Report of the Senate Environment, Communications, Information Technology and the Arts References Committee
The Heat Is On: Australia's Greenhouse Future
Table of Contents

Chapter 5

Energy Use and Supply         (Part b)

(Chapter 5 - Part a)

A Greenhouse Trigger?

5.81 In December 1999 the Government published a discussion paper on the possible inclusion of greenhouse as a trigger for environmental impact assessment under the Environmental Protection and Biodiversity Conservation Act 1999 (EPBC Act). Public comment was invited and closed in February 2000. There are currently no Government plans to introduce amendments to the EPBC Act to give effect to a greenhouse trigger. [1] The concept of a trigger received much comment during the inquiry, with many witnesses arguing it would provide for oversight of the greenhouse implications of new projects, and others opposing it, arguing that it would unfairly target new projects or could endanger new investment.

5.82 A trigger could potentially apply to a large range of projects and activities, including energy and industrial processes, road construction and land clearing. It is discussed in this chapter because the focus of its discussion during hearings was its application to the energy sector. However, the Committee acknowledges its potential use across the entire range of emitting activities.

5.83 Currently, under the EPBC Act, there are six matters of national environmental significance which could trigger environmental impact assessment: world heritage, wetlands of international importance, listed threatened species and communities, listed migratory species, nuclear actions and marine environment. [2]

5.84 The Government's discussion paper canvassed a range of design issues which would govern what kind of activities and projects would be captured for assessment under a greenhouse trigger. These included:

• whether both new projects and new capacity should both be included;
• the range of greenhouse gases to be included;
• whether emissions which are not directly caused by the activity, but are closely related either upstream or downstream from the activity, should be included (projects like aluminium smelting or transmission augmentation may be relevant here);
• whether projects whose emissions effects are diffuse, such as road construction or land clearing, should be included and how; and
• the measure of the project's emissions potential, and the threshold above which activities become liable for assessment. [3]

5.85 A number of witnesses said that the trigger was essential to direct investment in new generation and transmissions capacity away from coal. This would be important both to reduce emissions in the short term and enable Australia to better adjust to a greenhouse constrained world. Dr Clive Hamilton argued that:

In my view, it is madness to approve new coal-fired power stations in Australia when we know we are facing this constraint. What the Queensland government is doing is saying, `We will build coal-fired power stations before there are any restrictions on it'. The cost of meeting the emission reductions associated with that, whether they occur in the coal industry or else, will be met by the rest of Australia. It is shifting the cost on to the rest of Australia. It should be stopped, which is why the greenhouse trigger should go into the EPBC Act. The government's task is to manage the transition that is going to happen as a result of Kyoto and changes in the world economy. We can either manage it or be confronted with it in a more costly way later on. [4]

5.86 The conservation group, Environment Victoria, also emphasised the need to meet long term international commitments:

A greenhouse trigger is an essential component of [the EPBC] Act in order to ensure that the Commonwealth has a reach into the states on something that we have an international commitment on, and that is greenhouse. We have put in submissions that say that, but so far we are not clear about what the process is for resolving having a trigger. We think that is something that needs to be resolved - the trigger needs to be set up as soon as possible. [5]

5.87 Again citing the planned Queensland coal developments, the Australian Conservation Foundation (ACF) argued that the trigger would be in the national interest, given Australia's Kyoto obligations:

There is a clear national interest that the national Government be involved, at the very least, in the bigger projects which are greenhouse emitting. We have not necessarily been talking about a complete ban here; we are just talking of a concurrence role, if you like. I think it is crucial that the national Government have some intros into those debates about major projects. We have seen Senator Hill, the Environment Minister, being very critical of Queensland with its coal-fired power stations and we welcome those sorts of criticisms. But the Minister is reduced to just crying poor from the sidelines under the current approach which failed to include greenhouse as a matter of national environmental significance. [6]

5.88 The Australasian Railway Association argued that the trigger should capture investment in transport infrastructure which would have a major impact on emissions:

If there is an analysis of a particular corridor and it is agreed to build a freeway rather than a light rail, or rail line, we believe there should be a study done to look at the greenhouse implications of such projects. It fits in with our overall policy platform that all externalities, all external costs of greenhouse, as well as all the other issues like pollution, congestion and noise ought to be considered in all the infrastructure investments. So, in a sense, yes, we certainly do see the trigger as important, and we would endorse that approach. [7]

5.89 Industry representatives of large carbon emitters and electricity dependent industries were strongly opposed to the trigger, feeling that it would unfairly target new projects or could endanger new investment. For example, the Australian Industry Greenhouse Network commented that:

We are concerned that incorporation of this as a greenhouse trigger could result in a situation where it would imply that the greenhouse problem and the need to address it rests solely with large and new projects. We have consistently sought a comprehensive approach to the management of this problem, both internationally and domestically. [8]

5.90 The Business Council of Australia (BCA) echoed this concern, saying that: `our response to international climate change obligations must be managed well and in an holistic and strategic manner, not on an ad hoc project by project basis targeting a limited range of projects and with differential coverage of sectors and emissions growth'. In their view the trigger would not be an `appropriate or cost-effective approach':

At risk with the approach proposed is investment certainty and maintenance of conditions which promote a competitive economic environment in which business succeeds and supports national, social, environmental and economic objectives. We do not believe that we are in a position to - or, indeed, need to - subject future investment or the national economy to such risk at this stage. The BCA, therefore, considers that the important issue is not whether to apply greenhouse as a trigger under the EPBC Act but, rather, how to develop an appropriate mechanism to address continued economic growth while reducing the carbon intensity of our energy mix for growth across all sectors. [9]

5.91 The BCA was also strongly opposed to the use of a trigger by the Commonwealth to intervene to prevent the construction of new coal-fired power stations, even if such investment were to put at risk Australia's ability to meet its Kyoto commitments:

The specific decisions in that case are a matter for the state government that is addressing energy needs in the state. The determination of what the power sources might be and the implications for greenhouse policy is an area in which you do need national coordination of views. Our view would be that we need to be very careful in discounting the significance of coal-based energy generation in a country in which the economics of coal powered energy represents a very important factor in Australia's competitive performance. It is directly relevant to the costs of energy. It is also important that we recognise the contribution that the coal industry is making to the welfare of this country. [10]

5.92 The Committee agrees with the BCA that there needs to be a nationally co-ordinated approach to greenhouse policy. However, the Committee does not agree with the BCA that the Commonwealth has no legitimate role in setting policy directions on Australia's energy mix. Indeed, it is the Commonwealth which has the ultimate responsibility of ensuring that Australia meets its commitments under the Kyoto Protocol.

