John Howard delivered this election campaign opener for the National Press Club at Parliament’s Great Hall today.
Securing Australia’s energy future
Australia is a strong country, an optimistic country, a country respected around the world. The characteristics and values that have made us strong � hard work, extraordinary adaptability, a fair go, pulling together when things get tough � have stood the test of time.
In recent years, Australia has outperformed most economies in the world. We�re getting the big things right. Last week, Australia�s unemployment rate fell to a 23 year low. This Government�s economic management has delivered a sustained improvement in our labour market not matched in more than two generations. You have to go back to before the doubling of Australia�s unemployment rate under the Whitlam Government to see anything comparable. And then our economy was much more protected.
This economic performance is no fluke. It is the result of clear priorities, careful policy development, a willingness to take hard decisions and the experience that comes from knowing what could knock us off course.
Looking over the horizon
The job now is to build on our solid foundations � to unlock new reserves of Australian energy and optimism for the challenges ahead.
I believe that Australians want a government that delivers a strong economy with good jobs, high wages and low interest rates. I think they support our determined approach to national security in the face of the new threats of the twenty-first century. Australian families welcome what we�ve done to help with the costs of raising children.
Australians don�t want us to take risks with their future. They don�t want us to take our eye off the ball. But they do want us to look over the horizon.
To renew our commitment to making Australia even better � to set a course so Australians can plan for progress in their daily lives over the next decade and beyond.
Throughout this year, the Government has released a series of initiatives to lock-in Australia�s future economic prosperity � including detailed policy statements on demographic change, on science and innovation and on upgrading our land transport infrastructure.
Today, I want to outline what the Government is doing to secure Australia�s energy future well into the twenty-first century. And to do this while meeting our obligation to pass on this vast land to future generations in good condition.
This White Paper � entitled Securing Australia�s Energy Future � will deliver sustainability, prosperity and security to the energy sector for the benefit of all Australians.
It recognises that Australia cannot afford to put at risk our existing energy advantage � to put at risk industries that directly employ 120,000 Australians and which earn more than $24 billion a year in export income. It recognises that further development of Australia�s energy resources is vital to our future prosperity.
It also modernises Australia�s fuel excise system, takes steps to improve energy efficiency, and strengthens Australia�s energy security position.
Of course, the production and use of energy comes with a major environmental challenge. The Government is determined to meet this challenge � domestically and internationally � with leading-edge, clean energy technology.
We are taking action to address greenhouse emissions and climate change, but we are determined to do it the smart way � a way that does not threaten our energy advantage and national prosperity.
This White Paper includes steps designed to make Australia a world leader in low emissions technologies. A centerpiece of this strategy is the establishment of a Low Emission Technology Fund. The Government will provide $500 million to this fund which in turn will leverage at least $1 billion in private sector investment to develop and demonstrate low emission technologies.
The Government will also invest $75 million in Solar Cities trials � a far-sighted effort to demonstrate a new energy scenario. Beyond the Low Emission Technology Fund and the Solar Cities trials, we will commit a further $134 million to support the commercial development of renewable energy technologies.
Australia can secure its energy needs, extend its economic prosperity, and meet our environmental obligations � as long as we have the right policy framework.
Maintaining Australia’s Energy Advantage
Underpinning this framework is the assumption that Australia can, and should, continue to play a major role in supplying the domestic and world economies with low-cost energy.
Developing Australia�s abundant energy resources is a key to our future prosperity. Australia is the world�s fourth largest producer, and largest exporter, of coal. We supply 8 per cent of world trade in liquefied natural gas. Our known oil reserves are significant, but are projected to decline in the absence of new discoveries. Our wind and solar resources are plentiful.
The energy advantage provided by our resources is something Australia must not throw away. It is not in Australia�s national interest to lock up and leave undeveloped our natural resources. As an efficient global supplier, we need to be positioned to meet growing demand for energy while also moving to a low emissions future.
Renewable energy sources such as wind and solar power will play a part in meeting growing energy demands. But for the foreseeable future, coal, oil and gas will meet the bulk of Australia�s energy needs. It is for this reason that we must look at more environmentally responsible ways of developing all our natural resources.
