Chapter 1
National Market Driven Energy Efficiency Target Bill
2007 [2008] and Renewable Energy Legislation Amendment (Renewable Power
Percentage) Bill 2008
References
1.1
These separate but related bills, the National Market Driven Energy
Efficiency Target Bill 2007 [2008] and the Renewable Energy Legislation
Amendment (Renewable Power Percentage) Bill 2008, were considered concurrently
by the committee. The benefit of this procedure was noted from the evidence
that debate continues on the extent to which an emissions trading scheme might
be affected by mandated energy efficiency targets.
1.2
The National Market Driven Energy Efficiency Target Bill 2007 [2008] is
a private senator's bill, introduced by Senator Lyn Allison (AD-Vic) which was
referred to the Economics Committee on 16 August 2007 for report by 22 October 2007. The committee sought and received an extension of time from the Senate on
17 September 2007 to report by the end of the 41st parliament. Further
consideration of the bill ceased with the calling of the election on 14 October 2007.
1.3
The bill was restored to the Notice Paper on 14 February 2008 and
re-referred to the Economics Committee, with the recommendation that the
committee look specifically at the provisions of the bill relating to the definition
of energy efficiency activities, monitoring and verification of energy
efficiency savings, and the energy efficiency improvement potential for the
benefit of the economy through productivity benefits, including effects on GDP,
inflation, employment and technology innovation. The committee has conducted a
more limited inquiry at a time when the government's own anticipated
legislation is demanding the full attention of most experts in this field.
1.4
The Renewable Energy Legislation Amendment (Renewable Power Percentage)
Bill 2008 was referred to the Senate Standing Committee on Economics on 12 March 2008 for report by 30 May 2008. This bill was also introduced by Senator Allison.
The bill proposes to amend the Renewable Energy (Electricity) Regulations 2001 for
the purpose of extending, from 2008, the interim targets of the Mandatory Renewable
Energy Target (MRET).
Conduct of the inquiry and submissions
1.5
The committee advertised the inquiry on its website and in The
Australian commencing on 26 March 2008, calling for submissions by Friday, 18 April 2008. The committee also directly contacted a number of relevant
organisations and individuals to notify them of the inquiry, to invite
submissions and appearances before the committee.
1.6
Seventeen submissions for the National Market Driven Energy Efficiency
Target Bill 2007 [2008] were received as listed at Appendix 1, and 11
submissions for the Renewable Energy Legislation Amendment (Renewable Power
Percentage) Bill 2008, as listed at Appendix 2. These appear on the committee's
website.
1.7
The committee conducted a public hearing in Melbourne on 12 May 2008 to hear evidence in relation to both bills. Witnesses who appeared before the
committee are listed at Appendix 3.
Acknowledgement
1.8
The committee thanks those who assisted with the inquiries.
Background
Position of the committee on
climate change policy
1.9
Energy efficiency and renewable energy need to be considered in the
context of broader climate change policy. The committee recognises that
governments face difficult problems in developing policies which address the
challenge of stabilising or reversing the effects of climate change, of which
there is irrefutable scientific evidence. Its adverse effects are incremental
rather than dramatic, although some effects are already being felt in some
locations and among those pursuing particular livelihoods. Governments – of
whatever political complexion – have to overcome the short-term political
difficulties of introducing hard measures affecting business and employment, while
at the same time convincing scientists, and the scientifically literate
community, that they are serious about confronting the potentially catastrophic
effects of climate change. Ultimately, the long-term goal of reducing
greenhouse gas emissions must attract support from both energy consumers and
suppliers.
1.10
The committee comes to this inquiry with a common appreciation of the
likely problems to be faced in addressing climate change, but with no fixed
views on particular strategies for dealing with it. It agrees broadly, for
instance with the general view expressed to it that a variety of measures will
be needed. It agrees that a market-driven approach is likely to achieve more
effective emissions control in the long run. It also agrees that energy efficiency
measures can operate in parallel to any carbon trading scheme. The contestable elements
include what mix of measures will work best; what timeframes should operate;
and how much regulation there needs to be to supplement any market-driven
strategy. The committee considers that these questions should be subject to
much more deliberation and debate when the detail of emissions trading is
announced later this year.
1.11
The value of this inquiry has been to open the committee's eyes to some
dimensions to the climate change abatement debate. It is inevitable that energy
cost increases will have significant implications for future economic planning.
Changes in the energy market will affect foreign trade, food supplies,
electricity supply and the structure of industry. Such effects could drive the
economic management agenda of governments – Commonwealth and state – for
decades, and will be reflected in the future work of this committee.
1.12
It is necessary to make some reference to the climate change policy debate
so far, and provide a context for discussion of the bills under consideration
in the light of current government action.
Government policy so far
1.13
Climate change is an issue which has only recently impressed itself on
public consciousness. In the minds of many, the threats posed are hypothetical,
and the measures to be taken are too technical to be bothered with. Debate and
discussion is little heard beyond a relatively small coterie of informed
participants. The Coalition made an early start in addressing the challenges of
climate change, setting up the Australian Greenhouse Office in 1997. Early
interest was not sustained however, and the states and territories decided to
take up the issue themselves.
1.14
The National Emissions Trading Taskforce (NETT) was established in January
2004 by state and territory governments responding to a perceived absence of
national leadership on greenhouse policy. NETT's purpose was to develop a
multi-jurisdictional emissions trading scheme driven by state and territory
governments. Significant design work was undertaken for a national emissions
trading scheme and NETT consulted widely with stakeholders around the country.[1]
NETT's work was pushed aside when the Commonwealth government decided to act on
the issue.
