Speech - Local Government and the Clean Energy Future Plan

The Australian Government's Clean Energy Future Plan represents the most significant environmental and economic reform in a generation.

I would like to respectfully acknowledge the traditional owners and custodians of the land on which we meet today, and pay my respects to their elders, past and present.

Thank you for inviting me to here today to speak about the Government's plan for a Clean Energy Future and the opportunities it provides for local government.

The Clean Energy Future Plan

The Australian Government's Clean Energy Future Plan represents the most significant environmental and economic reform in a generation.

The Plan provides a coherent and comprehensive program to cut pollution, harness markets to drive investment in new clean energy sources, support Australian families, provide business with greater certainty, and create the transformational change required if Australia is to meet the environmental and economic challenges of the coming century.

Securing a clean energy future involves four key elements:

* introducing a carbon price

* promoting innovation and investment in renewable energy

* encouraging energy efficiency, and

* creating opportunities in the land sector to cut pollution.

Today, I would like to talk to you about three issues regarding the Clean Energy Future package.

First, I want to give a brief overview of the international context in which this historic reform is occurring. 

Second, I want to talk to you about what the impacts of the carbon price will be, particularly for local government, and to dispel some of the misinformation that's being thrown around.

Third, and most importantly, I want to talk to you about the new opportunities available to local governments under the Clean Energy Future Plan. I want to make clear today that while the carbon price will have a modest impact on some of the operations of local governments, there are significant economic and environmental benefits available to those councils that are willing to embrace the opportunities that the carbon price also creates.

1. The international context

You don't need me to point out to you the fear-mongering that the Opposition has been indulging in around the introduction of the Clean Energy Future Plan, and in particular around the pricing of carbon pollution.

The Opposition have been making hysterical claims about the carbon price as a wrecking ball that will destroy whole industries, towns, and our way of life.

They've been saying this despite the fact that John Howard went to the 2007 election promising a price on carbon and a comprehensive emissions trading scheme.  I note that had Howard won that election, the emissions trading scheme that he promised would, like ours, have been starting this year.

And the Liberal Party maintained this policy for an emissions trading scheme in opposition - right up until Tony Abbott took over the leadership from Malcolm Turnbull at the end of 2009.

They've been saying that the carbon price will be the death of the coal industry, while their MPs buy shares in coal companies.

And the Opposition has been saying that Australia shouldn't be ‘acting first' on climate change. This is just another piece of misinformation from a party that supported pricing carbon right up until the moment certain people in the party saw a political opportunity in opposing it. 

I want to be clear about this: in putting a price on carbon, Australia will not be leading the world. Rather, we will be joining more than three quarters of the world's advanced economies that are also putting a price on carbon. And we'll be doing so with a policy that reduces dangerous pollution in the most economically responsible way.

From 2013 there will be more than 33 national and 18 sub-national emissions trading schemes in place around the world. These schemes will cover a combined population of more than 850 million people.

National schemes are now in place in 26 of the OECD's 34 member countries, and sub-national schemes are in place in another two OECD economies.

In addition, sub-national emissions trading schemes will be operating in the US states of California (which is the world's eighth largest economy in its own right) and New York, and in seven provinces and cities in China, announced last year as part of its twelfth Five Year Plan.

So when Australia's carbon price starts next month, we will be joining the large majority of the world's industrialised countries in putting a price on carbon.

A carbon price

When the carbon price commences next month, the largest polluters in Australia will, for the first time, pay a price for every tonne of carbon pollution that they put into the atmosphere.

Economists around the world agree that pricing carbon is the most efficient way to tackle climate change, and it's the measure being adopted around the world - including by the conservative governments in the UK and New Zealand.

But what we're seeing from the Opposition in response to this critically important reform is an old-school political scare campaign, based on fear, negativity, and disinformation.  

I can't help but be reminded of the scare campaign they mounted against native title twenty years ago in the wake of the historic Mabo decision. The Conservatives railed against reform, telling us that our backyards would never be safe, that the economy would be destroyed, and that Australian society would never recover from accepting the reality that Aboriginal people were here first, and consequently had rights that the law should recognise.

Climate change is another reality that this Opposition would rather hide from than face.

But it's a reality that the Labor Government is facing, with an effective, economically responsible and measured response.

Putting a price on carbon will give industry an incentive to adopt new clean energy sources and technologies, and will ensure that Australia's economy continues to grow while we reduce pollution.

2. The Role of Local Government in our Clean Energy Future

I'll now move onto my second point, which is to clear up some of the misunderstandings regarding the impact of the carbon price on our economy, on households and on local governments.

And I'll also be highlighting some of the opportunities that are being created for local governments under the Clean Energy Future package.