The choice is between low and high emissions outcomes � not between renewables and other energy sources. We can have both of them.
Australia spends more than $50 billion on energy each year. Demand for electricity in Australia is expected to increase by 50 per cent between now and 2020. And demand for transport fuels is expected to grow by a similar amount in that time. Substantial investment will be required over this period to meet Australia�s energy needs with industry putting a figure of $37 billion on the future investment task.
World demand for energy is expected be about two thirds above current levels by 2030. Developing countries, mostly in Asia, will account for 60 per cent of that growth. Demand for natural gas will rise faster than for any other fuel, doubling by 2030.
Trade in liquefied natural gas is likely to grow very strongly. In two decades time, the United States � the largest natural gas market in the world � is expected to source around a quarter of its demand from LNG imports.
Already the world�s second largest energy consumer, China will continue to grow in importance on world energy markets. Chinese demand for gas is expected to double in the next decade. China�s continuing need to source oil and gas will make it a strategic buyer on world markets.
This Government has devoted unprecedented time and attention to Australia�s resources diplomacy. And we�ve had some big wins � most notably in August 2002 with the $25 billion deal to sell LNG to Guangdong province in China, the biggest single trade deal in Australia�s history.
Just as Australia�s resources sector helped fuel industrial growth in Japan and South Korea over several decades, we are now developing a strategic resources partnership with China. China is now our second largest customer for mineral and energy commodities, after Japan.
New markets in the United States would complement our large and growing markets in North Asia. A little over a week ago, I met with California Governor Arnold Schwarzenegger to lobby on behalf of the Australian LNG industry. I also had very encouraging discussions with President Bush and Federal Reserve Chairman Alan Greenspan on the strategic fit between Australia � as a cost-effective energy supplier � and the United States with its large future energy demands.
From the top down, the Government has worked closely with industry to ensure Australia�s energy advantage is well understood. But we know that ultimately it is the economic fundamentals that count.
Developing major gas fields � such as the North West Shelf and the Gorgon and Sunrise fields � requires substantial foreign investment and joint venture arrangements between many companies. Competition for this investment is fierce, as is competition for markets.
Australia must have a policy framework that provides certainty for investors � certainty of title, certainty over the rules that will apply, and certainty that commercial decisions � not government fiat � will determine when and how investments proceed. Requiring developments to quarantine resources for domestic use, or imposing strict �use it or lose it� provisions do Australia�s cause no good.
Australia also needs to maintain a tax system that supports further development of energy resources. The Petroleum Resource Rent Tax plays a key role in allowing investors to earn good returns, while ensuring the Australian people are compensated for the use of public resources.
In this year�s budget, the Government moved to further increase the attractiveness of exploration in frontier areas by increasing the value of exploration deductions in designated areas from 100 per cent to 150 per cent.
Continued energy market reform is a vital part of securing Australia�s energy future. Under the Australian Government�s leadership, major reforms have now been agreed under the Council of Australian Governments process. On 1 July, a single energy regulator � the Australian Energy Regulator – and a single rule-making and market development body � the Australian Energy Market Commission � will be established.
Australians enjoy a high level of energy security. Our abundant energy resources, access to imports (in the case of oil) and high quality infrastructure have ensured the reliable delivery of our energy needs. Maintaining Australia�s excellent record in this area is a high priority for the Government.
While Australia�s enormous reserves of coal and gas are sufficient to meet our needs for a long time into the future, a disruption like the Moomba gas fire is an important reminder that effective gas interconnections between state jurisdictions can minimise the impact of disruptions.
This year�s budget earmarked $4 million for protecting Australia�s energy infrastructure from disruption and this White Paper outlines additional measures to strengthen our energy security.
Kyoto and beyond
Human induced climate change is one of the major challenges confronting the world this century. The potential for climate change is real and addressing it will require changes to the way the world produces and uses energy.
