The evidence received by the committee strongly indicated that the
Carbon Pollution Reduction Scheme (CPRS) as currently proposed will not provide
the incentives necessary to adequately reduce Australian emissions. Chapter 9
explores the arguments presented to the committee regarding the need for
additional measures to reduce Australian emissions as well as issues regarding
energy efficiency and lower emissions energy and fuel.
Please note the terms of reference of the committee include 'g. the role
of alternative fuels to petroleum and diesel'. The section addressing
alternative fuel contained in this chapter is restricted to the evidence
received by the committee related to the CPRS. The committee will further
explore the issues associated with alternative fuels when addressing term of
Need for complementary measures
The committee received substantial evidence of the need for
complementary measures because the CPRS will not provide the incentive required
to generate sufficient investment in the low emissions technology required to reduce
emissions. Such investment was also seen as an opportunity to expand
Australia's economy. For example, the Australian Coal Association stated:
An emissions trading scheme alone will not accelerate the
early deployment of low-emission technologies, and complementary measures to
support investment in R&D are an essential part of a comprehensive and
effective climate change response...R&D...also represents an important investment
in sustaining the value of national assets.
The Construction, Forestry, Mining and Energy Union expressed a similar
We think that the emissions trading scheme will not of itself
set up Australia for the long term.
There is a need for complementary measures around renewable
energy, around energy efficiency and around CCS carbon capture and storage.
The Clean Energy Council also argued that the CPRS 'will not do it
alone. There is a need for a suite of effective and efficient complementary measures.'
Environment Business Australia argued that:
...what is urgently required is a government enabling framework
so that policies are put in place to create a friendly marketplace for the next
generation of technology and infrastructure, and drive that into the
Western Power argued that 'if we want to get results quickly, we have to
have complementary measures and activities—actions—to achieve that.'
Mr Matthew Warren, Chief Executive Officer of the Clean Energy Council highlighted
the importance of energy efficiency measures in reducing Australia's emissions.
Mr Warren informed the committee that the 'International Energy Agency predicts
that up to 73 per cent of global emissions abatement will be derived from
energy efficiency measures.'
Dr Peter Brain, Executive Director of the National Institute of Economic
and Industry Research argued that:
The Treasury modelling seems to, at least in part, view
energy efficiency as like manna from heaven being absorbed into the capital
stock. But for the high-emission industries, the reality is that, to improve
their energy efficiency by those means, they have to pull out the vintage of
the capital that is embodied in that. It is just like a truck: you have to
throw away a truck, put in a new truck, and it goes up the line with that sort
of idea. So, in terms of a cap and trade system, the idea of simply setting a
cap and letting the price put in the energy efficiency requirement in a given
period is absurd.
There are inefficiencies there and that is why we support
some price mechanism, but the heavy-lifting fact is that, to dramatically
increase your underlying core energy efficiency, you have to redirect an
enormous amount of investment quickly to replacement, rather than capacity expansion,
which would be very costly. So the idea simply of setting a cap and letting the
price fix it is just absurd. What would happen in that case is that, because
industry is largely locked in in any given period to its accumulated investment
over the last 20 or 30 years, you would get emissions down, but that would
basically stem from businesses closing down their operations and selling their
Dr Brain also argued that only a relatively small percentage of
households have the capacity to respond to a carbon price and invest in more energy
As discussed in chapter 8, the Australian Council of Social Service also
pointed out the difficulties for low income households investing in low
The Australian Academy of Technological Sciences and Engineering argued
that the types of incentives required to encourage small business to invest in
energy efficient technology are 'an accelerated investment allowance...and
accelerated or even free depreciation'.
Environment Business Australia argued that energy efficiency could be
improved by upgrading the standards for appliances and 'a national trade-in
program for appliances.'
As discussed in chapter 8, the Royal Automobile Club of Queensland (RACQ)
argued that the CPRS 'will not reduce driving or greenhouse emissions.'