In discussing what the actual impacts of the carbon price are likely to be I'll be using figures drawn from detailed economic modelling conducted by Treasury and bodies such as CSIRO, rather than relying on made-up numbers and the imagery of cobra strikes and python squeezes, drawn from the handbook on negative political campaigning that Tony Abbott appears to sleep with under his pillow. Next, he'll be warning us about carbon price drop bears.

Impacts of the carbon pricing mechanism

Modelling from the Australian Government Treasury shows Australia's economy will continue to prosper with a carbon price.

Overall consumer prices are projected to increase by only around 0.7 per cent in 2012-13 as a consequence of the carbon price, much smaller than the 2.5 per cent rise in the Consumer Price Index caused by the introduction of the Goods and Services Tax in 2000.

The Treasury modelling predicts that employment will continue to grow after the introduction of a carbon price. By 2020, while our carbon pollution will have reduced, national employment is projected to increase by 1.6 million jobs.

The modelling shows that impacts will vary across industries. But with industries employing more than 90 per cent of the workforce accounting for less than 10 per cent of emissions, much of the economy will be relatively unaffected.

Overall, the sectoral effects are small compared to normal variations over time driven by productivity, the terms of trade or demographic pressures.

The modelling is clear - a carbon price will drive structural change in key sectors, and at the same time the vast majority of industries will continue to grow broadly as they would without a carbon price.

Australia will enjoy robust growth in living standards, even as we make substantial cuts in carbon pollution.

Impacts on households

While the modelling shows that the impact on the cost of living is in fact quite modest, the Government will ensure households are provided with the support they need to transition to a low carbon future.

Under the clean energy future package, 9 in 10 households will receive some combination of tax cuts and increased payments to help them with cost of living impacts from a carbon price.

More than 4 million Australian households will get assistance that is at least 20 per cent more than their average expected price impact, and more than 1 million Australians will no longer have to lodge a tax return.

The Government will also increase pensions, family payments and income support payments by an amount equivalent to a 1.7 per cent increase in the maximum annual rate of the relevant payment.  Payments have already started flowing for pensioners, families on Family Tax Benefit Part A, and students on Youth Allowance, and the tax cuts will come into force from 1 July 2012.

Impacts on local government

A number of landfill facilities will have obligations under the carbon pricing mechanism from 1 July 2012, creating an incentive for them to reduce dangerous greenhouse gas emissions.

Landfill facilities will be liable if they emit 25,000 tonnes or more of carbon dioxide equivalent (CO2‑e) greenhouse gas emissions each year.

The Clean Energy Regulator has now determined that of 559 councils across Australia, 32 have landfill sites generating more than 25,000 tonnes of CO2-equivalent gasses per year. There are also 2 local councils who are will be liable as natural gas suppliers.

In reaching its determinations regarding liability, the Clean Energy Regulator worked closely with councils to provide the certainty local governments need to prepare for the Clean Energy Future.

And so it's now clear that the vast majority of councils in Australia will not be liable under the carbon pricing mechanism.

Price setting to meet landfill carbon pricing liabilities

I am aware many councils are concerned about the flow through effect of rate increases on their ratepayers.

The Government does not believe it is fair to ask ratepayers to pay for emissions from waste deposited over previous decades (known as legacy waste). For this reason, coverage of landfill emissions will be limited to emissions from new waste that is deposited on or after 1 July 2012.

The Government estimates that landfill operators - including liable councils - will need to charge no more than $26 per tonne for the carbon cost component of municipal solid waste entering landfill in 2012-13.  This figure is for a landfill with no gas capture now, or in the future.

However, in practice, landfill gas capture occurs at many landfill sites across Australia and the carbon price will encourage operators to consider its installation at many more sites.

Gas capture can reduce emissions, and carbon costs, very substantially.

Average capture rates of 50 per cent would reduce carbon costs to below $13 per tonne for municipal solid waste.

Sites operating at best practice can reduce emissions by 70 per cent or more, reducing carbon costs further, to below $8 per tonne.

Using these figures, and given that the average household produces just under one tonne of waste per year, the impact of the carbon price on waste for the average household is between 13 and 47 cents per week - depending on the extent of landfill gas capture.

This modest figure is amply covered by the average household assistance for the carbon price of $10.10 each week.  

I expect that liable councils will provide an important price signal to the private waste industry regarding the true cost of carbon price liabilities for waste.  As bodies serving their communities, I fully expect liable councils to charge their communities no more than the expected cost of their emissions liability under the carbon price. 

In this regard, a number of claims have recently been made by certain councils about the impacts of the carbon price on rates, and some of these claims are quite misleading. Rate rises beyond the modest impacts I've been discussing should not be attributed to the carbon price, and I expect councils to conduct themselves with transparency and integrity when passing costs on to their communities.

