Tim Reed, President, Business Council of Australia
12.20pm, Wednesday 30 September 2020
Thank you for the opportunity to speak at the Global Smart Energy Summit today. This is an incredibly important discussion and one the Business Council is pleased to contribute to.
I would like to start by acknowledging the traditional owners of the land on which each of us are located today. For me that is the Cammeraygal people of the Eora nation. I pay my respect to their elders’ past, present and emerging.
2020 has been a year of unprecedented challenges for Australia.
A summer of bushfires ravaged homes and businesses, cost lives and brought to the fore the impact of more frequent and extreme weather events on our country.
Before we had the opportunity to really recover, rebuild and help affected communities get back on their feet, the COVID-19 pandemic took hold and we are now all experiencing the devastating health and economic impacts of the crisis.
The Business Council is focussed on recovery – we believe this will require both sustained and sustainable economic growth, including tackling climate change by investing in a carbon efficient future.
Whether it is rebuilding bushfire affected communities as part of our initiative BizRebuild or outlining our roadmap to economic recovery in response to the virus; we are committed to a stronger Australia – one that is fair, inclusive, sustainable, outward looking and prosperous.
The task is massive and we need to generate about 1.5 million jobs, replacing those that have been lost during the pandemic and those needed to respond to technological change.
Business is up to the task. Business wants to invest, expand, innovate, create, export and compete with the rest of the world again.
Ours is an ambition to transform the nation, making it more competitive and attractive to investment, and setting us up to be a clean energy superpower – leading the world in new low, zero and negative emissions technology.
There is no reason why Australian cannot muster its considerable resources and talents to be at the global forefront of new advances in detecting, harnessing, generating, using and storing clean energy.
As we transform our nation in other ways too, we must continue to be considered, but also move decisively and boldly.
These extraordinary times require us to reaffirm the strengths that have underpinned our proud record as a country: an open economy, a clean and green environment with stringent safeguards, immigration and strong institutions. They also require us to fully embrace a growth agenda by taking calculated risks and developing the new capabilities that will springboard our success.
Our policy and spending decisions should meet the twin objectives of getting people back to work and positioning our country for a stronger future.
To give Australia the best chance at recovery, we’ll need to find the courage – and consensus – to act on the problems that threaten to hold us back.
The threat of dangerous climate change has been discussed by governments, scientists and business at the national and international level for more than three decades.
Climate change poses immense global environmental, economic and societal risks. The scale and pace of the response required is increasing and becoming more urgent over time.
Climate change is already impacting life in Australia, requiring adaptation to higher average temperatures and increased intensity and frequency of droughts and bushfires.
Many businesses in Australia are now managing their own climate risks with customers and suppliers, shareholders and investors. Climate change is changing the way business plans for its future, both to adapt to a warming climate and to mitigate emissions along supply chains.
Decisive action by governments working with all stakeholders in the community will be needed to minimize the physical and economic risk of climate change and its impact on the Australian economy and environment. This is both an economic and a moral responsibility.
I believe our summer of horrendous bushfires has changed the conversation on climate change this year. Questioning the science of climate change has largely ceased, the debate is now how best to, and how fast we can decarbonise.
Managing climate change is also an opportunity. It has the ability to deliver enormous shared economic benefits from the flow on effects of increased investment, industrial re-build, which will bring with it greater efficiency and improved productivity.
Achieve a net-zero target by 2050
At the BCA, we believe we need a national commitment to achieve net-zero emissions by 2050.
Why is this so important? Because this is what the science tells us we need to do to meet the goals of the Paris Agreement – keep global temperature rises below 2 degrees and strive for below 1.5 degrees.
This target is necessary so we know where we are headed and the scale of change needed.
A target without a plan is a problem, just like a plan without an end goal is a problem – both are very important but the ‘how’ is the harder part of the plan, but it is critical to Australia’s future economic competitiveness and the impact on Australians, particularly low-income households and regional communities.