The RACQ argued that there are measures that, if adopted, would be effective in
reducing emissions from vehicles. These measures include eco-drive programs,
changes to road taxes and reducing congestion.
It was argued that eco-driving programs can 'reduce vehicle emissions by an
average of 10 per cent.'
Another suggestion was:
Initiatives such as purchase rebates for very fuel efficient
cars have the potential to improve the average fuel efficiency of our vehicle
fleet over a number of years. Government modelling has shown that improvements
in vehicle fuel efficiency will be the main means to reduce emissions from road
Qantas and Virgin Blue Airlines argued they have achieved significant improvements
in fuel efficiency and that improving traffic management and investment in new
aircraft are the most effective ways of reducing emissions from the aviation
industry. Virgin Blue argued:
Rather than tax the industry when the economy can least afford
it, significant carbon abatement can be achieved in the short term by improved
traffic management procedures, including flexible flight tracks, improved air
traffic control sequencing and introducing continuous descent approaches. This
should be the immediate priority.
In terms of fleet renewal, Qantas pointed out:
...we need to be a healthy industry to facilitate new aircraft.
If we cannot afford to buy new aircraft...the benefits to the environment will
not accrue. A financially healthy industry is an environmentally healthy
Carbon capture and storage
As discussed in chapter 5, the committee heard evidence regarding the
importance of improving emissions from coal in addressing climate change, as
coal is central both to Australia's energy supply and to its economy.
The Minerals Council of Australia argued:
...there is no solution to this issue without a clean coal
solution. We have to put all of our efforts into developing the technology, in
conjunction with the rest of the world...That is the sort of technology that has
got to be developed, to be able to be retrofitted on old power stations and
installed in new power stations, if we are to make a dent in this issue. We are
not going to do it any other way. It has to be a coal solution.
The Australian Workers' Union argued:
...Carbon Capture and Storage (CCS) technologies represent
potentially the single most important abatement measure to secure safely future
emissions without stranding enormous reserves of coal reserves and assets or
the EITEs which rely upon it.
Mr Burt Beasley, Acting Executive Director of the Australian Coal
The deployment of carbon capture and storage technologies is
the only principal means of cutting emissions from coal, lignite, gas, diesel
and other fossil fuel based power generation. It also has applications in other
industrial processes, such as iron and steel, cement and metal manufacturing.
The role of these technologies is particularly significant at a global level.
The International Energy Agency projects that global demand for coal, driven
principally by China and India, will grow by two per cent a year to 2030...It is
really important therefore that we have available for them the technology to
capture and store the CO2 that they generate.
Mr Beasley explained that carbon capture and storage (CCS) technologies
are yet to be proven on a commercial scale and the costs are not known at this
Mr Beasley informed the committee that commercial scale operations are likely
to take a further 10 years and argued that:
...the contribution of funds to those early demonstrations is
vital...When they reach the point of needing funding commitment, certainly the
dollars in some of those projects can be quite large...We would certainly like
governments, state and federal, to commit funding to the large-scale
The Commonwealth Scientific and Industrial Research Organisation (CSIRO)
also explained that 'In terms of the capture technologies, the issue there is
the need to demonstrate that on a large scale' and raised the issue of the need
Mr Peter Colley, from the Construction, Forestry, Mining and Energy
Union, argued that complementary measures are needed for carbon capture and
storage technology as 'the emissions trading scheme will not be sufficient to
bring on carbon capture and storage at the required rate.'
Mr Colley further argued, 'We want to see a commitment by the developed world,
including Australia, to bring on carbon capture and storage as a commercial
scale technology by 2020.'