The carbon price is not an excuse for the private sector to gouge councils or ratepayers with inflated estimates of their liabilities.  Councils, and indeed all users of waste services, should closely examine all claims for price increases said to be related to the carbon price.

The Australian Government, supported by the ACCC, is working to prevent unscrupulous individuals and companies from price gouging under the cover of the carbon price, and I expect councils - whatever their political colour - to be on the side of consumers, not the scammers.

3. Opportunities for local government

The introduction of a carbon price creates a number of opportunities for councils to reduce their emissions and benefit from the transition to a clean energy future.

Because no carbon liabilities attach to emissions from waste deposited prior to 1 July 2012, all landfills, are a potential asset - rather than a liability - under the Clean Energy Future package.

The Australian Government's Carbon Farming Initiative provides opportunities to councils and commercial landfill operators to earn carbon credits from capturing methane gas from waste deposited in landfills prior to July 2012. 

Councils can then use these credits to meet any potential carbon price liability or to generate income by selling credits to firms with carbon price obligations. This new income stream, realised by reducing carbon pollution, can then be re-invested in the local community or returned to ratepayers through reduced rates.

Captured methane can also be used to generate electricity for the local community and generate another source of income under the Renewable Energy Target. For example, Newcastle City Council currently uses its landfill gas to create enough power to supply 3,000 homes.

These opportunities to reduce carbon liabilities through gas capture for Carbon Farming Initiative credits and electricity generation are also available to commercial landfill operators, and if implemented could very significantly reduce their costs.

Because the carbon price is to be determined by the market after 2015, and with the potential for the introduction of income from new gas capture and electricity generation programs at landfill sites over time, I urge councils not to lock themselves into contracts for waste disposal when dealing with landfill operators that are liable to pay the carbon price. Rather, councils should consider including contractual provisions for periodic price reviews to reflect the changing costs of carbon liabilities over time, as well as the impact of any offsetting financial benefits.

Electricity costs and the opportunities of energy efficiency

Across Australia, the carbon price is expected to increase household electricity prices by 10 per cent in 2012-13, or around $3.30 per week on average.

This increase will also be amply covered by the Federal Government's household assistance package of $10.10 a week, on average. Simple energy efficiency measures will also leave more money in householders' pockets.

Increased energy efficiency has multiple benefits - lowering carbon pollution, improving energy security, and helping households and businesses cope with rising energy prices. The Government also recognises that the key to improving Australia's energy efficiency is local action.

To encourage local governments to take up energy efficiency opportunities, the Australian Government has established the $200 million Community Energy Efficiency Program to work with council and community organisations to implement energy efficiency measures across diverse local communities.

Local councils and community organisations can access grants of up to $5 million to support the implementation of energy efficiency upgrades and retrofits to council and community-use buildings, facilities and lighting.

In the last week, the Minister for Climate Change and Energy Efficiency, Greg Combet, and I announced over $42 million in grants under this Program.

The 63 successful Round One recipients of the Community Energy Efficiency Program will co-fund projects to improve energy efficiency in community buildings like museums, indoor sports and aquatic centres, art galleries and libraries.

Road construction

The Government recognises that many local councils play a major role in the construction and maintenance of roads and other infrastructure. The impact of the carbon price on construction and fuel costs is projected to be modest.

Treasury modelling shows that the impact of the carbon price on the construction sector as a whole will be less than 1 per cent in the first year. Most infrastructure construction inputs will not be impacted by a carbon price. Labour, sand and equipment depreciation, for example, will face no direct cost.

The carbon price will not apply to fuel used by light vehicles. Heavy on-road transport will not be covered until 1 July 2014. An effective carbon price will apply to off-road fuel use from 1 July 2012 through a reduction in fuel tax credits (6.21 cents per litre for diesel).

However, the combined effect of other planned changes to fuel tax credits and the effective carbon price means that the fuel tax rate for off-road diesel use (for road construction and maintenance) will fall by around 13 cents per litre on 1 July 2012.

It's also important to remember that the Australian Government will continue to provide ongoing financial support to local governments through Financial Assistance Grants.

These grants include automatic indexation, so any increased costs that flow from the introduction of a carbon price will be captured in the indexation of funding for local governments.

Conclusion

Moving to a clean energy future presents an opportunity for the Australian economy to adapt, change and grow.

In putting together the carbon price and the Clean Energy Future plan, the Government has been mindful of the need to offer support to households, business, communities and councils as we make the transition to a clean energy future.

And as we move towards the start of the Carbon Pricing Mechanism on 1 July, it's important that councils take the necessary steps to adapt to this economic reform, so that they can make the most of the opportunities that it presents. 

The Government stands ready to assist with this effort, and you and your council staff should not hesitate to seek further assistance or information from the Department of Climate Change and Energy Efficiency.