5.93 The Committee further notes that if Australia has to buy emissions permits from overseas to meet its Kyoto targets, it will be taxpayers, not the responsible polluters, who will be paying for them. [11]

5.94 The ACF suggested that the current absence of a trigger was reinforcing distortions in a market which, sooner or later, will have to adjust to a greenhouse constrained economy. The current market, which did not provide the appropriate signals to new investors, was unfairly advantaging irresponsible investment over investment in less emissions-intensive alternatives:

Having no triggers, and the converse - having nothing there but a voluntary approach - is leading us down the path at the moment where you have various states vying with each other to see who can put up the next coal-fired power station. You will have individual states alone blowing our emissions target without any capability for a coordinated or a national perspective. It is a recipe almost for business as usual except for those progressive companies prepared to take voluntary action. It leaves those progressive companies at a great disadvantage because it means that the laggards or those that are not prepared to do the right thing are free-riding in our economy. My strong view is that the business community should be rejecting such a proposition strongly. [12]

5.95 The NSW Government had a different concern with the trigger, in terms of its policy effectiveness in reducing emissions:

The introduction of an emissions trading cap would serve a lot of the purpose that this slightly more indirect trigger would attempt to do… it would not actually of itself limit those emissions in any way and would not stop the projects going ahead, unless you made a very specific decision… . It would be, I suspect, more useful if we were to signal that, at some time in the not too distant future, there will be a cap on Australian emissions and people had better start factoring the cost of that into their projections of project costs, rather than us trying to do it in a regulatory manner through greenhouse trigger. [13]

5.96 The Committee agrees that an emissions trading system provides an effective least-cost approach to emissions reduction across a range of sectors. However, it raises very complex design and implementation issues, which may not be resolved in the short term. In order to ensure that Australia has a reasonable chance of meeting its international obligations, it will be necessary for the Commonwealth to introduce other measures in the meantime. Although investors should be planning for the likely introduction of emissions trading, this has made little or no impact on recent decisions for investment in new coal-fired power stations in Queensland. Other measures are required to divert these investments into more sustainable alternatives such as gas.

5.97 Woodside Energy, while ambivalent about the trigger, asked that clear principles for the assessment of projects under greenhouse be established at the same time:

The greenhouse trigger is really only half the story. The greenhouse trigger is the entree into the approvals process. How greenhouse is considered in the approvals process is somewhat more of an important point. At the moment, the Government has not seen fit to produce any sort of criteria as to how greenhouse will be considered within the approvals process. There does not seem to be a policy there which we can hang our hat on. To put out the greenhouse trigger for consultation without having the accompanying criteria does seem to be asking us to put the cart before the horse a little bit. [14]

5.98 Their concerns were echoed by Pacific Power, which is otherwise supportive of the trigger:

The trigger simply means that certain developments get called in under the Commonwealth legislation. It really does not guarantee any particular outcome. So, as well as having the trigger, we need to have guidelines about how the assessment process will be applied once the legislation is triggered. Whether or not that is actually administered by the Commonwealth or the states may be another issue. But one thing that is important is that those guidelines are clear and they are out on the table so that people who are prospectively looking at developments can see them and can factor them into their planning and, at the same time, the people who apply those guidelines in assessing developments can do so quickly so that you do not just create another level of bureaucracy - you actually do something that adds value. [15]

5.99 The Committee concurs with the views of Pacific Power and Woodside in this regard, and agrees that is important for the Government to set out clear principles and policy intentions for the environmental impact assessment of projects under greenhouse. These would have the added benefit of ensuring that greenhouse issues are incorporated into project designs well before an EIS needs to be prepared, and improve investment certainty.

5.100 For example, it may be useful to establish principles that proscribe new electricity investments that will increase the overall greenhouse intensity of generation, or to set out policy objectives that will proscribe new or added capacity investments in coal-fired power, or mandate an emissions coefficient or a renewable component for new generation. Assessment of new road infrastructure projects may be guided by a policy of diverting travellers into more sustainable systems such as rail. International best practice could guide the assessment of available technology.

5.101 The Committee notes the views of those who believe that a trigger would be an ad hoc and limited policy response to the problem of greenhouse. A comprehensive approach is obviously desirable. The AGO acknowledges that it is one potential tool of many, but emphasises that it has an important place as part of a comprehensive approach:

[The greenhouse trigger] is certainly a viable mechanism. It is certainly a mechanism that can be used as one of a range of tools. The point that we would make about it is that it is not a complete response in itself in that it does address new developments. It addresses the incremental increase in emissions from new developments as opposed to being an instrument that addresses the overall emissions picture across the economy. [16]

5.102 While it is necessarily a selective response, there is nothing about the trigger which would be inequitable. It is arguable that a trigger would prevent the cost of irresponsible investment decisions from being unfairly passed to the community and the environment in later years. A trigger would also supply the Government with a more targeted and potentially more effective tool than a (nominally more comprehensive) policy such as emissions trading. Emissions trading would rely on indirect price and cost incentives which may be blunted by other market complexities. In the Committee's view, there is an important place for a trigger in combination with more comprehensive programs and policies.

