This chapter considers evidence given by witnesses regarding
complementary measures for reducing carbon emissions.
The complementary measures presented to the committee can be divided
into three broad categories:
proposals to reduce emissions by changing the types of activity
occurring in the economy;
proposals to use technologies which emit less carbon pollution; and
capturing and sequestering those emissions which continue to occur.
Effective action to mitigate climate change will likely consist
of a mixture of these approaches.
Evidence was given to the Committee that actions to shift to less carbon
intensive activity in the economy may include:
introducing a market based instrument (such as the CPRS); and
specific regulation in certain areas, such as in the area of energy
efficiency or demand management. These are discussed further below.
The committee received considerable evidence on the need to promote
renewable energy sources. Evidence was received from witness:
Calling for greater government intervention to improve the viability of
these renewable technologies (although some witnesses gave evidence that these
technologies may not be economically viable);
Advocating the use of less polluting industrial processes; and
Identifying technologies that have the have the potential to capture
emissions after they have occurred.
In relation to the various complementary measures canvassed in evidence
before the committee, some of these approaches are already in operation; other
new technologies present exciting opportunities. In some cases, technologies
and techniques proposed to the committee may never be commercially viable.
The approaches discussed in this chapter are often described as
'complementary' measures. As the term suggests, these types of measures are
often described as being 'complementary' to something else – typically a market
Mr Phillip Sutton, of the Climate Emergency Network, gave evidence to
the committee of the need for complementary measures in addressing climate
...the price only has its effect through an interaction with responsiveness
of the economy. It is the complementary measures that make the economy responsive.
If you do not have very strong complementary measures then you need a much higher
price in the market to get any response. It is quite reasonable to think that,
in fact, if you favoured the complementary measures in the very short term,
created the infrastructure and provided the investment that would have a more
stimulatory effect than if you simply relied on a very long-term and volatile
price system coming out of a permit trading system.
Impact of a cap and trade approach
The extent of the adoption of any complementary measures to reduce
carbon emissions will be affected by the emissions cap, if any, adopted by the
As discussed in Chapter 3 of the report, a cap and trade model operates
by setting a national cap on emissions and then allocating permits to emit up
to that cap level. The cap is mandatory. Emissions are not permitted beyond the
cap other than as a result of a 'safety valve' mechanism, 'banking' of
emissions between years, or activities in sectors not covered by the scheme.
The Productivity Commission, in their submission to the committee,
stated 'under a 'pure' ETS with a binding quota, the quantum of emissions is
fixed. In this case, other abatement policies aimed at sectors covered by the
ETS could change the composition of emissions reductions but not total
In other words, additional actions can only change the composition of the
emissions mix, or influence the cost of abatement (including easing costs for
particular parts of the community), or achieve other policy goals, such as
The Productivity Commission gave the following example to illustrate
this design feature of an ETS:
Mandating energy efficient light bulbs, for example, could
achieve greater abatement from less energy use, but there would be an
equivalent decrease in abatement elsewhere. This is because the energy
efficiency policy reduces emissions and thereby displaces other abatement that
would have occurred in order to meet the ETS target, reducing the demand for
permits such that their price falls. As it is unlikely that all firms and households
would install energy-efficient light bulbs under an ETS, the policy induced abatement
occurs in place of other abatement that would have occurred with a higher
permit price. The composition of abatement changes, not the amount.
Evidence was given to the committee that complementary measures can
still play an important role in conjunction with a cap and trade model. This
chapter provides examples of this evidence.
Criteria for selecting complementary measures
If there is general agreement that the CPRS, or other price signal, will
not be effective without the use of additional measures, the question arises of
how these complementary measures should be selected.
The Australian Industry Group in their submission to the committee put
forward the following criteria for selecting which measures should complement a
If emissions reduction under a complementary measure can be achieved
at a price lower than the permit price, these additional emissions reductions
will tend to lower the overall burden on the economy of greenhouse gas
If, on the other hand, the per unit emissions reductions that
would be achieved under a complementary measure would cost more than the permit
price, adopting the measure would increase the overall burden on the economy of
greenhouse gas emissions.
Similar concerns about the cost of such measures were expressed by the
Productivity Commission in their submission to the committee:
all supplementary policies must be subject to rigorous
evidence-based analysis to determine if their rationales are sound and, if so,
whether intervention would deliver a net community benefit after consideration
of the costs of action.
Dr Karl Mallon of Climate Risk Pty Ltd put forward an alternative view
in his evidence to the committee:
...the CPRS cannot be seen alone. The nature of the CPRS, which
is, if you like, a price based mechanism, means that it brings through the
least-cost solutions first. What that means is that under the CPRS we may see
things like energy efficiency or some of the low-cost opportunities being
strongly promoted but some of the more expensive but fundamentally important
resources like geothermal and solar energy would be sitting on the shelf...But
the complementary measures, especially in the energy efficiency sector and the
renewable energy target, are fundamentally essential to the functioning of the
CPRS and the overall objective of the emissions outcomes that are intended.
The White Paper notes that the Council of Australian Governments
(COAG) 'have agreed a set of principles for jurisdictions to review and
streamline their existing climate change emission reduction measures, with the
aim of achieving a coherent and streamlined set of climate change measures in
The White Paper sets out these principles as follows:
measures are targeted at a market failure that is not expected to be adequately
addressed by the Scheme or that impinges on its effectiveness in driving
emissions reductions. For example, research and development failures, common
use infrastructure issues, information failures and excess market power.
measures should adhere to the principles of efficiency, effectiveness, equity
and administrative simplicity and be kept under review. They may include:
targeted at a market failure in a sector that is not covered by the Scheme
for where the price signals provided by the Scheme are insufficient to overcome
other market failures that prevent the take-up of otherwise cost-effective
targeted at sectors of the economy where price signals may not be as
significant a driver of decision making (e.g. land use and planning)
measures in (a) or (b) may only need to be transitional depending on expected
changes in coverage or movements in the carbon price.
measures should be tightly targeted to the market failures identified in the
above criteria that are amenable to government intervention. Where the measures
are regulatory they should meet best practice regulatory principles, including that
the benefits of any government intervention should outweigh the costs.
measures may also be targeted to manage the impacts of the Scheme on particular
sectors of the economy (for example to address equity or regional development concerns).
Where this is the case, in line with regulatory best practice, the
non-abatement objective should be clearly identified and it should be
established that the measure is the best method of attaining the objective.
measures meet the above criteria, they should generally be implemented by the
level of government that is best able to deliver the measure. In determining
this, consideration should be given to which level of government has
responsibility, as defined by the Constitution or convention/ practice; the
regulatory and compliance costs that will be imposed on the community; and how
the delivery of the measure is best coordinated or managed across
The committee concurs with the view expressed by the Government in the White
Paper that complementary measures 'will be required to work in parallel
with the scheme'.
However, the committee notes that the work through COAG on the
streamlining of existing measures in place at Commonwealth, state and territory
level on climate change is still underway. This is concerning given views
expressed by industry about the regulatory burden imposed by contradictory and
Ideally, the design of complementary measures should take place after
the primary mechanism (whether the CPRS or some other system) has been chosen
and designed to fill any gaps or weaknesses left by the primary mechanism.
However, in practice there is already a large number of existing programmes in
place at Commonwealth, state and territory level.
There is a real risk that all levels of government will continue to
introduce complementary measures in an ad hoc manner, and will not rescind
existing ones which are no longer required. This is less desirable than
developing measures developed in compliance with best practice policy making
principles and as part of a coherent national framework. The recent decision of
the government in relation to home insulation as part of the February 2009
economic stimulus package could be an example in this regard.
