First Super Investors’ Seminar - Forestry and the Clean Energy Future Plan

Today I want to talk about why we are taking action to tackle climate change

I would like to acknowledge the Indigenous owners of the land on which we meet and pay my respects to their elders past and present.

I am very pleased to be able to join you today. This is an exciting time for Australia, and its economy - and an exciting time for the forestry industry. This week we have introduced into Parliament legislation to implement the Gillard Government's Clean Energy Future Plan, which will tackle climate change and secure a clean energy future for Australia.

Today I want to talk about why we are taking action to tackle climate change, about the support that the Government will be providing to the forestry industry and the opportunities that will present themselves as we transition to a carbon constrained economy.

And most importantly, I want to talk about the strong future that Australia's forestry industry has under our Plan.

Pricing carbon pollution

But first, why should Australia put a price on carbon pollution?

It is important to start with the science. The consensus among the scientific community is clear - our climate is changing and human activity is causing that change. The longer we delay action, the greater the costs - economically, socially and environmentally.

Of course, the corollary of that is that if we move quickly and decisively - as we will with the Clean Energy Future Plan - we can lower those costs and, more importantly, position Australia to take full advantage of the opportunities presented by a future, carbon constrained global economy.

Fair and effective global action to achieve ambitious emissions reductions is in Australia's national interest. This is, after all, a global problem. Australia needs to demonstrate our willingness and ability to do our fair share to address this problem.

The Gillard Government is committed to ambitious pollution reduction targets as part of global action. This is what we are doing through the Clean Energy Future Plan - putting in place policies capable of delivering these targets.

I cannot stress enough the importance of these targets - they set clear goals for our country, and underpin our mitigation efforts.

It is critical to recognise that there is only one policy package on the table today that will allow us to meet these targets - the Clean Energy Future package centred on a market-based approach.

The introduction of a carbon price will cut pollution in the cheapest and most efficient and effective way while driving investment in renewable energy sources such as solar, wind, and geothermal.

Every cent raised through this measure will be returned by assisting households, supporting jobs and tackling climate change.

The headline policy of the Clean Energy Future package is introducing a carbon price. But the Clean Energy Future Plan is a comprehensive package and involves a suite of measures to:

  • promote innovation and investment in renewable energy;
  • encourage energy efficiency; and
  • create opportunities in the land sector to cut pollution and improve productivity, sustainability and resilience.

Putting a price on carbon is the most environmentally effective and cheapest way to cut pollution. This is a fact that is well recognised by global economists, and respected international institutions, such as the Organisation for Economic Cooperation and Development and by Australia's Productivity Commission.

Starting at a fixed price of $23 a tonne in 2012-13, and then moving to a full emissions trading scheme in 2015, the carbon price will generate incentives to reduce pollution and invest in clean energy, breaking the link between pollution and economic growth.

I want to stress this point.

The key to positioning Australia for the future is to decouple economic growth from growth in emissions.

This Government is not prepared to sacrifice Australia's strong economic performance. This decoupling is a fundamental design principle for the Clean Energy Future Plan.

The act of constraining carbon pollution will drive innovation across all sectors of the economy. All sectors will be encouraged and assisted to find new energy and carbon efficient ways of doing business. It will also make investment, in new low carbon products and processes and in scientific and engineering research, more viable and more attractive.

At the same time as providing these incentives we are moving to safeguard strong jobs growth. The Government has carefully designed measures to support Australian jobs and competitiveness as we move to a clean energy future.

For instance, the ongoing Jobs and Competitiveness Program will provide over $9 billion in support over the first three years of the Carbon Pricing Mechanism. The assistance is targeted at companies that are emissions intensive but are constrained in their capacity to pass through costs in global markets, such as steel, aluminium, cement and flat glass manufacturing. Under this program, businesses producing over 80 per cent of the manufacturing sector's emissions are expected to be eligible for support.

Of course, the Jobs and Competitiveness Program is not the panacea to supporting manufacturing in Australia under a carbon price. It's essential that the Government assists manufacturing directly in improving energy efficiency and support research and development in low pollution technologies.

That is why the Government will introduce the $1.2 billion Clean Technology Program to help manufacturers invest in energy efficient capital equipment and low emissions technologies, processes and services. The Clean Technology Innovation Program will provide grants of between $50,000 and $5 million on a co‑investment basis to businesses in all industry sectors to support research, development and commercialisation of clean technology products.

As I have mentioned, the Clean Energy Future plan is a comprehensive package and much more than just a price on carbon and a Jobs and Competitiveness Program. The Government will also be assisting manufacturing and households directly to improve energy efficiency, and directly supporting research and development in low pollution technologies.

A genuine commitment to emissions reduction requires a market mechanism that creates an incentive for the private sector to reduce emissions.