5.103 The Committee does not support the argument that a trigger should be delayed until more comprehensive policies can be put in place. With more than 2000MW of investment planned for new coal-fired power generation, and escalating national emissions from the electricity sector, there is a strong argument for the immediate introduction of a regulatory tool to assess new investment with greenhouse impacts.

5.104 The Committee supports the insertion of a greenhouse trigger in the EPBC Act, which would mean that large new energy projects would be subject to either state or Commonwealth environmental impact assessment. The Committee recommends that the trigger be designed so as to capture large transmission augmentation projects such as Basslink which could have a substantial impact on emissions from the electricity sector. Whether or not such projects would be included in the trigger is currently unclear. [17]

Recommendation 33

The Committee recommends the immediate introduction of amending legislation that will designate greenhouse gas emissions as matters of national environmental significance under the Environmental Protection and Biodiversity Conservation Act 1999, and that it be designed so as to incorporate new projects, capacity expansions and recommissioned plant that would produce large amounts of new emissions sources.

Recommendation 34

The Committee recommends the proposed addition of a greenhouse trigger to the Environmental Protection and Biodiversity Conservation Act 1999 be designed to ensure that transmission augmentation projects which will have a significant impact on electricity emissions will be subject to environmental impact assessment.

Recommendation 35

The Committee recommends that the introduction of a greenhouse trigger be accompanied by the announcement of general principles or other policy objectives that will guide the assessment of new projects.

Basslink

5.105 A significant issue raised during the inquiry was the greenhouse implications of the proposed new cable linking Tasmania and Victoria, known as `Basslink'. Basslink will be a 400MW high voltage direct current cable, and has been under consideration since 1990. In 1999 the Tasmanian Government selected four consortia to bid for the rights to develop the project, which was awarded to the National Grid Company in February 2000. The Tasmanian Government requires Basslink to begin commercial operation by 30 December 2002. [18]

5.106 The greenhouse implications of Basslink hinge on the direction of the flow of electricity: if the flow is predominantly north from Tasmania to Victoria, and is thus able to displace brown coal generation with hydro, it will beneficial in greenhouse terms. However, it large amounts of high emissions brown coal-fired power flows south, it could lead to a further increase in the average emissions intensity of power generation at a time when it is already dangerously high. There was considerable disagreement among witnesses as to its overall effect.

5.107 McLennan Maganasik (MMA), in a report to the AGO, suggested that there could be significant flows south:

The viability of the proposed link (called Basslink) will depend on the level of trading between the states and, therefore, the revenue that the cable owner could earn from the transmission of electricity. It is likely that during off-peak periods low cost electricity would be imported from Victoria to Tasmania. During these periods hydro energy in Tasmania would be conserved for export to Victoria during peak periods. [19]

5.108 The Committee notes that these comments suggest these flows could be balanced or exceeded by northward flows of renewable power. [20] However, there is considerable uncertainty about how this balance would be achieved in practice and about its overall greenhouse implications.

5.109 The owner/operator of the Breamlea Wind Generator in Victoria, Dr Michael Gunter, suggested that the net flow would in fact be south:

The postulated reason for Basslink, for example, is that Victoria can have power coming in during peak load times. But I believe the net flow will actually be south and that the carbon associated with meeting Tasmania's energy demands will go up because there will be more cheap brown coal heading south than there will be clean hydro coming the other way. [21]

5.110 Dr Gunter explained this result in terms of market forces in the deregulated NEM, which made brown coal price competitive, also because Tasmania may not have enough hydro capacity:

I would imagine that to make it financially viable to the network owner - obviously the way they recover the cost of putting it in is going to depend on whether it is a regulated asset or a non-regulated asset, and that is something that I am not fully up to speed with either - it is going to have to have energy flowing through it most of the time. I do not think there is enough water in the dams in Tasmania to have energy constantly flowing towards Victoria. It will obviously depend on the pool price differential between Tasmania and here. When energy is more expensive over here, there will be a net flow northwards. I suppose that could be influenced by vesting contracts and other complications, but that is a pretty broad generalisation. Most of the time the cheap brown coal from Victoria will see a better price in Tasmania and so it will flow south, just by market forces. That would be my concern. [22]

5.111 Professor John Todd, from the Centre for Environmental Studies at the University of Tasmania, suggested that rainfall and water reserves were indeed a concern in Tasmania:

We have realised that, because of the extended drought in Tasmania, it is likely that the State will have to use its oil-fired thermal power station in order to meet demand this winter. We have heard in the media that the thermal power station has been fired up just recently to get it ready just in case it is needed… . We are faced with a shortage of hydro-electricity. [23]

5.112 However, Professor Todd cautiously supported Basslink as greenhouse positive:

I think there are both positives and negatives. The introduction of Basslink totally changes the way in which electricity can be managed in Tasmania. At present, for example, the suggestion is that Tasmania might supply hydro-electricity at peak periods into Victoria… . But in terms of the overall environmental benefits, yes, I think Tasmania has the opportunity of supplying hydro-electricity into Victoria, and in terms of the overall management of the south-eastern electricity grid, I think there is potential for savings in greenhouse gas emissions as a result of Basslink. [24]

5.113 Professor Todd did qualify his optimism with a concern that a smaller than anticipated flow would create pressures to sell electricity south:

My concern with this is that if the use of Basslink cable is not as great as anticipated, there will be very strong pressures to encourage greater electricity use in order to cover the capital cost of the cable. So basically the cable is a significant additional capital cost within the south-eastern grid, and there are two ways to pay for that: either more electricity has to be sold, which ultimately will be more thermal generated electricity, because the hydro system is already operating near its peak; or the prices will have to go up somewhere. The current thinking is that, by selling at a premium into Victoria, it will be possible to achieve an overall increase in revenue, offsetting that by purchasing the baseload back into Tasmania at a higher prices than would be paid for baseload in Victoria; that the system will somehow pay for Basslink. [25]

5.114 The Tasmanian Hydro Electric Corporation (Hydro Tasmania) strongly argued for Basslink to proceed. It argued that the net greenhouse benefit would be substantial given the legislation of the Commonwealth's 2 per cent target for renewable energy, which would increase the mainland market for Tasmanian hydro and potential new windpower developments:

We have undertaken modelling over a 25-year period, looking forward, of the market conditions which can be modelled and could be expected to arrive in Victoria, the increases in demand, and the possible increases in supply sources that would be here in Tasmania. For the most part we have conducted that modelling on a balance of net exports being the same as the net imports… .