The Government's Climate Change Budget Overview 2009-10 outlines
$10.3 billion in funding for various projects in 2008-09, and a further
$4.8 billion in the 2009-10 Budget, including support for energy efficiency,
renewable energy, carbon capture and storage, assistance for households and
industry, and development of future programmes.
Many of these programmes are, no doubt, worthwhile in themselves. It is not
clear to the committee, however, the extent to which these programmes meet the
criteria for selection of complementary measures provided by the Government in
the White Paper.
Despite the government's stated view that the continued existence of
certain state based schemes 'would result in an increased compliance burden on
business and increased costs to the economy',
agreements between the Commonwealth and states to reduce regulatory burden can
be slow to implement. The experience of the introduction of the goods and
services tax and implementation of the corresponding agreement on the elimination
of stamp duty is an example in this regard.
The committee is concerned that passage of the CPRS legislation prior to
finalisation of a concrete agreement by COAG on complementary measures
(including reduction of redundant programmes) could lead to imposition of new
burdens on industry without compensating reductions of the regulatory burden.
This would achieve little benefit in terms of mitigation of emissions.
State and territory governments may not agree to termination of their
programmes until the Commonwealth's approach is in place. However, the
preference of the committee is that the best way to ensure that complementary
measures will 'work in parallel' with the scheme is to ensure they are agreed
in parallel, rather than in isolation from each other.
The committee questions the rush to pass legislation when such critical
issues have not been resolved. This reinforces the committee's Recommendation
Reducing demand for energy
Aside from the provision of a price signal on carbon (which has been
discussed at length elsewhere in Chapter 3), the committee received evidence
from witnesses encouraging a reduction in demand for energy by promoting energy
efficiency in industry and transport.
The committee notes that a number of government programmes encouraging
energy efficiency at Commonwealth, state and territory level are already in
The committee notes that on 30 April 2009, COAG reaffirmed its
commitment to introduce a National Strategy for Energy Efficiency.
Submissions received by the committee pointed to the enhanced role that
energy efficiency can play in reducing demand for energy and consequently,
reduction of emissions).
Submissions focussed in particular on building design, energy standards for
businesses and appliances, and use of more efficient techniques by industry.
The committee heard views that measures of this kind could be
implemented in the near term. Mr John Hepburn of Greenpeace stated before the
With direct regulation in terms of energy efficiency there is
a lot of opportunity today to set mandatory standards for best practice.
The Australian Sustainable Built Environment Council (ASBEC) in its
submission to the committee gave evidence that commercial and domestic
buildings contribute approximately 23 per cent of Australia's total greenhouse
ASBEC identified 'untapped potential' for greater energy efficiency,
giving evidence that 'measures to stimulate investment energy efficiency in the
built environment could save 60Mt of CO2e per annum, on average, by
2030 – compared with just 8Mt of CO2e a year under the CPRS alone'.
To achieve these reductions, ASBEC advocated adoption of a national
electricity retailer efficiency requirement ('white certificates'), accelerated
depreciated for energy efficiency in buildings, and public funding for
ASBEC also noted in their submission the importance of higher building
standards and the role of the building code.
The findings of ASBEC were supported by the Australian Institute of
Ms Romilly Madew, Chief Executive, Green Building Council, gave evidence
to the committee that tighter energy efficiency standards could be mandated in
new construction through the building code, and highlighted the potential gains
from undertaking energy efficiency in the existing stock of commercial
...if a 10-year program of upgrading Australia’s older
commercial office stock to environmental standards were to be undertaken it
would create 108,000 construction jobs, with a further 270,000 jobs being
created across the broader economy. It would also involve a reduction of
greenhouse gas emissions of 140 million tonnes. So the message here is
threefold. Firstly, buildings are a key greenhouse gas abatement opportunity;
secondly, the CPRS simply will not achieve reductions in the very sector where
emissions are significant and potential reductions are most easily achieved,
meaning a range of other measures to achieve these reductions are required;
thirdly, the transition to a green, low-carbon economy is necessary and
inherently beneficial in both economic and environmental terms.
Some organisations in their evidence raised concerns about the potential
cost of such enhancements to the building code or mandatory energy efficiency
In its submission to the Standing Committee on Economics inquiry into
the exposure draft of the legislation to implement the Carbon Pollution
Reduction Scheme, the Housing Industry Association noted:
...to achieve expected higher energy ratings in new residential
dwellings a greater percentage and quantity of building products subject to the
CPRS are expected to be used in construction. HIA recommends that greater
industry consultation be undertaken to assess the potential impact of
complementary environmental measures and their interaction with the CPRS on
business activity and the cost of supplying new housing product.
Vehicles and Appliances
A number of submissions and witnesses gave evidence proposing greater
use of mandatory energy efficiency standards and other incentives to encourage
the more efficiently use of energy in vehicles and appliances could help to
reduce Australia's demand for energy. Some of these are listed in the following
Mr Frank Topham, Manager, Government Affairs and Media, Caltex Ltd, in
his evidence to the committee proposed a number of measures which would be more
effective for the road transport sector than the CPRS:
...if you are going to leave motorists and certain other
commercial users out of the CPRS, you have to have alternative or complementary
measures. We propose a set of measures which would incorporate voluntary
targets for carbon efficiency, a feebate scheme which essentially provides cash
back for the purchases of high-efficiency vehicles, grants for research and
development into low-emission vehicles and low-carbon fuels, and a package of
other measures relating to consumer education, public transport, better road
management and better urban planning. That package of complementary measures
would be far more effective than the totally ineffective CPRS as it relates to
motorists and small users.
Ms Fiona Wain, Chief Executive Officer, Environment Business Australia,
in her evidence to the committee described measures that could be taken to
encourage the take-up of more fuel efficient vehicles and appliances:
The standards for things like appliances, electrical
fittings, automobiles should be put into a package alongside the household
retrofit program where there is a national trade-in scheme for appliances. If
we are talking about automobiles, if all three levels of government were to
mandate that they would buy or lease a certain standard of fuel-efficient
vehicles each year that would give the automotive companies a very clear signal
about what a basic market is in this country that would then allow them to produce
that scale and it would bring down the unit cost for the community.
The committee also received evidence calling for minimum standards to be
used to phase out inefficient products. For example, Energetics in its
submission to the committee argued that funding from the Climate Change Action
Fund should be used to accelerate the development of new Minimum Energy
Performance Standards for business equipment.
The committee also received evidence that greater energy efficiency
should not seen as an end in itself. Dr Paul Simshauser, Chief Economist and
Group Head, Corporate Affairs, AGL gave evidence to the committee that:
One of the things that are characteristic of households is
that, in general, their consumption has tended to increase over time. Our
appliances are far more efficient now than they have been historically; the
problem is that they tend to be a lot bigger. I am just thinking of my own
household. Back when I was a student, I had a rickety old 1950s refrigerator. I
now have a five-star fridge but, quite honestly, I could fit most of my family
in there. That five-star fridge is obviously consuming a lot more power than
that old 1950s fridge. That is fairly symptomatic of society more generally.
The floor spaces of our households have jumped from about 135 square metres 20
years ago to, probably, close to 200 square metres, so we have a lot more space
heating and space cooling. We obviously have a proliferation of electronic
gadgets: hairdryers that look like hand cannons and vacuum cleaners that could
just about take the carpet off the ground...the appliances and the consumption
levels are much higher than they have ever been. The reality is that power is a
very cheap commodity in our society.... Pricing alone, I believe, will not
necessarily get us there.