The Australian Energy Company argued that: 'Perversely, the CPRS design
has created a major barrier to the cost effective implementation of the
Government's policies on low emissions coal and carbon capture and storage
In addition to the industry investment in research and development, the
committee heard evidence of companies installing clean coal technology and
ensuring new plants are clean coal ready. For example, Chevron Australia
informed the committee that:
...an integral component of the Gorgon project is to take the naturally
occurring carbon dioxide that is contained in the reservoir gas. That carbon
dioxide is extracted during gas processing and traditionally vented to the
atmosphere, and the Gorgon project is proposing to take that reservoir carbon
dioxide and safely inject it below Barrow Island—geologically store it below
Barrow Island. When the project is up and running, it will potentially be the
world’s largest greenhouse gas storage project, so that is an integral
component of the Gorgon project in Australia.
Griffin Energy reported, regarding their new coal fired plants:
...we are making those plants carbon capture ready, as defined
by the International Energy Agency. So, coupled with our research as to
locations of potential sites for geosequestration, we are in fact designing the
plants to be are [sic] capable of it. Once the technologies are commercially
viable, then we can marry the two and actually move forward.
The committee heard evidence that Australia has excellent resources to
develop alternative energy, however most of these are as yet unable to provide
a consistent, reliable alternative energy source. The majority of evidence
received addressing alternate energy sources included renewables such as wind,
wave and geothermal; and nuclear. The report will explore the issues raised
regarding nuclear energy and the issues faced by the renewable energy industry,
particularly in regards to newer technologies such as wave power.
Several witnesses expressed the view that Australia should consider
nuclear energy when looking at options to substantially reduce emissions. The
committee received minimal evidence objecting to the use of nuclear power.
Mr Michael Angwin, Executive Director of the Australian Uranium
...the nuclear fuel cycle—and that takes into account from the exploration
and mining of the uranium through to the decommissioning of plant and the management
of waste—produces about the same amount of greenhouse gas emissions as
hydroelectricity and wind power, also measured over the cycle, and what we find
surprising to many people is that all of those create fewer greenhouse gas
emissions than solar and, obviously, much less than both coal and gas using
existing technology. So the nuclear fuel cycle, for which our industry is a
major supplier, is a key source of low-emissions clean energy for the world.
Similar to the issues raised about the gas industry, the Australian
Uranium Association made the point that uranium exports are part of Australia's
contribution to global emissions reductions, as although the industry causes
some emissions locally in the mining, milling and transport of uranium, it
reduces global emissions when used as an energy source.
Mr Angwin stated, 'We know that expanding our exports will enable Australia to
pull its weight in providing relief to the climate globally.'
Mr Paul Howes, National Secretary of the Australian Workers' Union, argued:
...it is important when we are addressing the energy security
of the nation that we put all options on the table. We have one-third of the
world’s uranium here. If we look around the world at the expansion that is
going on in China, South Africa, Sweden and France to make nuclear power part
of their climate change solution, I think it should be at least investigated...To
me it is something that needs to be debated and thoroughly investigated. I have
never changed my position on that...
A similar argument was put by the Australian Chamber of Commerce and
We have the fuel source available in terms of uranium oxide.
What we are saying principally at this stage is that it should not be
arbitrarily excluded from the different fuel choices that we might have and it
is obviously no coincidence that those countries that are more able to achieve
their greenhouse gas abatement targets are those countries which have a fairly
significant electricity generating portion flowing from nuclear energy.
Mr Bernard Wheelihan, Chair of Pacific Hydro also stated, 'I am strongly
in favour of it [nuclear]'.
An alternative view was put to the committee by the Australian
The Australian Conservation Foundation does not support
nuclear power and it does not support uranium mining. We believe we are much
better off investing the substantial resources that go into nuclear energy
internationally into renewable energies.
The Clean Energy Council explained that:
Nuclear energy is a proven technology, with known costs, so
you would have to say that it is the wicketkeeper technology in this process
and that, if all else fails, then you have that in your back pocket, and
different economies have different social and political challenges in employing
that, but it is available.
Professor Anthony Owen, Professor of Energy Economics at the Curtin
University of Technology, raised the issue of the economic viability of nuclear
The economics just do not add up - that huge up-front cost
waiting so long for the revenue stream...if smaller scale nuclear technology
becomes available...then it might be a viable technology.