Since the introduction of the 2 per cent measure in a much more expected form since that measure was approved by the Cabinet of the Commonwealth Government, we have been modelling with considerable net export from Tasmania over a long period because we now expect that that measure could lead to wind developments here in Tasmania faster than the electron growth in the Tasmanian market. The primary modelling was on level flows but the more recent modelling done by us is on net export with Basslink. [26]

5.115 Hydro Tasmania emphasised that without Basslink, new wind development would be much slower, with or without the 2 per cent renewable energy measure:

Without Basslink we will be limited in Tasmania to the development of wind generation at the rate of growth of the electron usage in Tasmania. Currently that has been running at the level of 0.8 of 1 per cent per annum, so it is a rather low growth market, so called, by national standards, both in GDP growth and then reflected in electricity growth. So without Basslink we are restricting the capability of Tasmania to be part of a national response to the greenhouse issue. [27]

5.116 The Committee agrees that every effort should be made to encourage the development of wind generation, however, concern has been raised that current transmission pricing under the NEM distorts the economics of Basslink and with the NEM reforms outlined in the NGS, the viability of the project would be questionable. Any decision to proceed with Basslink should take into account the impact of the NEM reforms agreed to by Australian governments under the NGS.

5.117 However, substantial uncertainty about Basslink's net greenhouse benefit remains. In the Committee's view, this underlines the need for a comprehensive evaluation of the greenhouse implications before the link proceeds. Dr Gunter endorsed this need:

I think that if it is going to be a regulated interconnector then a proper EIS should be done and maybe the greenhouse trigger should be looked at. But, again, I do not quite know how it would pan out if it were to be an unregulated interconnector and whether there would any leverage that governments or triggers could have on whether it went ahead. I think that this needs to be looked at fairly closely. [28]

Recommendation 36

The Committee recommends that a full evaluation be made of the long term greenhouse emission impacts of the Basslink project.

Recommendation 37

The Committee recommends that any decision to proceed with Basslink take into account the impact of the NEM reforms agreed to by the Australian governments under the National Greenhouse Strategy.

Energy Efficiency and Demand Management

5.118 The Committee heard from a number of witnesses that energy efficiency measures provided an enormous untapped potential for low cost greenhouse abatement, and to dramatically reduce energy emissions. At the same time, the Committee also heard that current energy markets were a disincentive to energy efficiency.

5.119 Professor Hugh Outhred told the Committee that, in addition to the negative impacts of reform, electricity consumption was rising both in raw terms and on a per-capita basis:

The fall in real terms in electricity prices over the last decade has contributed to an increase in electricity consumption but there is also a range of other factors going on. The technical progress means that electricity has become much more widely used than it was previously. Lifestyle factors are also contributing. We see a significant growth in apartment living with smaller family sizes. That means more refrigerators, television sets and water heaters per capita. All of those tend to have parasitic loads, loads that are there all the time, that mean that the per capita consumption of electricity is going up. [29]

5.120 The Committee was told that such trends cause difficulties in encouraging electricity users to moderate their demand. ESAA's Managing Director, Mr Keith Orchison, remarked that:

Back in 1990-91, my association invested quite a significant sum in looking at the opportunities for demand management in Australia, and the great difficulty in it has always been that where you have relatively cheap electricity you are going to find it hard to get the customers to be efficient in its use… . I believe we have estimated that, at its optimum, something in the order of 30,000 gigawatt hours of electricity per year could be saved through more efficient use in Australia. That represents at the moment about one-sixth of the electricity sold. Of course it involved to the users of electricity in investing significantly in more efficient equipment. [30]

5.121 ESAA also stated that gains in end use efficiency in Australia over the past 10 years were about half the OECD average, and that there needed to be much greater effort to achieve efficiencies in motor vehicles, appliances, plant and equipment, and industrial, commerical and residential buildings. [31]

The Abatement Potential of Energy Efficiency

5.122 A one sixth reduction in consumption indicates enormous potential - a potential saving of up to 27 Mt per year (using the 1998 electricity emissions figure). Newcastle City Council, which has developed energy efficiency programs for local councils, also suggested that large scale energy efficiencies were possible. They informed the Committee of substantial savings they themselves had made:

You can take that Newcastle scenario across the country, and I have since learnt that the country does not use $7 billion worth of electricity, but $12 billion. Newcastle council's bill was $1 million. We achieved a 20 per cent reduction through a $400,000 investment, which gave us a two-year payback. Half of that money went to material, which is obviously linked to labour, and the other half went to creating jobs, in fact four jobs. [32]

5.123 They thought that their experience could easily be replicated across Australia, with dramatic results:

If we can do that - if a silly old council can do that - then, surely, by looking at all of our facilities throughout the whole country systematically, we can do it ourselves. With a 20 per cent efficiency, our bill comes down to $5.6 billion. We have to invest $4.8 billion to get there, $2 billion you pay back, $2.4 billion goes to the material costs and $2.4 billion goes to labour, and that equates to 48000 jobs for one year or 4800 jobs for 10 years. We worked out that, if you were paying 10c a kilowatt hour for that electricity, we would save 14 megatons of greenhouse gas emissions - simply by achieving a 20 per cent energy improvement across the whole country. [33]