Australia accounts for only 1.6 per cent of emissions and cannot change the course of climate change alone. We are, however, making significant progress in separating economic growth from emission growth. Between 1990 and 2002, the Australian economy grew by 47 per cent, while greenhouse emissions grew by only 1.3 per cent. We can and will continue the drive towards a better emissions performance.
The Australian Government has already invested nearly $1 billion to fund a range of climate change measures across the energy, transport and agriculture sectors.
We have played a positive role in seeking a global solution to climate change. Currently Australia is one of the few nations on track to meet its target under the Kyoto agreement. We will achieve this with a strong and growing economy.
The Government�s position on Kyoto is well known. We will not ratify something that does not encompass the world�s largest emitters. Neither does the Kyoto protocol address the issue of investment and emissions moving from one nation to another with no overall global greenhouse benefit.
To give an example, Australia is in a strong position to meet Asia�s burgeoning LNG demand. But we face stiff competition from a number of countries such as Indonesia that do not face Kyoto constraints and that have gas resources with high levels of carbon dioxide.
If Australia is forced to impose a discriminatory impost on carbon emissions, it is likely that new LNG investments will go elsewhere � costing Australia economic growth, jobs and export income.
The global environment would be no better � indeed it would be worse � and Australia will have lost out.
The Australian Government is looking beyond the Kyoto Protocol towards a more effective long term response to climate change. We will work actively in the international community to develop such a response.
In the meantime, Australia accepts that substantial further effort is needed to prepare the economy for future emission constraints. Future reductions in emissions will become much tougher � both as the world economy grows and as the easy options are taken up. We have therefore developed a plan to lower the cost of a broader range of low emission options for the future.
This will ensure that Australia can move more quickly to lower greenhouse emissions as part of an effective long-term global response. To make this happen, the Government will drive investment of at least $1.5 billion in break-through low emission technologies with significant long-term greenhouse gas abatement potential. The Government will provide $500 million to a Low Emission Technology Fund so as to leverage at least $1 billion in private sector investment.
The Fund will support low emission technologies, including renewable energy technologies, that are able to reduce greenhouse emissions by at least 2 per cent at realistic rates of long-term take up.
The Fund will support all technologies that have the potential to significantly lower Australian energy emissions in the longer term. It will have particular focus on electricity generation technologies, and an eye to technologies that could underpin the future value of our substantial energy resources.
Solar cities
The Government will also provide $75 million for trials to test a visionary new energy scenario � where solar power, energy efficiency and market reforms combine to provide a sustainable energy future.
These Solar Cities trials will, for the first time, place a proper market value on the role solar energy can play in meeting peak demand and reducing the need for transmission and distribution investments.
This is about doing things smarter with solar panels, better insulation, energy efficient appliances and smart meters that allow households to sell excess electricity back into the grid at peak times.
The trials will be held in two or three urban centres. They will require support from industry, state and local governments. Centres in Adelaide and Sydney would be prime locations for trials. The Australian Government encourages governments and industry to develop proposals to host the trials so that the best locations can be chosen.
Support for renewables
Renewable energy plays an important role in delivering low emission electricity. Solar, wind, geothermal, and biomass all show great potential as sources of electricity. But the high cost of renewable electricity options remains a barrier to their wider use.
As well as being eligible for the Low Emission Fund, renewable energy sources will receive support of a further $100 million for research, development, demonstration and commercialisation. The Government will also spend $34 million to improve wind forecasting and develop options to store electricity � targeting impediments to the uptake of solar and wind-based electricity.
Together, these measures represent a strong further commitment to the development of renewable energy as a source of low emission energy for the future.
Mandatory Renewable Energy Target
The Government will retain and improve the existing Mandatory Renewable Energy Target (MRET) scheme. MRET will continue to play a significant role in supporting the renewable sector, and will underpin $2 billion in renewable energy investment in the period to 2010.
Expanding MRET would impose substantial new costs on the economy and would benefit too few technologies. A better path is to directly promote the development and demonstration of a broader range of low emission technologies and tackle the impediments to the uptake of renewable energy.
The Government�s $500 million Low Emission Technology Fund, plus over $200 million in funding for renewable energy technologies, will prepare Australia to respond to potential long-term emissions constraints. They maintain the nation’s economic prosperity and place Australia at the cutting edge of low emission technologies.