The Western Australian Sustainable Energy Association, Environment
Business Australia and the Clean Energy Council argued that Australia has
significant renewable energy resources.
It should be noted however, that renewable energy does not currently
provide reliable large scale energy. As explained in chapter 2, renewable
energy does not currently provide effective baseload power, and as set out in
chapter 6 significant additional investment is required to connect renewable
energy to the grid.
Mr Phil Southwell, General Manager, Strategy and Corporate Affairs of
Western Power argued that the CPRS will have minimal impact on the use of
renewable energy in the short term:
My expectation is that in the early days it will not have a
major impact on the use of renewables...We expect that something like a focus on
targeting renewables is required to give the impact in the early days...
The committee heard evidence from Dr Michael Ottaviano from Carnegie
Corporation, 'Australia's leading wave technology developer'.
Dr Ottaviano explained that 'because the Southern Hemisphere is not landlocked
the wave resource is constant throughout the whole year and always there...it is
a genuine baseload resource.'
Dr Ottaviano argued that Australia is behind 'the rest of the world in terms of
incentives specifically for marine energy and wave energy'
...it is very difficult for renewable energy companies to develop
projects in Australia and to finance them in Australia. An ETS or a carbon
pollution reduction scheme will, however, favour or skew towards the cheapest
form of proven renewable technologies. There is no doubt about that. What that
means in reality is that we will see wind being taken up under that sort of
program but it will not help new renewable technologies.
I think the government has a role to play but it should only
be a limited or one-off role to help new technologies enter the market.
Mackay Sugar explained to the committee that:
...to counter falling sugar prices over time, Mackay Sugar has
embarked on plans to install a major co-generation plant at Racecourse Mill,
followed by a food grade ethanol plant. The co-generation plant will be 36
megawatts in capacity and will feed about 28 megawatts into the Mackay grid...
Mackay Sugar explained the overall impact of the CPRS on their business:
...our modelling has shown that the scheme will have a small negative
impact on current operations. However, with a strategic plan to enter the
renewable energy and ethanol markets, Mackay Sugar views the CPRS as a positive
policy which will enhance both projects. But, more importantly for cane farmers
in Mackay, the 20 per cent renewable scheme offers them a more immediate and
tangible scheme for the transition to low-emission renewable energy in Mackay.
Alternative energy sources
As discussed in chapter 3, the committee received evidence from Envirogen,
a power generation business that generates power from waste coal gas, therefore
generating power 'through providing emissions abatement.'
Representatives of Envirogen explained that while the industry currently
receives funding through state based arrangements that promote renewable
energy, these arrangements:
...are due to expire in 2012 and with them goes any incentive
for mines to use productively what would otherwise be a waste product. In other
words, mines will seek to abate by flaring gas, which we believe and have
demonstrated we can use for power generation. In short, there are both negative
environmental and economic impacts from the omission of waste coal gas from the
CPRS or indeed from the renewable energy target. The result of that will be
that our industry will have no future.
Envirogen proposed that waste coal gas be included in the proposed
expanded Renewable Energy Target.
The committee received evidence stating that there needs to be further research
into second generation biofuels given that the currently produced biofuels are
of minimal benefit.
Mr Bruce Harrison, Chief Executive Officer of the Biofuels Association
of Australia argued that:
We have been very keen for the CPRS to be introduced so that
we can see the pricing mechanism brought into play so that we can get a
revaluing of the biofuels and we can get some investment in the industry.
However, the interaction of the CPRS with the current policies that are in
place we believe will have a negative impact on the biofuels industry over the
next few years.
Mr Harrison added that the fuel tax offset provided under the CPRS which
effectively exempts fuels 'is concerning us because that stops the investment
money coming into the industry.'