5.124 Newcastle City Council was also actively involved in broader energy efficiency programs, including:

• the Green Energy Learning Program;
• developing and making available a computer software program to enable council managers to track their energy use;
• mentoring other councils to retrofit for energy efficiencies;
• the Energy Management Efficiency Service; and
• plans for a Residential Energy Monitoring Program across 200 homes for a 12 month period, with the aim of cutting residential energy use by 50 per cent. [34]

5.125 The Council is also involved in the Cities for Climate Protection Program™, but was concerned that there was too much competition for funds:

It is an international program - 300 cities around the world are involved but 82 of those are now in Australia. At the local level there is a huge growth in enthusiasm, and I believe that if we do not feed that enthusiasm we are going to lose it within a year or two. So the opportunity for Federal Government assistance to local government I think needs to be looked at. At the moment $13 million of the initial funding that was provided for global warming was allocated to local government. We have to compete for that funding with the private sector. I think this is fairly inappropriate given that we are not in this for money; we are in this to help the Federal Government make this thing happen. I spend so much of my time writing grant applications and servicing those grant applications that I am wasting the time that I could be spending on rolling out the projects. [35]

5.126 The former Chief Executive of SEDA and adviser to the Clinton Administration, Cathy Zoi, agreed that there was much untapped potential for energy efficiency in Australia, but stressed that appliance standards were still wanting:

We can have much more aggressive appliance standards. In the United States there is now legislation that is accelerating the development of energy-efficient appliances. This brings me to the issue of efficiency, which I think has been largely overlooked. It is much sexier to talk about solar and wind farms than about improving efficiency, but in my experience doing this in the United States and in Australia I have not run across a building that could not become 30 to 50 per cent more efficient at reasonable rates of return… . It is not just a local government issue; every sector at every level of operation in Australia, from the home up through factories, could become substantially more efficient if they were either directed or incentivised to do so. [36]

5.127 The Committee notes that much of the building efficiencies described by Newcastle City Council have been typical of `no regrets' measures, in that a reasonable capital investment has been rewarded in time by cheaper energy bills. The task here may be to further promote and publicise the potential for energy efficiency, and to develop skills and firms that can advise on energy efficiency strategies and choices. Two Canberra-based architects, Laurie Virr and Paul Hanley, put the view that `learning about energy efficiency should be as necessary in our society as the capability to swim, ride a bicycle, drive an automobile or operate an automatic teller machine'. [37]

5.128 SEDA claims great success for its energy efficiency initiatives, saving NSW companies $50 million, NSW government agencies $30 million, and householders $20 million over the next 10 years. It also claims to have reduced greenhouse emissions by 300,000 tonnes CO2-e per annum as a result of its energy efficiency and renewable energy projects. [38]

5.129 The sustainable energy consultant, Mr Alan Pears, told the Committee that the greenhouse abatement achieved by energy efficiency was not merely low cost, but produced net financial benefits:

I do believe we can achieve the Kyoto target at a net economic benefit. As an illustration of that, in the March 2000 Australian Energy News we find the effect of minimum energy performance standards being estimated at reducing emissions at a cost of negative $31 per tonne of CO2. As someone who works a fair bit in the appliance industry, I can say that is right - it is really cost effective and there is a lot to be driven there. [39]

5.130 This was echoed by the Australia Institute:

The Markel-Mensa model some years ago estimated that energy use in Australia could be cut by 30 per cent at no net cost to the economy by investing in insulation, in energy efficiency equipment and so on and so forth, and the payback periods were to be quite short, a few years. Here we have zero cost, a huge reduction in energy consumption at zero cost. I have actually gone back to some of the people who specialised in this and asked, `Do you think that 30 per cent would be very different now?' They say, based on anecdotal evidence but these are energy experts who work in this area every day, it is about the same now. In other words, we could cut our emissions and our energy consumption by about 30 per cent at zero cost. [40]

5.131 The ACRE Energy Policy Group and the Australian CRC for Renewable Energy also argued that local government building and energy regulations needed greater coordination to be more effective and consistent:

What we have is 776 local governments in Australia, all with their own views on how a solar water heater should be installed, whether or not they allow a solar panel on a roof, what level of insulation or other things they either ask for or whether they regard them as useful, whether they have any solar access requirements in their planning processes. What we find now, most worryingly, is a huge conflict between solar access as something that would be critical for energy-efficient development going totally against the policies of trying to increase urban density, which is also there ironically for sustainability reasons, to some extent. It is more driven now by developers getting 10 houses on a block where they would previously only get five. The solar access is being totally lost in that argument. [41]

5.132 ACRE told the Committee that they had recommended to the Commonwealth to create `a pool of energy officers that local governments can call on for the expertise that they do not have in house. Otherwise, they do not deal with it. It is just a whole new area that they have not thought of before'. [42]

Energy Efficiency in Buildings

5.133 Mr Laurie Virr and Mr Paul Hanley also argued that home and building energy rating ratings systems were currently inadequate. Their submission was very critical of design and implementation of the ACT's energy rating scheme, which, as the only state or territory in which it was mandatory, was supposed to be a testing ground for a national system. They argue that: `The House Energy Rating Scheme is a concept that originated from the very best of intentions… . The assessment criteria, however, were hurriedly determined, predominantly subjective, and in some cases in serious error'. [43]

5.134 Mr Virr and Mr Hanley are strong advocates of passive solar houses and policies, such as that pursued by Leichhardt Council in Sydney, which mandate solar hot water systems in new housing construction or major renovations. However, they argued that the ACT system was hostile to recognising solar hot water as a measure of efficiency, and said that the scheme:

Takes no cognisance of specific location, topography, existing or future vegetation, micro-climate, prospect, undesirable views, personal preferences, the reflectivity of roofing materials, and a whole host of other practical and aesthetic considerations that a sensitive designer has to take into account after accepting a commission from a client to develop a passive solar house… . The assessment process is based entirely on an examination of the drawings and specifications, and hence is decidedly theoretical. [44]