Other evidence presented to the committee referred to greater costs
associated with mandating higher energy efficiency standards in products. For
example, the Federal Chamber of Automotive Industries in its submission to the
committee argued that this approach could impact on the goal of achieving lowest
Such an approach would offend against the major objective of
the CPRS, that is, to drive emissions reductions from the cheapest available
source. By imposing additional measures on the transport sector, it would
suggest that it is worth paying more to abate one tonne of CO2 from
the transport sector than from elsewhere. The rationale for this is not clear.
The committee agrees that there are likely to be continued benefits from
investment in energy efficiency in the built environment and in motor vehicles.
The benefits from such measures may go beyond climate change (for example,
The committee cautions that this is an area where governments at all
levels may in future be tempted to intervene on an ad hoc basis. It is
preferable that investments must be guided by best practice policy making
principles. This includes the requirement for a cost-benefit analysis to be
undertaken for proposed initiatives. Investment must be made within a coherent
policy framework according to transparent criteria for setting priorities.
The committee received submissions relating to the benefits of moving to
less polluting forms of transport.
For example, the Bus Industry Confederation (BIC) in their submission
A percentage of the dollars raised through a CPRS and
proposed complementary measures should also focus on Federal Government support
for increased public transport investment for both Public Transport
infrastructure and planning and for rolling stock in the form of
hybrid/electric and gas driven buses on the condition that State governments
identify public transport black spots in the system and increase the total
number of services and their frequency.
The BIC also gave evidence in their submission that:
The BIC believes that the CPRS should exempt permanently high
capacity passenger vehicles, public transport and coaches, from any impact that
a CPRS will have on fuel prices. The BIC seeks for the CPRS to recognise the
positive emissions outcomes delivered by buses and coaches as compared to cars
and permanently provide a cent for cent credit against any fuel price impact of
Mr Owen Pascoe, Climate Change Campaigner, Australian Conservation
Foundation, gave evidence to the committee that:
Investment in public transport through Infrastructure
Australia through the budget could potentially reduce more emissions than the
solar thermal funding.
The Australasian Railway Association (ARA) in their submission to the
committee criticised the CPRS as 'favour[ing] road transport over more
efficient rail transport'.
The Australian Rail Track Corporation echoed these concerns.
The ARA propose a range of complementary measures to promote rail transport,
including research and development incentives, increased infrastructure
spending, asset depreciation, road congestion charges in metropolitan areas,
and a 'Mandatory Rail Use Target' to build on existing targets set by the
Victorian and New South Wales governments. The ARA argue that such measures
will reduce the emissions growth from road transport, which they project to be
seven times higher than other forms of transport between 2010 and 2020.
Support for increased funding for rail freight was also provided by the
Grain Growers Association.
Transition to less polluting technologies
The committee received submissions referring to a wide range of possible
sources of renewable energy generation. These included solar, hydro, wind,
biomass, wave energy, tidal power, geothermal and biofuels. The evidence
presented to the committee indicated that these technologies are in varying
states of development and commercial readiness. The following section briefly
discusses some of these options.
The principal existing forms of obtaining direct energy from solar
radiation energy are photovoltaic technology and solar heat (thermal).
Evidence was given by witnesses about the potential of solar energy to
meet demand for power.
Professor Andrew Blakers, Director of the ARC Centre for Solar Energy
Systems (Australian National University) stated:
...solar energy is a complete long term sustainable solution.
Australia receives 30,000 times more solar energy each year than all fossil
fuel use combined. Australia has a significant presence in the worldwide solar
energy industry, which can be build upon to create a major export-oriented
technology rich industry.
Evidence was also given to the committee concerning the potential
obstacles preventing the wider take up of solar power, including cost.
Dr David Brockway, Chief of the Division of Energy Technology at the
CSIRO, in his evidence estimated that solar thermal produces power at a cost of
approximately $160 to $200 per megawatt hour, compared with current wholesale
power costs of $40 per megawatt hour (which do not incorporate a carbon price).
This price may come down slightly in time.
In relation to photovoltaics, Professor Blakers advised the committee:
Photovoltaics will compete at the retail level—that is up
against 15c, 20c or 25c a kilowatt hour—within five years in Australia and that
is as commercial as anything you would like to find. In the longer term, if we
continue to march down the cost curve as we have for the last 30 years, by
around 2025 we will be in the $90 a megawatt hour range, which will be right in
there with any other low emission technology.
Wind power is in use by many power generators in Australia, and is one
of the more relatively 'technology ready' sources currently in use in
In a 2008 Research Paper by the Parliamentary Library entitled 'the
potential for renewable energy to provide baseload power in Australia', it was
estimated that Australia's wind capacity was 817 MW. About 2500 GWh is
Dr Brockway in his evidence to the committee referred to the current
costs of wind power as $100 to $110 per megawatt hour, with support from MRET.
Mr Andrew Richards, Executive Manager, Government and Corporate Affairs, Pacific
Hydro gave evidence to the committee that the costs of wind power were $80 to
$90 per megawatt hour.
As wind is a mature technology, Dr Brockway indicated it was unlikely
the cost of wind power generation would decline further in future years.
Ms Jeanes of the Australian Geothermal Energy Group gave evidence to the
committee that there are approximately 40 companies with exploration licences
looking for geothermal energy around Australia.
Ms Jeanes cited a report by McLennan Magasanik and Associates which
estimated that 2200 megawatts of installed geothermal capacity could be
operation in Australia by 2020, and could be the cheapest form of emissions
free energy in use by that time.
In terms of cost competitiveness with coal fired power (in the absence
of a price on coal), Ms Jeanes gave evidence to the committee that:
The geothermal drilling fund, at the moment, provides project
developers who are ready to produce a pilot plant with up to $7 million of
taxpayers’ money. The average cost of a pilot plant is about $25 million, so
that is roughly a two-for-one deal. The renewable energy demonstration fund has
just received applications and we think that several projects will need about
$50 million to demonstrate that geothermal energy works at scale. The cost of
producing energy from a pilot plant is around $135 a megawatt hour and from a
demonstration plant about $105 a megawatt hour. These are cost estimates for
the future obviously, because we have not done them.
We ultimately think we are going to get down to an output
cost of about $80 a megawatt hour. That is competing with a coal price now of
about $45 to $50 a megawatt hour. We think that by 2020 our carbon price and
renewable energy target certificate are going to well and truly cover the
difference. What we need now is capital funding up front, and I have just given
you some idea of what that magnitude is.
Hydro electric power is one of the more long-standing forms of renewable
energy used around the world.
A 2008 Parliamentary Library research paper entitled 'the potential for
renewable energy to provide baseload power' noted there were 100 hydroelectric
power stations with 7050 MW capacity providing about 16,000 GWh annually.
Ocean Power (Wave & Tidal)
Wave and tidal powers present two different forms of power which can be
derived from oceans.
Dr Ray Wills, Chief Executive, Western Australian Sustainable Energy
Association, gave the following evidence to the committee:
Dr Wills—There are great opportunities in tidal power
around the world and certainly in the Kimberley. People who are generating
tidal power are moving away from tidal basin storage and simply using the
current of the tide itself. We have seen significant investment, again in the United
Kingdom, in tidal power.
Senator IAN MACDONALD—We have had a look at the
Horizontal Waterfalls. Is that for real? It is very remote. Is there any
prospect with that?