Qantas and Virgin Blue Airlines made representations to the committee
regarding the importance of biofuels. Qantas argued for the need for
complementary measures to accelerate the commercialisation of alternative
fuels, stating 'There is much the government can do in terms of accelerating
the deployment and commercialisation of those types of fuels.'
Virgin Blue Airlines argued that:
...biofuels have the potential to not only substantially reduce
greenhouse gas emissions but also contribute to diversification of supply and
fuel security. This will require significant work to establish a sustainable
supply chain. This does, however, represent a significant opportunity for
economic development in Australia.
The Australian Council of Social Service raised concerns about the
impact of the ethanol industry on the global food supply and land clearing.
The Pastoralists and Graziers Association of Western Australia also raised
concerns about measures to assist the biofuels industry stating, 'You are
basically offering a subsidy to farmers to not grow food.'
Coal to liquids
The committee heard evidence from Mr Thyl Kint, Chief Executive Officer
of Spitfire Oil, a company 'working on technology to produce oil, coal to
liquids, from [a] lignite deposit.'
This process 'will emit, compared to the conventional, about a quarter of the
greenhouse gases associated with preparation of the fuel.'
Mr Kint explained that 'If we can get this technology to work, it will
enable a country like Australia to generate very large amounts of hydrocarbon.'
Thus, an important technology when considering Australia's fuel security.
Mr Kint argued that the introduction of the CPRS, rather than encouraging
this lower emissions technology, would jeopardise its further development in
Australia. The increased costs imposed as a result of the price on carbon
emissions in Australia, albeit lower emissions, not faced by overseas
competitors, even those with much higher emissions, makes it much harder for
products derived from this low emissions technology to compete. Even by
emitting only a quarter of the emissions compared to conventional processes
under this technology, Spitfire Oil will face an additional cost under the CPRS
not faced by relevant overseas competitors.
Mr Kint proposed that consideration should be given:
...for start-ups like this where you have got a new technology
in an important sector of the economy, there could be an exemption at least
during the start-up phase until it reached full commercial operation.
The committee notes the evidence received indicating that the CPRS as
currently proposed will not in itself encourage the development or adoption of
low emission technologies.
The committee agrees that by expanding the exploration, mining and
exportation of uranium, Australia can make a significant contribution to global
reductions in greenhouse gas emissions.
The committee considers that the use of nuclear energy in Australia
ought to be properly explored by government, both as an effective means to
reduce domestic emissions and with the view to help ensure Australia's energy
security into the future.
The committee notes the significant disincentive created by the CPRS in
relation to the development of low emissions technology in Australia. Imposing
costs on domestic lower emissions technologies not faced by overseas
competitors will, in the absence of an appropriate global agreement, put the
development of new low emissions technology in Australia at risk. Imposing a
cost on domestic carbon emissions, even where those emissions are at world's
best practice levels, will make products derived from those lower emissions
processes less competitive than equivalent overseas products produced using
more conventional and polluting processes. The case presented by Spitfire Oil
was but one such example.
The committee is of the view that businesses such as Envirogen and
Spitfire Oil, that are delivering or developing emission abatement or reduced
emissions technologies, should be encouraged.
The committee views carbon capture and storage as an important technology
in reducing Australian and global emissions and encourages further support to
develop this technology to a commercial stage.
The committee is of the view that there needs to be further research and
development of second generation biofuels.
The committee recommends that the development of emission abatement or
reduced emissions technologies be encouraged and facilitated, not constrained
as they will be under the proposed CPRS. Consideration should be given by
government to providing tangible recognition to businesses operating at world
best practice levels.
The committee recommends that incentives be provided to encourage
research and development of second generation biofuels.
The committee recommends that the Commonwealth and state governments
remove restrictions on the mining and exporting of uranium.
The committee recommends that the Commonwealth Government explore the
feasibility, advantages and disadvantages of producing nuclear power in
Australia, as a means of reducing domestic emissions and providing energy
security for Australia into the future.
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