunities

By Fiona Wain, CEO, Environment Business Australia
December 2006

The Prime Minister announced the members of the emissions trading taskforce on Sunday with business represented by John Stewart, CEO, National Australia Bank; Margaret Jackson, Chairman of Qantas; Peter Coates, CEO of Xstrata Coal; BHP Director Chris Lynch; Australian Pipeline Trust Director, Russell Higgins (formerly head of PM&C's Energy Task Force); Tony Concannon, Regional Managing Director for International Power Australia; and Alumina CEO, John Marlay. Peter Shergold, Head of the Department of Prime Minister and Cabinet will chair the taskforce and is joined by Federal Government departmental secretaries Dr Ken Henry, Treasury; David Borthwick, Environment and Heritage; Michael L'Estrange, Foreign Affairs and Trade; and Mark Paterson, Industry, Tourism and Resources.

The challenge ahead of the taskforce is to build Australia's next competitive edge by addressing the opportunity side of tackling climate change. Australia has an abundance of energy sources, but which ones will tomorrow's markets favour as we enter the 'cleantech era'? Indications from institutional investors, insurers, supermarkets such as Tesco or Wallmart, and major corporations such as GE, all point towards a decarbonisation of goods and services. Global demand for energy efficiency and renewables will increase as the damage costs of negative externalities are recognised and included in supply chain pricing.

It is very unlikely that 'business as usual' could maintain current markets, nor will it carve out new export areas for Australian business. Taskforce members should therefore be concerned when a major coal company's representatives say emissions trading shouldn't occur until technology is ready." Translated this means "until carbon capture and storage from coal-fired power stations is proven viable and commercially competitive."

This is an anti-competitive stance that thwarts the efforts of other technically proven technologies to access the market. And these technologies are available - solar thermal, photovoltaics, wave and tidal where electricity production can be combined with provision of desalinated seawater, deep hot fractured rock geothermal, wind and reverse hydro, or next generation bio-fuels such as algae that combine a carbon sink with cleaner burning transportation fuel. But, in a typical Catch 22 scenario, until they have access to a market of sufficient scope and scale, they cannot be operationally refined and brought down their natural cost curve.

Stalling a domestic emissions trading scheme until a perfect global scheme is created means that Australia does not take advantage of the significant offsets (forestry, soil carbon land management, recycling of "waste" resources and the embodied energy they contain) which Australia has to offer and which can be very successful ventures in their own right. We should question whether the taskforce members are aware of the major offset investments going overseas because of the difficulty in utilising carbon credits in this country (in one contract Australia recently lost a $26 million forestry investment to New Zealand; and another example is Global Renewables which has moved its headquarters from Melbourne to the UK where the company's carbon management strategies helped them to win the largest municipal waste recycling contract in the world - worth over $6 billion).

Furthermore, fast-tracking emissions trading would allow Australia to recycle and repatriate credits from the embodied energy that our energy intensive industry exports overseas, or from the clean burning LNG we export.

A well designed emissions trading scheme would provide Australia with an opportunity to fund major energy efficiency programs at energy plants and at site level in the key major demand management sectors. A target of 2.5% efficiency gains per annum would do much to galvanise activity in this area, with the additional rewards of significant cost savings for business. Demonstrating that Australia's energy intensive production can significantly reduce emissions and champion pollution avoidance, would give us a genuine technology transfer capability to export to where it is increasingly needed - China and India.

Environmental degradation is a huge drain on economies. A recent article in the Australian Financial Review by Pan Yue, the Vice Minister of China's State Environmental Protection Administration, stated that "it would cost $US84 billion to clean up the pollution produced in 2004 - or 3% of GDP for that year. But more realistic estimates put environmental damage at 8-13% of China's GDP growth each year, which means China has lost almost everything it has gained since the late 1970s due to pollution."

For Australia, Asia is the market of scope and scale we need to focus on. APEC has been identified as a potential nexus for a free trade agreement and I have suggested that APEC, plus India, would also make an outstanding base for Australia to engage in international emissions trading. There is a natural link with the AP6 technology approach to addressing climate change where the technology providers in the six participating countries (Australia, USA, Japan, China, India, South Korea) are calling for market incentives to take us beyond project demonstration and into full scale commercialisation and deployment. From an Asian base, Australia could conceivably then engage with the EU Emissions Trading Scheme and the Kyoto Protocol Clean Development Mechanism (CDM) aimed at linking technology and financing support for projects in developing countries. In our region the CDM market is growing rapidly. Imagine the value of the carbon credits that could have been negotiated with the Chinese Government if the LNG exports from the North West Shelf contract had included a CDM component.

The opportunity side of the equation should be the basis for Australia's over-arching strategy on climate change, and emissions trading is a key catalyst to timely and effective action. Conversely, we can watch as an enormous global business develops around energy efficiency and clean energy until the day when China starts exporting skills and technology in this area to us!

The opportunity side of the equation should be the basis for Australia's over-arching strategy on climate change, and emissions trading is a key catalyst to timely and effective action. Conversely, we can watch as an enormous global business develops around energy efficiency and clean energy until the day when China starts exporting skills and technology in this area to us!