Dr Wills—Again, the problem is very remote generation.
If you want to take it to another location you need to use DC transmission. I
know that the network providers have been looking at that in terms of their own
research and development. If we want to transport energy long distances through
wires, we cannot do it will with AC, we have to go to DC. There are alternatives
to that of course. You can find a transportable fuel source—hydrogen is one example,
but it may not necessarily be the best one.
Mr Ali Baghaei, Chief Executive Officer, Oceanlinx in his evidence to
the committee said that his company has had a wave power operational model
plant near Port Kembla, NSW, since 2006.
The committee also received evidence from witnesses in relation to
biofuels, particularly in reference to transport.
In its submission to the committee, Renewable Fuels Australia stated
that Biofuels are already in wide use around the world:
Biofuels such as ethanol and biodiesel have already
demonstrated the capability to secure net carbon (CO2) reductions
ranging from 30% using dedicated feed corn in the U.S., to between 50% to 87%
in net reductions in Australia - based on industry and CSIRO life cycle
analysis in Australia. No other demonstrated alternative fuels can offer proven
carbon reduction benefits of this magnitude at this time or in the near future.
The Grain Growers Association in their submission to the committee
called for 'continued development of, and support for, renewable fuel sources
such as biofuels as part of a wider strategy of energy security'.
The committee notes that the possible role of biofuels is one of the
terms of reference of the Senate Select Committee on Fuel and Energy, which in
its interim report recommended 'that incentives be provided to encourage research
and development of second generation biofuels'.
Methane Gas Capture
Methane is a particularly potent greenhouse gas, with 21 times the
impact of carbon dioxide.
Evidence was presented to the committee regarding how the CPRS may
affect methane capture from mining and waste management facilities.
Power generation from methane captured from landfills and fugitives from
mining is currently supported by various programmes at Commonwealth and
state/territory level, including the NSW Greenhouse Gas Reduction Scheme (GGAS)
and the Commonwealth's Greenhouse Friendly programme.
It has been announced that no new greenhouse gas abatement projects will
be considered by the Greenhouse Friendly programme from 4 February 2009.
In the White Paper, the Government undertook to work with the NSW
and ACT governments to develop 'appropriate transitional arrangements' away
Mr Max Spedding, Secretary, Australian Landfill Owners Association, gave
evidence to the committee that a number of landfills generate sufficient
methane to facilitate power generation:
Interestingly, a substantially larger landfill is needed to
get to the point where it is economical to produce renewable energy because of
the level of the RECs, the renewable energy certificates. In the past we have
had the greenhouse friendly [NSW Greenhouse Gas Abatement Certificates], which
gave support to this. These go under the CPRS. What is needed at the moment to
have a good return on investment for power generation is three megawatts of
capacity – that is, basically three large engines and generators. A landfill of
around 200,000 to 300,000 tonnes gives the capacity to run such an installation
for 20 to 30 years. In Australia, in round figures only 30 or 40 landfills out
of the total are that size.
Evidence was given to the committee that another prominent source of
methane emissions is the release of fugitive emissions from coal mining
Mr David Hamill of Envirogen Pty Ltd gave evidence advocating the
inclusion of fugitive methane emissions from coal mining in the Renewable
We have been abating fugitive emissions since 2000, and our
industry has a total installed generating capacity of 215 megawatts.
Practically, this means we provide sufficient power to electrify over 210,000
homes. That is equivalent to powering a city about 1½ times the size of
Canberra. At the same time—and this is important—while providing that amount of
power we are also removing the impact of emissions equivalent to 1½ million
cars on our roads. Providing the waste coalmine gas industry has a regulatory
environment which enshrines an ongoing investment incentive, our industry has
the capacity to double its abatement contribution and assist Australia in
outperforming its Kyoto targets. By including the contribution of waste
coalmine gas within the proposed expanded renewable energy target, the industry
has potential, with funding available, to increase its contribution to fugitive
emission abatement from its present level of about 6½ million tonnes of carbon
equivalent per annum to over 12 million tonnes of carbon equivalent per annum. This
would increase Australia’s abatement of fugitive emissions from eight million
tonnes of carbon equivalent per annum to 14 million tonnes of carbon equivalent
per annum, which would be a 75 per cent increase during the Kyoto commitment
period of 2008‑12.
Mr Seamus French, CEO of Anglo Coal, in his evidence to the committee
noted that gas from its mines is used in the powers stations at German Creek
and Moranbah, but that the economic viability of this is dependant on revenue
obtained via the NSW GGAS.
Energy Developments also raised concerns about the impact of the loss of
revenue from the NSW GGAS.
The committee is cautious about suggestions to include methane as an
eligible source in the expanded renewable energy target, on the basis that
fugitive methane from mining operations is not strictly speaking a 'renewable'
source of energy.
The committee is concerned about the possible loss of opportunities for
abatement from the production of energy from methane. While there may be little
practical difference in terms of emissions as to whether methane from such
sources is combusted by being flared on site or combusted in power generation,
this source has the potential to offset energy and emissions that would
otherwise be produced by other sources.
The committee urges the Government to expedite discussion with the ACT,
NSW and Queensland governments regarding transitional arrangements for
companies currently receiving revenue from the NSW GGAS programme, and
continued support for these activities under the CPRS. The failure to clarify
these arrangements is a significant flaw in the CPRS proposal and is creating
uncertainty for several companies currently undertaking useful mitigation work.
The committee recommends any remodelled CPRS legislation clarify future
arrangements to provide continued support for methane gas capture and energy
generation following the foreshadowed cessation of state based schemes.
The committee recommends that the Government work with the NSW, ACT and
Queensland governments to clarify, as a priority, transitional arrangements for
power generation projects from waste methane which may be affected by the
possible cessation of the NSW GGAS and similar programmes.
Capacity constraints on take up of renewable energy
In 2005-06, renewable energy sources made up approximately 7.6 per cent
of total electricity production in Australia, with 82 per cent of this coming
This suggests that building up supply to meet any increased demand would
not be instantaneous. However, ActewAGL noted that supply would grow to meet
If you had a new mandated renewable energy target that went
from two per cent to 20 per cent, people would build the renewable energy to go
with it, because we retailers would be required by law to buy it. What happens
if we cannot sell it is going to be the interesting thing.
Evidence was given to the committee that the cost of transmission was
noted as a potential obstacle to the greater take‑up of renewable energy
sources, particularly given the distance of many sources (e.g. wind and
geothermal) from major population centres. ERM Power stated:
The idea that the wind from the southern states of Australia
can get to the loads on the eastern seaboard north of there without huge—tens
of billions of dollars—expenditure in transmission is daunting. Of course the transmission
authorities—Powerlink, Transgrid, Grid Australia—are struggling with how they work
within the present regulatory test rules to meet these daunting options they
have for where power will come from with, the RET scheme especially. The
concept is that so much electricity has to be moved to areas a long way away
from the thing.
The Australian Academy of Technological Sciences and Engineering called
for planning of electricity grids to 'provide for the long term demands of a
diversity of technologies supplying power, both base load and intermittent
renewables, distributed locations for some power generation and the need to
system stability under varying supply and demand situations.'
Against these costs can be seen the potential costs of climate change on
existing infrastructure networks. The Energy Networks Association provided the
committee with estimates by Parsons Brinckerhoff of a $2.5 billion cost to
energy networks arising from climate change in the next five years, with the
largest proportion arising due to the need to augment networks to cope with
increased demand for airconditioning.