A long-term target will help provide the certainty and confidence needed to drive the investment required to decarbonise our economy, drive down energy prices and to ensure stability of supply, all of which underpins our ability to maintain and improve our international competitiveness.
Our recovery plan must address the existing global problem of climate change by creating and incentivising a more carbon efficient economy.
In the past two decades, Australia has become increasingly less competitive on the world stage with respect to energy prices. We have gone from the fourth cheapest in the OECD in 2004 to the 10th cheapest in 2016 and above the OECD average. In the race for global capital, high energy input costs are a major deterrent. In recent times, wholesale prices have come down, so our focus must be on maintaining these lower electricity prices and delivering the lowest-cost system for energy in Australia.
Climate change and energy policies are inextricably linked.
Driving down electricity prices will be central to our ability to recover.
At the same time transitioning to our future energy fuel mix must remain a priority and presents an opportunity to invest in new projects and create new jobs and industries. The best way to do this is to unleash the pipeline of queued up private investment in the energy sector.
The investment required to replace the National Electricity Market’s retiring generation capacity and firm-up the renewables that will largely replace this energy output would yield up $53 billion NPV in capex investment over time.
There is more than enough market-driven investment in the pipeline – some $100 billion of potential projects already proposed – to fill this significant gap under any scenario.
However, investors are not pulling the trigger on these projects because policy uncertainty is deterring investment. Companies are hesitant to commit to significant investment decisions on long-term assets when investment conditions are unclear.
A decade of policy paralysis in relation to how emissions will be treated in the energy sector, combined with ad hoc government intervention in the market, has stymied investment in new projects.
Essential to retaining lower wholesale energy prices is to ensure the market has sufficient incentive to invest in new projects. To enable this investment, the Government needs to provide clearer guidance on its long-term emissions targets so that business can plan for future.
Government intervention in energy investment may have the intention of supporting the sector, but the unintended consequence is that it undermines private rates of return and pushes out private investment. The Government needs to step aside and let the private sector unlock the significant opportunities that exist in their development pipelines.
There is no doubt that technology change needs to drive our transition to a net-zero economy.
Of course this must continue in the energy sector – a sector where there is a clear pathway to decarbonisation and a clean energy future – but we also need to invest in new low, zero and negative emissions technologies across the economy, including in hard to abate sectors such agriculture and manufacturing.
We have recently welcomed the Government’s Technology Investment Roadmap and First Low Emissions Technology Statement for providing some much-needed certainty around the range of technologies the government will back to drive down emissions, delivering confidence to invest and create new jobs for the future.
This roadmap forms an important part of the nation’s long-term strategy to meet our international commitments. We believe Government is right to focus on the areas further up the innovation funnel, those that are not yet commercially viable, but will be increasingly important in 5 to 10 years to continue the drive to net zero 2050.
As a country we need to prioritise these new technologies to help us transition. This will underpin our future competitiveness, position us as an energy superpower at home but also, as a nation that only contributes 1.3% of global emissions; if we really want to move the dial on global warming that, will enable us to have an impact in overseas markets.
- energy storage
- soil sequestration
- carbon capture, storage and use
- building standards
- electric vehicles
- energy productivity and demand management
Further, by expanding the scope of ARENA and the CEFC we will encourage new low, zero and negative emissions technology in sectors like agriculture, transport and manufacturing.
We’re already seeing businesses invest in these solutions:
- LNG exporter Woodside is investing heavily in hydrogen technology
- Jemena is looking at injecting biomethane into traditional gas distribution networks
- BlueScope steel is studying the potential application of carbon capture sequestration and use
- Coles and Woolworths have replaced their refrigeration systems with more efficient systems
- Bunnings is rolling out solar PV systems across many of its stores
- GE and AGL are investing in renewables like the Coopers Gap Wind Farm which will power 250,000 homes.
Partnerships between government and business will be needed to accelerate the transition to a lower emissions economy and clean energy future.
As we start the journey of recovery from the events of 2020 business stands ready to work with governments to drive this transition, to position Australia as a clean energy and technology superpower, and in doing so, to create new industries and jobs.