The carbon price at heart of the Clean Energy Future plan provides this incentive. In contrast, the Coalition's proposal ignores the private sector and prioritises a select few projects favoured by the Coalition.

Compare the two methods of abatement. The Clean Energy Future plan sends a price signal to the market. It immediately sets in motion a process where the top 500 emitters across Australia respond to the carbon price by adapting their processes to reduce emissions in the most efficient way for them. These reductions come at no cost to the taxpayer beyond administration of the scheme and create a revenue stream that can be used to invest in clean energy and assist families for increases in cost of living.

In contrast, Direct Action will require a grant based tender process that does not foster innovation across industry as a whole. Some businesses would use taxpayer funds to reduce their emissions, while others would do nothing to change. There would be no revenue stream for the Commonwealth, and taxpayers would not be compensated for the $48 billion they will be out of pocket in general revenue.

Direct Action also fails to support co-investment in renewable energy. Under the Clean Energy Future plan, we will invest $10 billion in the Clean Energy Finance Corporation, providing opportunities for innovative Australians to get their projects off the ground. The Corporation will support loans, loan guarantees and equity investments. It will work with industry and business to reward existing emissions reducing initiatives and boost private sector investment in renewable energy and clean energy projects.

A new, independent statutory body, the Australian Renewable Energy Agency, will also be created to coordinate and streamline around $3.2 billion in existing grant funding programs supporting research, development and demonstration of new renewable energy technologies.

Together, these programs will drive the biggest expansion in the clean energy sector in Australia's history, building a critical mass of renewable energy, energy efficiency and low-emissions generation projects. Our modelling suggests that the Government's renewables policies including the new Australian Renewable Energy Agency and the Clean Energy Finance Corporation will leverage around $100 billion worth of investment in the decades to come.

Carbon farming

The third plank of the Clean Energy Future package is about creating opportunities in the land sector to cut pollution and improve productivity, sustainability and resilience. This is an area where the forestry industry will really see gains.

The Carbon Farming Initiative, or CFI, is about encouraging and rewarding farmers and landholders who take steps to reduce carbon pollution above what commonly occurs. It works by creating credits for each tonne of carbon pollution, which is stored or reduced on the land.

The CFI legislation passed the Parliament last month and will commence operation from December this year. It will create a new income stream for farmers, new jobs for rural and regional Australia and provide strong incentives to identify and implement low-cost methods of pollution reduction.

Under the CFI, credits are only issued for additional abatement, abatement that would not have occurred in the absence of the scheme. This allows CFI credits to be used to offset emissions elsewhere in the economy and leads to a real reduction in emissions overall.

Methodologies that will be eligible under the CFI are currently undergoing assessment but forestry activities that may be eligible include new long-rotation hardwood and low rainfall plantations. And we are consulting with the forestry industry, among others, on what activities are additional or that go beyond common practice.

The new Carbon Farming Futures program will provide funding to the land sector for research, measurement and ‘action on the ground'.

The Carbon Farming Skills program will ensure that there are people in regional Australia with the necessary skills to support implementation of the CFI. We expect that the CFI will drive further development of the carbon jobs sector, with demand for carbon brokers, auditors, natural resource management bodies and authorities, farm extension officers and advisors, and agronomists.

Australia's forestry industry

Turning to forestry, I want to make clear that Australia's forestry industry will benefit and will have considerable support during the transition to a carbon price. Emissions from fertiliser, timber harvesting, and off-road vehicles and machinery, all pertinent to the forestry industry, are exempted from the carbon price.

There is also a more long-term and indirect advantage for forest industries. Over time, carbon pricing will increase the relative value of wood products. Major competitors to timber, such as cement, steel and fossil fuels, will be covered by the carbon price while timber is not. This means timber products will become relatively more attractive to buyers as the world transitions to a low carbon future.

Likewise, a carbon price will encourage the use of woody biomass as an energy source. The use of biomass for electricity generation or heat energy will not attract any liability under a carbon price. This means that generators that use biomass will become more cost competitive relative to generators that use fossil fuels, which will be subject to the carbon price.

Since the exposure draft, the exclusion of land use change, forestry and biomass emissions is now enshrined in clause 30 of the Clean Energy Bill 2011.

The results of the Treasury modelling indicates growth in the forestry sector. The modelling indicates that industries grow faster under a carbon price if they are outside the scope of carbon pricing or have relatively low carbon intensity, like the forestry industry.

Conclusions

The Clean Energy Future package is about positioning Australia for the future, preparing us to take advantage of the opportunities that will present themselves as the world transitions to a carbon constrained economy. Within that, there are opportunities for forestry to position itself - opportunities for investment and innovation - that will present themselves during this time of transition and beyond.

Clean energy is the next major global economic revolution. The Gillard Government's Clean Energy Future plan guarantees Australia's place in this new economy and ensures that the future is bright for Australian forestry.

Thank you.