Measures to promote renewable
The committee heard evidence supporting additional government
intervention to further support and develop the renewable energy sector.
One witness noted the important role that complementary measures can
play in minimising risk for investors in new technologies:
I think one of the issues which underpins achieving the CPRS
and the goals is the role of the private sector in delivering the outcomes. The
investment community and the industry will be required to take on a lot of this
work. At the moment, the policies are structured in a way so that a lot of the
risk is transferred to them. There may be a five per cent target but there may
be a 25 per cent target, so start planning for a 25 per cent target. But that
is a very big risk for an investor to take. Geothermal might come in at 8c, but
it might come in at nine. In that case, it may be able to compete with wind or
it may not. Those are very big risks that you are asking your entrepreneurs,
your green champions, to take on.
The role of the complementary measures is to take that risk
off them and to provide a nice stable environment. Essentially, you are
bringing them up to speed so that they can then transfer it into the future
carbon market and also allow for CPRS to have much more ambitious goals down
the track. The role is to try and create very stable things like feed-in laws
and to provide very stable prices that those markets can interact with. In the
end, that will also make the CPRS more competitive because there will be more
industries which are commercially viable and which will be competing with each
other down the track. That will eventually lower the cost of the CPRS. I would
certainly direct the committee to our work but also the work that has been done
by McLennan Magasanik Associates on these issues, which comes to the same
conclusion that a CPRS with complementary measures is, in the end, cheaper than
a CPRS without complementary measures.
Other submissions received by the committee concerning measures to
promote renewable energy discussed the appropriateness and impact of the
Renewable Energy Target, as well as calls for additional assistance in the form
of feed-in tariffs, greater support for research and development, and direct
grants to support pilot projects and assisting emerging technologies get ready
for commercialisation. These are discussed in the text below.
Several submissions argued that the CPRS as proposed in the White
Paper and exposure draft legislation would have a negative impact on uptake
of renewable energy and other measures to mitigate climate change:
The current scheme may have a negative impact on community
willingness to continue participating, hence reducing demand for energy
efficient and renewable energy technologies such as efficient lights and
appliances, insulation and shading, purchasing green power, home photovoltaic
power systems or solar water heating systems.
The committee is of the view that complementary measures, such as
renewable energy targets or feed-in tariffs, must be subjected to closer
scrutiny to ascertain if such these measures are able to complement the CPRS
(or other measures agreed to by the Parliament).
The committee notes that these have associated costs.
Renewable Energy Target
One of the major initiatives which will be used by the Government to
support the development of renewable energy sources is the expanded Renewable
Energy Target (RET).
The Renewable Energy Target is intended to build on the existing
Mandatory Renewable Energy Target (MRET). MRET was established by the Renewable
Energy (Electricity) Act 2000 and the Renewable Energy (Electricity)
(Charge) Act 2000.
The MRET has been in force since 1 April 2001.
Under MRET, wholesale purchasers of electricity must contribute to a
target of 9500 gigawatt hours (GWh) of renewable energy by 2010. This is
demonstrated through the purchase of Renewable Energy Certificates (RECs),
tradeable certificates generated by accredited renewable power stations, solar
water heaters and eligible generation units.
Shortfalls in RECs can be carried over to subsequent years, with a penalty
payment of $40 per REC owing if the REC shortfall is greater than 10 per cent
of the total REC liability.
RECs continue to exist for the life of the scheme unless surrendered.
The Government has announced that it will seek the expansion of the
Renewable Energy Target to 20 per cent (or 45,000 GWh) by 2020.
It is stated in the White Paper:
While the [Carbon Pollution Reduction] Scheme will help bring
renewable energy technologies into the market over time, the RET will
accelerate their use. The RET is an important transitional measure that will
support the development of a domestic renewable power industry and prepare the
electricity sector for its contribution to the significant emissions reductions
needed to tackle climate change. The measure will help ensure that renewable
energy technologies can be readily deployed when the price signal under the
Scheme makes those technologies more competitive.
Among further benefits the government sees from an expansion of the RET
is the replacement of existing and possible future state/territory government
schemes such as the Victorian Renewable Energy Target (VRET) with a single
national scheme. The establishment of the RET is being progressed through the
COAG Working Group on Climate Change and Water.
On 30 April 2009, the expanded RET received the endorsement of COAG,
with arrangements in place to 'smooth the transition' of state schemes into the
national RET. The Government has pledged to compensate householders for the
cost of emissions trading and of the renewable energy target.
COAG also agreed to put in place legislative exemptions from liability
under the expanded RET (but not the existing MRET) for electricity-intensive
trade-exposed industries. The partial exemptions will apply at differentiated
rates (60 or 90 per cent), and will be based on activities which receive 60 or
90 per cent EITE assistance under the CPRS.
Questioning the need for an
The need for any expansion of the RET in conjunction with the
introduction of a CPRS was questioned by some who gave evidence to the
In its submission to the Garnaut Review, the Productivity
An MRET operating in conjunction with an ETS would not encourage
any additional abatement, but still impost additional administration and
monitoring costs. To the extent that the MRET is binding (which is its purpose)
it would constrain how emission reductions are achieved – electricity prices
would be higher than otherwise and market coordination about the appropriate
time to introduce low-emissions energy technologies would be overridden. If it
was non-binding, it would simply increase administrative, compliance and
The Energy Users Association of Australia (EUAA) in their submission to
the committee state that that RET would lead to distortions when imposed in
conjunction with the CPRS.
EUAA argued that the RET would add $8-$9 to the cost of electricity per
megawatt hour by 2020, which the EUAA regard as a subsidy of some $23 billion
from energy users to renewable energy suppliers over the life of the RET. These
estimates were provided prior to the COAG announcement to exclude major energy
users from the expanded RET.
EUAA state that:
The RET has implications for the generation fuel mix that
will emerge with any ETS operating in concert with the RET. It is quite
conceivable that up to 2020 the scheme will override the ETS and distort the
structure of generation towards higher cost renewable technologies that will crowd
out other lower cost and lower emissions technologies, e.g. gas fired
generation and cogeneration. One perverse result may be that the life of
coal-fired electricity is prolonged, which is more emissions intensive and
would make our emissions reduction target more difficult to achieve. These
impacts could be compounded if the RET can only be achieved by increasing use
of wind farms that are less and less economic (e.g. due to the need to use
poorer wind resources or develop plants in areas that are more remote from the
electricity network), or into higher cost non-wind renewable energy
technologies as the most economic wind resources are exhausted. The 20% RET
will also make the power system less reliable and more difficult to manage due
to the intermittent nature of wind and some other renewable technologies. This
will impose additional costs on top of the direct costs of the scheme.
Professor Ross Garnaut noted that a renewable energy target was a less
efficient means of reducing emissions than an emissions trading scheme, and
questioned the need for both measures if the ETS is effectively designed:
If you were comfortable with all of the parameters of an ETS
and you thought that the targets were right and other dimensions of the scheme
were right, I do not think you could make a case for the renewable energy
target. It would be redundant. Any case for the renewable energy target depends
on your not thinking that the ETS is defined in a way that will do the job. You
do not think the targets are ambitious enough or you think something else is wrong
Evidence supporting the RET
Evidence given by the Roaring 40s (a wind energy developer with projects
in Tasmania, South Australia and Victoria) described continuation of support for
renewables through an expanded RET as 'fundamental to the ongoing development
of renewable energy projects in Australia, particularly until a sufficient
carbon price is reflected in wholesale electricity prices'.