Fuel excise reform
This White Paper overhauls the fuel excise system. The Government’s reforms will save business and households more than $1.5 billion between now and 2012-2013. These reforms build on the alternative fuels excise arrangements announced last year and on the AusLink White Paper launched last week.
Tens of thousands of businesses and households will be better off. Local and state governments will be big winners and I call on those governments to pass the benefits through via lower rates and state charges. Industry compliance costs of the current regime will be greatly reduced with firms able to claim excise credits using their existing Business Activity Statement.
Regional Australia will be a major beneficiary with all business use of fuels on farms eligible for a full excise refund when the changes come in fully.
Mining, construction and quarrying will all have access to full excise refunds for fuels used off road. The generous transition periods for bringing in excise on biofuels will provide time for the sector to establish its commercial credentials.
All fuel used by businesses off-road will become excise free on 1 July 2012.
No longer will firms have to make detailed calculations between eligible and non-eligible activities. No longer will some businesses miss out, while others benefit from excise credits.
A half credit will be provided for all new activities starting on 1 July 2008 as a down-payment on the reforms.
Excise on fuels used in power generation will be lifted on 1 July 2006. This will bring the treatment of diesel used in remote areas in line with the treatment of power generation in cities. This should mean lower power prices for those living in regional Australia.
The Government will also remove excise on burner fuels from 1 July 2006. This will benefit as many as 90,000 Australian households.
From 1 July 2006 the excise paid on fuels used in heavy vehicles will be converted to a road user charge. Existing urban and regional boundaries will be removed from that date. And the excise relief provided through the road user charge will apply to all fuels, including petrol � benefiting the owners of as many as 54,000 heavy vehicles.
At the same time, the government is acting to improve urban air quality and the emission performance of the transport sector.
Urban air quality is a serious health issue, and greenhouse emissions from transport account for 14 per cent of Australia�s total emissions.
We have created an environment in which the use of alternative transport fuels can grow. However recognising that petrol and diesel will continue to be the dominant transport fuels we will introduce stronger standards for fuels and vehicles to significantly improve environmental outcomes.
Incentives are being provided to ensure the early introduction of cleaner diesel and petrol � well in advance of the mandated dates.
New vehicles standards are being introduced to substantially improve the emissions performance of vehicles and a new agreement has been struck with car manufacturers to improve the fuel consumption of vehicles being sold into the Australian market. These new standards will facilitate the introduction of far more fuel efficient and cleaner vehicles in Australia.
Requiring Business to Do its Part
About 250 businesses in Australia use more than 0.5 petajoules of energy per year (enough to power 10,000 homes). These businesses account for more than 60 per cent of total business energy use and should play their part in ensuring Australian energy is used wisely.
To ensure this happens, the Government will require that Australia�s largest energy users undertake regular energy efficiency assessments. Firms using more than 0.5 petajoules a year will be required to undertake mandatory energy efficiency assessments every five years and report publicly. In this way, companies can demonstrate to investors and the community that they are using energy wisely.
The Government will introduce a requirement that heavy vehicles meet one of five tests to show they are not a high polluter before they gain access to excise relief through the road user charge. And firms receiving more than $3 million in excise credits will be required to manage their emissions through compulsory membership of the Greenhouse Challenge Programme.
Conclusion
My government does not take Australia�s economic prosperity for granted. We have worked hard to get the economy in the shape it is in today.
Australia is blessed with a wonderful resource base and reliable supplies of low cost energy. The Government recognises that we have a responsibility to develop Australia’s resources in an environmentally sustainable way.
The initiatives I have announced today position Australia to deliver better global outcomes by showing leadership with technological innovation in emission reduction. We are on track to achieve our Kyoto target. The Government is now looking beyond 2012 and acting to lower the cost of meeting future greenhouse constraints.
We understand that achieving the right balance in energy policy means pursuing economic growth and energy security while at the same time taking care of our environment. This White Paper strikes that balance and secures our energy future for the benefit of all Australians.