5.135 The ACT Government, through its Planning and Land Management Group (PALM), provided the Committee with a response to these criticisms. They assert that the ACT's energy guidelines will result in `subdivisions, residential construction and commercial buildings which perform in an energy-efficient manner'. They told the Committee that they were developing guidelines for subdivisions, residential buildings and commercial buildings, with the subdivisions being the first `in the operational policy phase to ensure that developers observe specific rules which result in solar access, setbacks, frontages, slope consideration, building envelope optimisation and plot development capabilities considered to be among the best in Australia'. [45]

5.136 In relation to specific criticisms of Mr Virr and Mr Hanley, the ACT submitted that:

• ACT subdivision guidelines maximise solar access through the siting of houses and design and orientation of blocks, with 80 per cent of subdivisions being 5-star, and the remainder 3- to 4-stars;
• making solar hot water systems mandatory reduces the flexibility available to builders in developing energy efficiency solutions, as would legislating for specific appliances in new residences, or mandatory levels of insulation;
• the ACT's energy rating scheme has been thoroughly measured and tested;
• the `Firstrate' climate zone software is capable of producing climate sensitive results for 27 different climates within Australia and have been reviewed in close consultation with the developers of the national house energy rate system; and
• the training of assessors in the ACT are consistent with those developed by SEDA in NSW. [46]

5.137 The Sustainable Energy Industry Association (SEIA) was concerned that policies such as emissions trading alone would not provide a spur to energy efficiency, whether in buildings, motor vehicles or appliances. They have proposed a `reverse carbon tax' in the form of `emissions reduction credits' in the form of one-off rebates for appliances and systems which can demonstrate life-cycle emissions savings. [47] This scheme is discussed in more detail in chapter 9.

Government energy efficiency programs

5.138 Energy Efficiency is a priority in the Commonwealth's NGS. Existing measures include:

• compulsory energy labelling for major domestic appliances in most Australian states (although business appliances are voluntary);
• new minimum energy performance standards (MEPS) for domestic electrical appliances, developed in consultation with industry, which took effect from October 1999 (however these are not best international practice);
• demand management initiatives by electricity utilities;
• database development for benchmarking Australian energy efficiency performance against available international comparisons; and
• energy information programs to encourage the adoption of energy-efficient technologies. [48]

5.139 The NGS also listed a range of additional measures under development:

• energy efficiency standards for residential and commercial buildings. This includes developing a minimum energy performance requirement for new houses and major extensions (including using schemes such as the National House Energy Ratings Scheme, which was discussed by Virr and Hanley), and the incorporation of mandatory energy efficiency standards for large buildings through changes to the Building Code of Australia;
• ongoing improvements to the energy efficiency of appliances through broadening Minimum Energy Performance Standards (MEPS), improving various codes of practice and keeping pace with best practice technology;
• a program to improve the efficiency of electric motors;
• possible approaches to providing strategic support to the development of and investment in close-to-commercial energy efficiency technologies and services;
• options for encouraging the consumer uptake of energy-efficient technology, such as rebates, shared savings or credit schemes and energy planning incentives;
• the promotion of low emissions hot water systems and the efficient use of hot water;
• cooperation with industry to promote industrial energy efficiency and best practice; and
• the development of methodologies for life-cycle energy analysis and the identification of emissions abatement opportunities. [49]

5.140 Minimum Energy Performance Standards (MEPS), established under the national Appliance and Equipment Energy Efficiency Program, have great potential to contribute substantial greenhouse abatement at negative cost. An AGO overview of measures regarding industrial equipment, electric motors, lighting, commercial refrigeration and airconditioning and household appliances suggests that average annual reductions of 7.2 MT CO2-e could be achieved during the first Kyoto commitment period at a price of -A$31 per tonne of CO2-e. Despite this, many Australian MEPS are below world's best practice (such as those for household appliances, which are around 30 per cent less stringent than those in the US). [50]

5.141 A 1999 discussion paper also spoke of problems in the pace and scope of implementation:

The program lacks a consistent, agreed procedure to establish mandatory labelling of MEPS probably because it developed ad hoc from a series of separate state initiatives. The absence of agreed process is most apparent when the program is compared with its US counterpart. The lack of agreed process has meant delays in legislation making processes and reductions in the overall program effectiveness. [51]

5.142 The discussion paper argues for a legislative goal of matching world's best practice MEPS and a timetable for implementation of within three to five years, in order to provide certainty and allow industry notice of new standards. However, they also suggest that in the absence of consensus lower than world's best practice MEPS should be used. [52]

5.143 In Australia, the MEPS levels for refrigerators and hot water systems commenced operation on 1 October 1999. Since then, there has been no indication of any move to tighten the level of standard introduced, although discussion about increasing the scope of MEPS has taken place. Governments and industry have agreed to begin working towards imposing MEPS on a range of additional commercial and industrial equipment. Labelling allows consumers to assess the energy efficiency of appliances. This encourages a competitive appliance market, where purchasers are able to consider whole-of-life costs for the appliance, not just the purchase price.

5.144 The AGO has adopted two different approaches to appliance labelling. The Energy Rating Program for whitegoods is a mandatory scheme, while the Energy Star scheme is a voluntary scheme run in cooperation with industry, originating in the US. Energy Star currently applies to office equipment including computers, printers, fax machines and photocopiers. [53] There appears to be no clear rationale to explain why one program is mandatory and the other is voluntary.

5.145 Energy efficiency of residential and commercial buildings is addressed by the Commonwealth Building Energy Efficiency Strategy. Following consultation with the building industry, the Ministerial Council on Greenhouse reached an agreement on 24 March 1999, on a comprehensive strategy aimed to make homes and commercial buildings in Australia more energy-efficient. The two-pronged Strategy balances the introduction of mandatory minimum energy performance requirements through the Building Code of Australia together with encouraging and supporting voluntary best practice initiatives. However, the Committee is concerned that the implementation of such standards is very slow and that voluntary approaches may not be working.