The Climate Institute welcomed the COAG announcements on the expanded
RET and Energy Efficiency strategy on the basis that there were a 'solid start
towards stimulating billions of dollars of investment and creating thousands of
new jobs in renewable energy and efficiency,' providing a 'good start to a low
Dr Paul Simshauser of AGL gave evidence to the committee that an ETS and
the RET were complementary, rather than incompatible, measures:
...if you look at every government around the world trying to
tackle carbon pollution, you will see they do not just pull out the one stick
and throw it in the fire; there is a three-pronged approach that all
governments are looking to take to try to crack this nut. Usually, the
centrepiece will be some form of emissions trading as a sort of a broader
industry approach to dealing with emissions. The second stream is usually a
renewables target of some description, and it usually has a much longer time frame—its
objectives are usually longer term. The issue there is that, if all you do is
an emissions trading scheme, industry will continue to pick off the low-hanging
fruit and will not look over at the next technology horizon. The third leg of
it will usually be an energy efficiency scheme. So it is really important that
we actually continue to push all three policy approaches, to make sure we have
got a balanced approach to dealing with this issue.
Dr Richard Denniss in his evidence to the committee argued the RET
not only provided useful support for the renewable energy sector, but was necessary
in Australia's case to address the perceived failures of the CPRS:
Because the CPRS is so flawed, because the targets are so low
and because the carbon price will be both so low and so volatile, the CPRS will
not drive any investment in renewable energy. So we have had to have a second
measure such as the RET, which I support and which will certainly provide for a
substantial investment in renewable energy. It will do so at additional cost
but, again, that comes back to my assertion that the CPRS clearly does not
deliver least-cost abatement. That is why we are spending $4 billion on
insulation and that is why we have a 20 per cent MRET. So, while I think it is
a good idea in terms of driving investment in renewables, the interconnection
between the two is evidence of how flawed the CPRS is.
Costs of the RET
Treasury gave evidence that adding the RET to an emissions trading
scheme would increase retail electricity prices between 2010 and 2020 by two to
four per cent more than the costs of the ETS alone. The cost per unit of
abatement under the RET is estimated to be three times higher. The combination
of the CPRS and the RET is estimated to increase electricity prices by about 20
per cent for average Australian household electricity in the period 2010 to
2015, and wholesale electricity prices by 48 per cent.
Treasury gave evidence that its estimates for the impact on the RET have
the advantage of drawing on empirical data arising from the experience with
Industry witnesses disagreed with the Treasury's cost estimates. The
committee heard evidence that many industries estimated much higher costs
arising from RET, particularly in conjunction with the CPRS.
The Australian Industry Greenhouse Network noted (prior to the
announcement of COAG's decision to exempt major energy users from the RET):
What does the MRET or the proposed RET do? Again, I think you
will hear from some of my members who have done some work on that, particularly
the electricity intensive ones. Their calculations suggest that in the range of
permit prices for the emissions trading scheme, which, let us say, is $20 to
$40, the RET scheme is likely to impose just as big an increase on electricity
prices on them. So, you are right: it is a double imposition of the same price.
Rio Tinto estimated that the additional costs imposed by the RET on
their operations (mostly in the aluminium operations) would be an additional
$600 million in the decade to 2020.
The National Lime Association in its submission to the committee also
gave evidence raising concerns about substantial additional costs imposed by
the duplication of the RET and the CPRS:
Renewable Energy Target (RET)... duplicates the CPRS
doesn’t meet the CoAG principles
for Climate Change mitigation
Will add substantial costs to the
industry in addition to the CPRS
Was not supported by Garnaut or
the Productivity Commission reviews of the CPRS
will become a higher percentage of
consumed power due to the reducing electricity demand expected from the CPRS,
and making the program more costly.
Even with the announced exemptions, some industry witnesses gave
evidence that the continued existence of MRET (which will continue without
exemptions) and expansion of the RET will impose higher costs.
Following the announcement of the COAG decision, the Australian
Aluminium Council estimated the renewed RET would cost the industry $130
million per year by 2020.
Alcoa indicated that its costs for the existing MRET will come to
$20 million and the costs associated with the expanded RET an estimated $4
million to $5 million in 2020.
The committee received evidence from witnesses criticising the decision
to partially exempt trade exposed industries on the grounds it imposes
additional costs on the remaining participants in the scheme.
This possible consequence was recognised by the COAG Working Group on Climate
Change and Water in December 2008, which noted the risk that 'to meet the
Government's target, an increased cost burden would be imposed on the remaining
liable parties. Higher electricity costs would be borne by businesses and
Treasury's evidence was that it had not undertaken modelling of the
costs of these exemptions:
Senator MILNE—On the renewable energy target, have you
modelled what exempting all of the large emitters would do to the cost of the
renewable energy target to the rest of the economy? I am particularly thinking
in terms of groceries, from the food processing sector, and households,
commercial entities and so on. Have you modelled the full exemption from the
RET, the energy intensive trade exposed, and from the coal fired power
stations, and so on?
Ms Quinn—Not for the modelling that we did for the
renewable energy target. We applied the renewable energy target across all
electricity users. It is the case with all analysis with CG models that if you
restrict coverage of a particular component, whether it be what part of the
economy is faced with an emission price or which elements of the economy are
covered by a particular scheme, we find typically that narrowing the scope on
which the policy acts increases the economic costs to the economy in aggregate.
It obviously has different impacts at the sector level, but narrowing the focus
on a particular component tends to raise the aggregate economic costs of any policy.
Senator MILNE—If the government did move to exempt the
big emitters from the RET completely, would we see an aggregate increase in
cost to the whole economy and a much higher cost to the remainder of the
Ms Quinn—We have not undertaken that modelling. There
are some possible offsets depending on exactly how the exemption happens, but a
general principle is that a narrower scope raises costs.
The committee notes that granting exemptions from participation may
increase the administrative complexity of the RET. As the debate since the
release of the Green Paper demonstrates, there is considerable room for
argument about which sectors should be entitled to assistance, the nature of
that assistance, as well as the need to deal with competing claims from those
organisations which fall the wrong side of the line.
Some in the renewable energy sector argue that the RET tends to favour
existing technology (such as wind) over emerging technologies. ActewAGL
reinforced this point from the perspective of a power purchaser:
Just looking at this from an electricity purchaser point of
view, if there is a 20 per cent target now, that we will have to buy 20 per
cent of our electricity from renewables, we will buy the cheapest renewable,
because our customers will say, ‘I’m happy to buy renewables, but I want to buy
the cheapest renewable’, not, ‘I’m happy to subsidise a more expensive one.’ If
wind power is the cheapest renewable on the grid, that is what we will buy. The
point I am trying to make is that the only way to make the others more
competitive is if they bring their prices down, and that will probably require
a subsidy for them in some way such as the way I have talked about with solar.
It is a fact that the way the market works our customers will want the cheapest
renewable energy they can get, and you can understand why from their
As capacity in the cheapest form of power is exhausted, purchasers will
go to the next most expensive form. This suggests that, if a policy decision is
taken to foster the development of power sources which are currently at the
more expensive end of the price curve, reliance on the RET will not be
sufficient to drive this development and more targeted forms of assistance will
The expansion of the RET is certainly a means of stimulating development
of the renewable energy sector. It has the potential to be an effective
complement to the CPRS. In conjunction with the CPRS, it will not lead to any
reduction in emissions beyond those delivered by the CPRS itself. If there is
no CPRS, the RET could have a stronger role in driving the economy to less
carbon intensive sources of energy.