1.15
Commonwealth policy development was not revived until the appointment by
Prime Minister John Howard of a Task Group on Emissions Trading in December
2006. The tone of the issues paper released by the task force, in early 2007,
was criticised for being less than whole-hearted about the urgency of tackling
climate change.[2]
Business interests, however, generally approved of its recommendations describing
them as 'sensible', whereas they had been critical of Stern, and later of
Garnaut in his review, released in February 2008.[3]
Industry presumably understands the dimensions of the problems posed by climate
change in the long-term, but has an immediate concern for its 'bottom line' in
the short-term.
1.16
In the meantime debate was stimulated at home and abroad by a host of
organisations and academics with considerable political effect.
Garnaut review
1.17
The Labor government won office in November 2007 and commissioned an
independent review on climate change by Professor Ross Garnaut, who provided an
interim report in February 2008 and is scheduled to produce a final report by 30 September 2008. The report will inform the government's consideration of the planned
medium term emissions trajectory to be announced by the end of 2008.[4]
Emissions targets will also be informed by economic modelling being undertaken
by Treasury.[5]
1.18
Garnaut is expected to provide strategies and underpinning design detail
on a system for emissions trading (an ETS) to commence in 2010. As noted in the
13 May 2008 Budget statement, the government's policy is built on three
priories: reducing Australia's greenhouse gas emissions; adapting to unavoidable
climate change, and helping to shape a global solution.[6]
What is eventually proposed is likely to deal with the three policies set out
in the policy document Labor's 2020 target for a renewable energy future.
These are:
- establishing market-based incentives to reduce greenhouse gases
through an emissions trading scheme;
- demand side management measures (ie. energy efficiency),
assisting households to contribute to reducing carbon emissions; and
- supply-side measures including support for zero emission and low
emission technologies through a national clean coal initiative and a strong
renewable energy target.
1.19
The aim is to reduce greenhouse gas emissions by 60 per cent by 2050.
1.20
Professor Garnaut has argued that an ETS will not achieve the lowest
cost reduction in emissions unless it is 'supported by measures to correct
market failures or weaknesses in areas such as innovation, research and
development, energy efficiency and new network infrastructure. 'Those measures
would include government programs, regulatory action and financial support for
investment'.[7]
The review will develop a set of principles to assist its assessment of whether
existing programs are complementary to an emissions trading scheme.
Energy Efficiency
1.21
The government has acknowledged the potential for energy efficiency,
recognising that emissions trading alone will not provide the reductions in
energy use required and therefore acknowledges energy efficiency as a
complementary measure to an emissions trading program. Australian Bureau of
Agricultural and Resource Economics research predicts that energy efficiency
measures could contribute up to 55 per cent of emission reduction targets by
2050.[8]
1.22
The 13 May 2008 budget statement notes:
The Australian government is committed to bringing energy and
water efficiency into the mainstream, providing Australians with cost-effective
solutions to reduce their environmental footprint. The government's policies
are intended to help households, businesses and the energy services industry
move beyond current barriers like high up-front costs and poor information,
increasing access to the whole-of-life benefits of energy and water efficiency
improvements.[9]
1.23
The Department of Climate Change advised the committee of a number of
energy efficiency measures through direct financial incentives, to strengthen
energy efficiency regulations and provide information to help households use
less energy. The key measures include:
- $10 000 low interest loans to assist households to install
solar, water and energy efficient products;
- rebates for energy-efficiency insulation for 300 000 rental
homes;
- $8 000 rebates for rooftop solar photovoltaic panels;
- $1 000 rebates for solar hot water systems;
- improved energy and water efficiency standards for new homes and
appliances; and
- making every school a 'solar school' within eight years.[10]
1.24
The Department also noted that the COAG Energy Efficiency Sub-Group is looking
to accelerate energy efficiency measures to ensure a nationally consistent
approach to climate change.[11]
Renewable Energy
1.25
Renewable energy is another plank in the government's climate change
strategy. The policy document Labor's 2020 target for a renewable energy
future states that the government will:
- ensure that by 2020, at least 20 per cent of Australia's
electricity supply – or approximately 60,000 GWh – is generated from renewable
sources, equivalent to the electricity used in 7.5 million homes;
- significantly increase the Mandatory Renewable Energy Target
(MRET) to 45,000 GWh by 2020 to ensure that with existing renewable capacity, a
20 per cent target is reached;
- work cooperatively with state and territory governments to create
a single national renewable energy scheme;
- phase out the renewable energy target from 2020 as emissions
trading matures and prices become sufficient to ensure a mandatory renewable
energy target is no longer required;
- establish a $500 million national clean coal initiative to invest
in advanced coal technologies to secure jobs and coal exports;
- establish complementary household energy efficiency measures to
reduce energy use and keep overall energy bills as low as possible; and
- use Commonwealth revenue from emissions trading to assist low
income households in the event of price increases flowing from measures to cut
greenhouse gas emissions.[12]
Committee view
1.26
In this chapter the committee considered the wider climate change policy
context. The committee notes that an emissions trading scheme will be the centrepiece
of the government's climate change policy and that energy efficiency and
renewable energy are being considered as complementary measures. The provisions
and detail of the energy efficiency bill and the issues raised during the
committee's consideration of the bill are considered in detail in chapter two. The
provisions and detail of the renewable energy bill and the issues raised during
the committee's consideration of the bill will be discussed in chapter three.
1.27
The committee commends the intent of these bills, and has welcomed the
opportunity its scrutiny has afforded to keep itself abreast of technical
issues in emissions policy. It does not support, however, the passage of these
bills in view of the fact that provisions contained in them are likely to be
addressed in the far more comprehensive legislation which is due to be
introduced later in 2008-09.
Navigation: Previous Page | Contents | Next Page