5.146 A strategy exists for expanding the Nationwide House Energy Rating Scheme by including a minimum energy performance requirement for new houses and major extensions, working with the states, territories and industry to develop voluntary minimum energy performance standards for new and substantially refurbished commercial buildings.

5.147 The Australian Building Energy Council (ABEC) has been formed to develop and introduce a voluntary code of practice for energy performance standards in the construction industry to be directed toward commercial and industrial buildings. In 1997 the Prime Minister said that if, after 12 months, the Government assesses that the voluntary approach is not achieving acceptable progress towards higher standards of energy efficiency for housing and commercial buildings, it will work with the states and territories and industry to implement mandatory standards through amendment of the Building Code of Australia. [54]

5.148 Mr Philip Harrington, from the AGO, indicated that progress on the building code was slow and that it still had not been amended. He thus indirectly acknowledged that the voluntary approach was not effective:

… the code is administered by the states and territories and the Commonwealth and each jurisdiction has been asked to put in writing its agreement to that code change process. We are certainly expecting that to occur now that the Building Codes Board has adopted that framework. [55]

5.149 The Commonwealth Government has also put in place a program of Energy Efficiency Improvement in Commonwealth Operations with a target to reduce energy in Commonwealth occupied buildings by 25 per cent by 2003. One aim of the Program is to establish leadership in the community by example through the reduction of energy consumption and greenhouse gas emissions.

5.150 At a broader level than the buildings and appliances industries, the Energy Efficiency Best Practice Program (EEBPP) aims to stimulate energy-efficient good practice in industry leading over time to best practice. Within particular industry sectors the Program will:

• identify current energy use performance and the potential for improved energy efficiency;
• establish energy performance benchmarks;
• motivate economic improvements in energy efficiency and provide information and other support to achieve that end; and
• monitor and report on sectoral progress towards improved energy efficiency. [56]

5.151 The Committee is concerned that the EEBPP may overlap with the AGO's Greenhouse Challenge Program whose agreements are designed to capture the capacity of industry to abate its greenhouse emissions, mainly by improving its efficiency in energy use and processing. It suggests that this issue be addressed in the overall review of the NGS.

5.152 The Committee recognises that achieving energy efficiency requires a diverse range of policy responses across a range of contexts - buildings and households, appliances, motor vehicles - and from a range of actors: business, consumers and all levels of government. On the other hand, as a nation we need to recognise the tremendous low (and often negative cost) abatement opportunities offered by energy efficiency measures.

Recommendation 38

The Committee recommends that Australian governments streamline and coordinate their processes for developing and implementing world's best practice energy efficiency standards for products, manufacturing processes and building design, with a view to the earliest possible adoption of world's best practice standards.

Recommendation 39

The Committee recommends that Australian governments at all levels expand awareness programs for consumers, business and industry and encourage the development of expertise in energy efficiency solutions and programs.

Recommendation 40

The Committee recommends that the inclusion of energy efficiency and greenhouse considerations into the Building Code of Australia be given priority for implementation.

The Energy Cycle - Possibilities

5.153 The Committee was also told of research into how different patterns of economic activity, and consumption, affect the energy intensity of the economy as a whole. Researchers from the Physics Department at the University of Sydney stressed that Australia had the highest per capita emissions in the world, but suggested that shifting the proportion of GDP to less energy-intensive industries could produce good results without affecting overall levels of employment.

5.154 They used economic models to compare the emissions intensity of various economic outputs, with the following results:

• beef cattle 10 kg CO2 per dollar of output;
• iron and steel 3.8 kg CO2 per dollar; and
• service industries between 0.7-0.8 kg CO2 per dollar. [57]

5.155 Focusing on the much lower energy intensity of service industries, they speculated that, because labour-intensive industries were less energy intensive, energy could be traded off for labour:

Those service industries have a much higher level of income associated with them, of course. In general, you can say that they have fewer imports associated with them, and they have a high level of taxation, and they do not necessarily mean that the employment level changes. The production factor way of looking at things is interesting, because you can see that to some degree you can trade off energy for labour, within an industry and between industries and commodities. So in some senses they are interchangeable. [58]

5.156 Other options to reduce emissions included changes in diet and the use of repairs to existing appliances rather than buying new ones. Repairing appliances can reduce emissions by 20 per cent while increasing employment by 35 per cent, and changes in diet could have similar emissions impacts:

We looked at consumer choices of diet. If you compare the current average diet to a recommended diet, the difference is perhaps that we eat approximately 40 per cent too much and we also eat about twice as much meat as is recommended. If you look at the total effects of that change in diet —and this is a personal example; I have other examples—the emissions would go down by 20 per cent, to feed people, and there is no net change in employment, including rebounds. [59]

(Chapter 5 - Part c)

 

Footnotes

[1] Mr Mark Tucker, Proof Committee Hansard, Canberra, 9 March 2000, p 19.

[2] Environmental Protection and Biodiversity Conservation Act 1999, No 91, 99, p i.

[3] Possible Application of a Greenhouse Trigger under the Environmental Protection and Biodiversity Conservation Act 1999: Consultation Paper, Department of Environment and Heritage, December 1999.

[4] Proof Committee Hansard, Canberra, 10 March 2000, p 62.

[5] Ms Esther Abram, Proof Committee Hansard, Melbourne, 20 March 2000, p 168.

[6] Mr John Connor, Proof Committee Hansard, Melbourne, 21 March 2000, p 197.

[7] Mr John Kirk, Proof Committee Hansard, Melbourne, 20 March 2000, p 142.

[8] Proof Committee Hansard, Melbourne, 20 March 2000, p 142.

[9] Mr David Buckingham, Proof Committee Hansard, Melbourne, 21 March 2000, p 176.

[10] Mr David Buckingham, Proof Committee Hansard, Melbourne, 21 March 2000, pp 177-78.

[11] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March 2000, p 58.