The expansion of the RET appears to be targeted to assist in the
transition to a carbon constrained economy by providing a short-term stimulus
to alternative energy sources, in the expectation that this will bring them
into a competitive position sooner.
The committee notes that whilst the RET may be a means of stimulating
development and research of renewable energy sources it should not be the only
way of doing this.
The committee is very concerned at the conflicting evidence given by
Treasury and industry in relation to costs associated with the expansion of the
The committee notes that the impact of exemptions of major energy users
is unclear, could lead to significant cost increases to be borne by other
sectors of the economy and may reduce the overall effectiveness of the RET
Further detail on the impacts of the exemption, and explanation of
differences in projected costs, must be addressed by the government in the
Regulatory Impact Statement which will be provided at the time the Renewable
Energy (Electricity) Amendment Bills are introduced into Parliament (currently
expected to be during the Autumn 2009 sittings).
The committee recommends that the Government consider in detail
different claims made about the probable expense of the expanded Renewable
Energy Target. Analysis of the different cost estimates should be included in
the Regulatory Impact Statement (RIS) accompanying the legislation to amend the
Renewable Energy (Electricity) Act 2000.
The committee recommends that following the decision by COAG on 30 April
2009 to exempt major emitters, the Government should explain in the RIS
accompanying the amendment bills:
any differences in costs caused to householders
and other industry sectors arising from the decision;
the impact the exemptions will have on the
efficiency and effectiveness of the scheme; and
the form which compensation to householders will
Another option presented in evidence to the committee for supporting
greater uptake of renewable energy is the introduction of a national feed-in
tariff. In Australia, according to the company Wind Energy and Solar Power, all
mainland state and territory governments have introduced or are in the process
of introducing feed-in tariffs.
Dr Ray Wills, Western Australian Sustainable Energy Association, gave
evidence to the committee that the advantage of a feed-in tariff over the MRET
is the ability to direct market stimulus to particular types of technologies:
One of the things that you can do with a feed-in tariff is to
target it to base load generators and to peak load generators and therefore at
a commercial scale start to address some of the design flaws that are in the
mandated renewable energy target. It is a simple way to offer market certainty
in a way that the MRET does not.
Similar views were noted by Solar Systems Pty Ltd, who argued that
systems like the RET favour cheaper existing technologies.
Supporters of the introduction of a national feed-in tariff included the
Clean Energy Council,
Conservation Council of South Australia,
the Conservation Council of Western Australia,
and Clean Energy for Eternity.
The Energy Suppliers Association of Australia argued that feed-in
tariffs increase energy costs for all energy users, citing estimates of
abatement costs ranging from $200 to $1500 per tonne of CO2e. They
argue the greatest impact of such increased costs will be on low income groups
who spend a greater proportion of income on energy.
Equity concerns concerning feed-in tariffs at the domestic residential
level were also raised by ActewAGL:
No discourtesy to those who are supporters of a feed-in
tariff, but on a domestic residential model it has certain problems. It is
deeply inequitable, because the people who can afford it tend to be people with
some reasonable amount of money. Here [in the ACT] it is a gross tariff of 50c
a kilowatt hour, which is pretty good. It is about four times what we sell our
retail tariff for normal energy. That cost, of course, has to be borne by the
whole of the community, including the poorer people of the community who spend
15 per cent of their budget on energy as against the better off people who
spend five per cent of their budget on energy. There is an equity issue there
and, also, it is very expensive.
ActewAGL argued that feed-in tariffs can be appropriate, but are more
efficient if aimed at larger facilities rather than at householders.
Support for research and
Evidence was given to the committee supporting enhanced commitment to
funding research and development, including supporting the development of pilot
Professor Andrew Blakers recommended that the Energy Innovation Fund be
expanded to $1 billion over seven years, with additional funding to be provided
to support commercialisation and manufacturing of new technologies.
The Energy Users Association of Australia supported greater funding for
research and development:
The EUAA believes that revenues generated from emissions
prices or via carbon tax revenue should be directed towards developing low
emissions technologies. The emergence of technologies, some of which offer zero
or close to zero emissions, will be vital to a low cost and environmentally
effective path to managing carbon. These technologies can be fossil fuel based (carbon
capture and storage, clean coal, coal drying, oxy-firing, nuclear), or
renewables based (hydro, biomass, wind solar, thermal, wave). The portfolio mix
of the above technologies, and the time taken to progress their development
would be a crucial determinant of the extent of the increase in energy prices.
Professor Ross Garnaut in his evidence to the committee stated that,
whilst a carbon price can drive innovation, it may not be sufficient on its own
to drive research into new technologies:
I think research, development and commercialisation of new
technology is essential alongside the ETS. You need two drivers of structural
change of the kind to which you were alluding. One is the carbon price. The
other is the support for innovation with the new technologies. Why can’t the
carbon price alone do it? The market cannot deliver an optimal amount of
research, development and commercialisation for the very simple reason that the
innovator, the company that makes the first moves, is spending a lot of money
on learning that everyone benefits from and it cannot capture all the benefits
for itself and so it will not do enough of it from society’s point of view
unless there is government support alongside the private effort for development
of those new technologies. To drive the structural change you need the
substantial support for research, development and commercialisation of new
technologies, as well as the carbon price.
The committee encourages further work by government in this area.
Fuels and energy generation:
Evidence was given to the committee that an area of opportunity for the
agricultural sector was in fuels and energy generation. The Grain Growers
Association gave evidence of how abatement and/or mitigation measures more
broadly could be applied to agricultural models of income generation:
[There is]...the correspondence of almost all of the wind
energy and almost all of the solar energy with almost all of the farmland. How
do we capture that as an opportunity so that we have renewable solar powered
and wind powered energy sources which local small farmers can engage in[?]...The
issue of jobs and regional development flows from that because you get the
regional servicing and the regional construction and other things that go with
The Western Australian Farmers' Federation described current efforts in
One of the other things we are doing involves mallees and
biomass. One way to become self-sufficient is to generate our own fuel. That is
in our carbon footprint. We have to start thinking outside the square to
establish how to do this practically. We have plenty of land; all we have to do
is think about how we can martial our forces a bit more effectively than we
have done in the past.
The Tasmanian Farmers and Graziers Association also referred to such
We believe that renewable energy has huge potential for
agriculture or landownership. We have stacks of wind, soil, biomass, sun,
biofuels and other things. A lot of our members talk to us constantly about
this area. We run forums around the state, talking to farmers, and usually the
biggest single topic of discussion is the opportunities for renewable energy on
The committee notes that there are opportunities for agriculture in
generation of renewables as well as costs. The committee encourages the further
exploration of these opportunities wherever possible.
During the course of the inquiry, references were made to nuclear energy
as a low-emissions energy source to address climate change.
However, nuclear power was not a major focus of most submissions. As the
Institute of Public Affairs noted:
Nuclear power faces apparently overwhelming political
obstacles and even if adopted by governments, as in Japan would face
considerable local opposition to new sites. Moreover, the replacement of
existing power stations would require capital costs of several $100 billions,
and would moreover signify the end of the energy cost advantage Australia has
enjoyed for over thirty years.
The committee notes that there have been numerous investigations of the
potential role of nuclear energy in recent times, including by other Senate
committees. Given the complexity and controversial nature of this issue
(sufficient for an inquiry in its own right), the committee will not further
address this topic.
