Access to low-cost energy has shaped the Australian economy. It has shaped our industries and is the lifeblood of our modern way of life.
Energy is also a huge source of Australia’s export wealth: it accounts for 21c in every dollar we export. The sector provides hundreds of thousands of direct and indirect jobs.
So we need to ask ourselves whether our energy and climate change policy settings are as good as they could be. In many respects, in a confused debate about what constitutes good energy and climate change policy, Australia has settled for second best.
The second-best scenario involves:
- moratoriums in some states constraining access to natural gas at a time when we need these resources the most
- duplicative and costly environmental and planning regulation
- leaving the existing Renewable Energy Target unchanged
- poor network regulation
- fragmented and ineffective approaches to climate change policy
- slow progress on energy market reform.
Retail electricity prices have doubled in the past decade for residential and small business consumers and have increased by 88 per cent for large businesses. Australian resource projects are around 40 per cent more costly to deliver than in the US.
Gas prices have increased by about a third in the past five years. At the same time, Australian resource projects face increasing competition from the US, Canada, Brazil and east African nations. The rising price of energy is adding to costs for Australian business and weakening competitiveness relative to international rivals.
Improving energy and climate change policy involves balance and trade-offs. This can be achieved only through honest and respectful community engagement – by being open with people about the choices and their implications for jobs and standards of living.
Australia should transition towards a low-emission economy. We can and should do this with a focus on innovation and in a way that does not threaten our economic competitiveness. Our country cannot afford to let good policy be derailed by short-sighted slogans that do not allow for a middle ground.
We need to act in a considered way with the nation’s long-term interest in clear view.
We need to explain the risks and costs of unnecessarily constraining access to natural gas resources, and do all that we can to ensure the debate is underpinned by science rather than misinformation and emotion.
Australia is well positioned to expand our energy exports to meet growing global demand.
Our proximity to Asian markets, our experience doing business in the region and the quality of our resources gives us an advantage. But that will mean little if we are not cost-competitive.
Australia has more than $209 billion of investment in energy resource projects committed over the next five years. There are a further 83 projects worth a potential $140 billion that the right policy and market conditions could transition into committed investment.
But we need to act now.
Australian energy policy needs a vision a vision that aligns energy and climate change policy.
The Business Council of Australia’s vision is to maximise our comparative advantage in energy by driving growth in our energy exports, and delivering reliable and cost-competitive energy to households and businesses while meeting best practice environmental standards.
To achieve this, Australia needs to go back to delivering on the central objectives of energy and climate change policy.
In the case of energy, the objective is to deliver energy in the long-term interests of consumers.
In the case of climate change mitigation policy, it is to deliver least-cost abatement in line with global efforts.
Policy focused on these objectives will allow Australia to strike the optimal balance between:
- meeting domestic demand while seeking to take advantage of global opportunities
- developing our resources and providing the appropriate environmental and community protections
- maintaining a secure and reliable energy supply while managing the transformation of our energy sector
- managing our greenhouse gas emissions and the cost of energy to consumers. the paper we are releasing today provides a set of practical actions that governments should implement collaboratively with business and the community.
On their own, these reforms will not put downward pressure on costs but collectively they would make a big difference to Australia’s competitive position globally.
Delivering on these reforms will require bipartisanship.
The reform direction represents incremental steps governments, business and the community can take that could spur a new wave of economic growth and productivity from Australia’s energy sector.
In doing so, they could help ensure the standard of living we enjoy today can be enjoyed – and improved upon – for future generations.