[12] Mr Don Henry, Proof Committee Hansard, Melbourne, 21 March 2000, p 197.

[13] Mr Peter Stevens, Proof Committee Hansard, Sydney, 22 March 2000, p 280.

[14] Mr Steven Waller, Proof Committee Hansard, Perth, 17 April 2000, p 490.

[15] Mr Paul Flanagan, Proof Committee Hansard, Sydney, 22 March 2000, p 365.

[16] Ms Gwen Andrews, Proof Committee Hansard, Canberra, 22 June 2000, p 727.

[17] See Possible Application of a Greenhouse Trigger under the Environmental Protection and Biodiversity Conservation Act 1999: Consultation Paper, Department of Environment and Heritage, December 1999.

[18] McLennan Maganasik Associates, Greenhouse Gas Emission Projections: Australian Electricity Generation and Natural Gas Combustion, Report to Australian Greenhouse Office, 5 June 2000, p 19.

[19] McLennan Maganasik Associates, Greenhouse Gas Emission Projections: Australian Electricity Generation and Natural Gas Combustion, Report to Australian Greenhouse Office, 5 June 2000, p 19.

[20] McLennan Maganasik Associates, Greenhouse Gas Emission Projections: Australian Electricity Generation and Natural Gas Combustion, Report to Australian Greenhouse Office, 5 June 2000, p 19.

[21] Proof Committee Hansard, Melbourne, 21 March 2000, p 260.

[22] Proof Committee Hansard, Melbourne, 21 March 2000, p 262.

[23] Proof Committee Hansard, Hobart, 5 May 2000, p 479.

[24] Proof Committee Hansard, Hobart, 5 May 2000, p 482.

[25] Proof Committee Hansard, Hobart, 5 May 2000, p 482.

[26] Mr Geoffrey Willis, Proof Committee Hansard, Hobart, 5 May 2000, p 503.

[27] Mr Geoffrey Willis, Proof Committee Hansard, Hobart, 5 May 2000, p 505.

[28] Proof Committee Hansard, Melbourne, 21 March 2000, p 261.

[29] Proof Committee Hansard, Perth, 17 April 2000, p 495.

[30] Proof Committee Hansard, Sydney, 22 March 2000, p 336.

[31] Electricity Supply Association of Australia, Submission 83, p 635.

[32] Mr Peter Dormand, Proof Committee Hansard, Sydney, 22 March 2000, p 286.

[33] Mr Peter Dormand, Proof Committee Hansard, Sydney, 22 March 2000, p 286.

[34] Mr Peter Dormand, Proof Committee Hansard, Sydney, 22 March 2000, pp 285-90.

[35] Mr Peter Dormand, Proof Committee Hansard, Sydney, 22 March 2000, p 289.

[36] Ms Cathy Zoi, Proof Committee Hansard, Sydney, 22 March 2000, p 300.

[37] Laurie Virr and Paul Hanley, Submission 199, p 1014.

[38] Mr Chris Dunstan, Proof Committee Hansard, Sydney, 22 March 2000, pp 268-9.

[39] Proof Committee Hansard, Canberra, 16 August 2000, p 900.

[40] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 16 August 2000, p 898.

[41] Dr Muriel Watt, Proof Committee Hansard, Sydney, 23 March 2000, p 415.

[42] Dr Muriel Watt, Proof Committee Hansard, Sydney, 23 March 2000, p 415.

[43] Laurie Virr and Paul Hanley, Submission 199, p 1017.

[44] Laurie Virr and Paul Hanley, Submission 199, p 1022.

[45] Comments by Planning and Land Management Group (PALM), ACT Department of Urban Services in response to Submission No. 119 on Friday 10 March 2000 by Messrs Paul Hanley and Laurie Virr in private capacity.

[46] Comments by Planning and Land Management Group (PALM), ACT Department of Urban Services in response to Submission No. 119 on Friday 10 March 2000 by Messrs Paul Hanley and Laurie Virr in private capacity.

[47] Alan Pears, Proof Committee Hansard, Melbourne, 21 March 2000, p 229; and Alan Pears, Proposal: rebate scheme for sustainable energy systems/services that reduce greenhouse gas emissions, Sustainable Energy Industry Association, Revised Jan 2000.

[48] Australian Greenhouse Office, The National Greenhouse Strategy: Strategic Framework for Advancing Australia's Greenhouse Response, 1998, pp 47-48.

[49] Australian Greenhouse Office, The National Greenhouse Strategy: Strategic Framework for Advancing Australia's Greenhouse Response, 1998, pp 49-50.

[50] The Australian Greenhouse Office, National Appliance and Equipment Energy Efficiency Program: Projected Combined Impacts from an Extended and Enhanced Program, March 2000.

[51] Future Directions for Australia's Appliance and Equipment Energy Efficiency Program, A discussion paper prepared by the National Appliance and Equipment Energy Efficiency Committee, February 1999, p 19.

[52] Future Directions for Australia's Appliance and Equipment Energy Efficiency Program, A discussion paper prepared by the National Appliance and Equipment Energy Efficiency Committee, February 1999, pp 19-20.

[53] greenhouse.gov.au/energyefficiency/appliances/labelling/index.html (07/08/00)

[54] Statement by the Prime Minister of Australia, the Hon John Howard, Safeguarding the Future: Australia's response to climate change, 20 November 1997, http://www.greenhouse.gov.au/ago/safeguarding.html (17/07/00).

[55] Proof Committee Hansard, Canberra, 22 June 2000, p 700.

[56] http://www.isr.gov.au/resources/netenergy/domestic/bpp/index.html (12/09/00).

[57] Dr Christopher Dey, Proof Committee Hansard, 23 March 2000, p 427.

[58] Dr Christopher Dey, Proof Committee Hansard, 23 March 2000, p 427.

[59] Dr Christopher Dey, Proof Committee Hansard, 23 March 2000, p 427.