Support for Innovation
Evidence was given by Dr Brian Fisher underlining the importance of
continued research and development when he argued that 'without a major
technical solution we will not have a solution to this problem'.
The committee is concerned that the CPRS may not sufficiently support
innovation and new methods.
The committee received several proposals for emissions reduction, which
the proponents claim would either not be adequately supported, or in some cases
hampered by the CPRS.
For example, the committee received a submission from MBD discussing the
possibilities of algae in reducing carbon emissions. The company's process
involves the use of carbon dioxide emitted from power stations, in conjunction
with sunlight and nutrient enriched waste water, to grow algae (using its
proprietary technology) on surplus land at power stations. The company claims
this algae sequesters carbon dioxide far more cheaply and simply than by CCS,
and can be used as a form of bio-oil and cattle feed. The company argues that a
full scale commercial pilot plant costing $23.1 million would yield 35,000
tonnes of algae (consisting of 25,000 tonnes of algae meal and 10,000 tonnes of
algae oil) per annum, abating 100,000 tonnes of CO2e per annum. 
The company has been involved in commercial and technical discussions
with major power stations in Victoria, New South Wales and Queensland, having
signed an MOU with one of them in March 2009. However, MBD has argued that
these projects may be affected by the proposed CPRS design as a result of algae
not being recognised as a form of abatement for participating power stations.
Similarly, Perdaman Chemicals and Fertilisers Pty Ltd noted that the conversion
of low grade black coal into urea (a product which is used as a fertiliser and
could potentially be exported) may be adversely affected by the current design
of the CPRS.
The committee is supportive of further development of new technologies,
and encourages the government to look seriously at them and find ways, wherever
possible, to enhance innovation in the area of climate change, including where
necessary by making adjustments to the CPRS legislation.
The committee received evidence discussing the possibilities for capture
and storage of emissions from industry.
The discussion of sequestration in this chapter should not be confused
with biological means of sequestration. These are discussed at greater length
in Chapter 6 dealing with land use and forestry.
Carbon Capture and Storage
Carbon capture and storage, or sequestration (CCS), involves the capture
of CO2 from coal or gas that is consumed—burnt or gasified—in order
to produce electricity. The captured CO2 is then stored or sequestered
in underground reservoirs.
The committee notes that CCS has been an important issue in the debate
about responding to climate change. Clearly, such technology is of particular
interest not only to Australia, which is an exporter and heavy user of coal,
but also to many countries where coal fired power stations are the predominant
source of energy generation. The successful development of CCS technology could
make a significant contribution to global abatement of CO2
emissions, as the world transitions to low- or no-emissions technologies.
Certain fixed processes such as lime and cement production, which due to their
nature have limited opportunities for abatement, have a particular interest in
Dr John Brockway of the CSIRO noted that CCS had to be considered as an
element in a diverse strategy for addressing climate change:
...if we are going to address climate change, it is now
universally accepted that a wide portfolio of new low emissions power generation
technologies, energy utilisation and efficiency technologies and transport
technologies will be required to achieve those reductions in greenhouse gas
emissions. A technology portfolio would be expected to include a number of
these areas. For instance, in terms of the generation, low emissions coal fired
and gas fired power generation, including carbon capture and sequestration; and
renewable, including solar, wind, geothermal, biomass and ocean energy in its
various forms. We will also probably require synergies between fossil fuels and
renewable power generation systems or the technologies. Distributed energy,
energy storage, energy utilisation efficiency and intelligent energy management
are all going to be very important in reducing the intensity or the utilisation
of energy, which is to do with energy efficiency, and of course low emissions
transport, which is going to be an important part of the mix in the future.
That is a broad portfolio of what we will need...
Dr Brockway expressed the opinion that CCS, along with certain other
technologies, was an important area of focus for Australia's efforts, given our
reliance on coal-fired power stations:
There are a number of areas that I think are important foci
for Australia. Post-combustion capture from coal fired power stations is
particularly important, in my view, because we do have 80 per cent of our
electricity now coming from coal fired power stations, and some of those will
be around for the next 30 to 50 years. If we are going to impact on greenhouse
gas emissions we need a technology at the end of the day that can capture CO2
from those sorts of plants. We need to focus on enabling technologies for
gasification of coal. This is the IGCC. That is another important technology.
We need to focus on how to reduce the cost of that technology. These enabling
technologies for that are a good place for Australia to work and where we do
have world leading research.
I spoke about disruptive and step change technologies for
power generation from coal. Coal is our biggest single export. It is important
to our economy, both as an export and for use in Australia. If we can come up
even in the longer term with much higher efficiency technologies and we reduce
the challenge of capturing and sequestering that CO2, that is all to
the good. I think that is an important one for Australia to focus on.
Geothermal, solar thermal, photovoltaics and energy storage systems were
also technologies that Australia should focus on, given our natural advantages
in these areas.
Dr Brockway explained that current efforts with CCS were focused on a
number of approaches involving different techniques.
In terms of timing he observed:
I would like to go on to talk about the timeframe for
commercial adoption of low emissions technologies. In this I would not
distinguish between low emission coal technologies and a whole range of
renewables technologies, such as solar thermal, geothermal, wave power or ocean
power of some sort, and biomass. Worldwide the timeframe is expected to be
about 10 to 15 years before these become commercially adopted, and it will be
different for each technology. This is in part due to where they are on what we
call the learning curve, how mature they are becoming. That timeframe will
depend on the intersection between the rising cost of energy, as a consequence
of increased costs for carbon, and the reducing cost of the technology that
comes about through maturation.
Dr Brockway observed that, as a rule of thumb, the time frame for
successful commercialisation of mechanical or chemical engineering developments
was '20-plus years'.
At this point, Australia was 'well placed' and did have 'leading research':
We have two post-combustion capture pilot plants in operation
at the moment in Australia. One in Victoria was the first one to capture CO2
at an operating power station using the PCC technology last year. We have a
second one at a New South Wales power station. Australia also has one of the
leading sequestration trials being undertaken by the CO2 CRC in the
Otway Basin in Victoria. Those are major technologies.
Although the various elements of CCS technology did exist, Dr Brockway
noted that the major challenge for CCS was to combine these effectively and
efficiently to work at the scale required.
Mr James Cameron, a British expert, discussing the need for an alignment
of public policy, finance and technology, advised the committee that there is:
...insufficient alignment between public policy incentives and
private capital. For example, you cannot take provisions in....[the UK] budget
to an investment committee and commit capital to carbon capture and storage.
Much more work needs to be done to make that a realistic prospect for private
The committee heard some evidence on current CCS projects. InterGen
Our assessment...is that carbon capture and storage is not
commercially viable currently. I do not have the full details as to why [the
ZeroGen CCS project is]...not continuing, but that would be a significant reason:
the costs are currently prohibitive to moving forward.
They considered that the project would be unable to continue without 'significant
subsidy, ongoing voluntary subsidies or government subsidies'.
International Power Australia, advised:
...we competed for part of the low emission technology fund
that was set up around 200506...Part of the bid that we put together included a
pilot carbon capture plant, a state-of-the-art facility, to be built at
Hazelwood Power Station. I am delighted to say that is about to be opened at
the end of next month.
The company estimated that the plant could be operating at commercial
scale within '15 to 20 years'.
The committee view
The committee notes that carbon capture and storage technology may hold
potential as a possible means of future mitigation. Whilst many technologies
are promising, it does not seem likely that these options are likely to play a
significant role in the short term. The committee encourages further research
and development in this area.
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