<< back to archive index Speeches Regarding Bills Date: 24th October 2006 Subject: Speech by The Hon. Dr ARTHUR CHESTERFIELD-EVANS, on the Electricity Supply Amendment (Greenhouse Gas Abatement Scheme) Bill From Hansard The Hon. Dr ARTHUR CHESTERFIELD-EVANS: " Global Warming is an issue the Australian Democrats take very seriously. We believe we must do everything we can to solve the problem of global warming. We are seeing it happen right now. More frequent and extreme weather patterns, melting polar ice caps, moving ice masses in Greenland and rising sea temperatures are realities. We are currently experiencing the worst drought on record. Those who have visited country New South Wales will appreciate the problems that the drought is causing in this State. The earth's surface temperature rose 0.6 degrees centigrade during the twentieth century and scientists expect the average global temperature to increase by an additional two to six degrees in the next 100 years. This will mean disaster for humanity, a loss of plant and animal species, failed crops, rising sea levels and scarce water resources. It is difficult to believe the many tonnes of coal and the billions of barrels of oil-which were created over thousands of years-that are being expended so rapidly would make no difference to the world's ecosystem. The idea that that huge release of carbon would have no effect is almost absurd. Yet there are those who persist in believing that is the case and who, for venal reasons, attempt to perpetuate that belief. If ever there were an absolute nonsense idea, the sequestration of carbon dioxide is it. Everyone knows that carbon dioxide in water fizzes out as soon as the pressure is released. It is also a fact that carbon dioxide in water disassociates to carbonic acid-HC03 plus H+-and that acidic change affects PH levels or may come out of the solution later. The idea that simply pumping it underground to make it go away is a nonsense. That would be admitted immediately were the process not favoured by the coal industry, which has enormous political power. I will draw an analogy with tobacco. Tobacco smoking killed thousands of people but the tobacco companies responded by calling for more research as a delaying tactic. That is what is happening with greenhouse gas emissions. The tobacco industry's liars for hire developed public disinformation into an art form. The lessons learned from the tobacco lobby about running disinformation campaigns are evident in all areas of political life-which is why I return continually to this subject. Politicians have learned simply to deny what is obviously true and then claim that the issue is controversial, that no conclusion about it has been reached and that therefore the situation is uncertain. In that manner that which is true becomes, through the transmogrification of a bare-faced lie, untrue or controversial. I think the arguments about carbon dioxide and sequestration are now so far fetched that they rival the stories circulated by the tobacco industry. Scientific Evidence of Global Warming Most scientists conclude that the evidence is getting stronger and that most of the global warming that has occurred in the past 50 years is attributable to human activity, such as burning fossil fuels and the corresponding deforestation, which caused emissions of carbon dioxide and other greenhouse gases. The groundbreaking CSIRO report commissioned by the Department of Immigration and Multicultural and Indigenous Affairs entitled "Future Dilemmas" reveals that we are consuming energy at unsustainable levels. It is widely acknowledged that electricity generation accounts for a large chunk of Australia's greenhouse gas emissions at 33 per cent of the total output. Some 96 per cent of our energy comes from coal and only 4 per cent from other sources, including renewable sources. I buy clean energy-and pay more for the privilege in my electricity bill-and I have noted with some discouragement that about 72 per cent or 78 per cent of all clean energy comes from burned forest floor waste, not renewable sources. Renewable sources include hydroelectricity, and I always wonder what volume of water was pumped in the middle of the night by carbon-fired systems. But I gather that the electricity generators may count hydroelectricity in only one part of the system. I am also interested in demand management. I live in a flat that is identical to the flat on the floor above me. We have the same electrical and hot water systems. I was interested to find that simply by turning off the electric booster on my solar heater-it is not required for about 90 per cent of the year-and changing my light bulbs to energy-efficient globes I used half the electricity consumed by my neighbour. Identical households can halve their energy usage simply by turning off the hot water booster, using the airconditioner less and installing energy-efficient light bulbs. That says something about the importance of human behaviour-certainly in the domestic sphere in New South Wales-and the possibilities of education about energy conservation. The greenhouse gas abatement scheme was established to reduce greenhouse gas emissions associated with the production and use of electricity. The scheme focused mainly on the electricity sector. Electricity generation is the largest source of greenhouse gas emissions in New South Wales, accounting for 54 million tonnes, or 35 per cent, of the State's economy-wide emissions. Indeed, it should be noted that when the legislation was introduced in 1999 and was subsequently amended in 2002 I moved a number of amendments designed to strengthen the bills and to introduce a levy. The Government was most reluctant to introduce a levy-and indeed did not do so for some years. The scheme is meant to encourage participation in activities intended to offset the production of greenhouse gases and enforce a penalty regime designed to create incentives for retailers and large customers to take action to reduce greenhouse gas emissions. In July 2006 the Australian Bureau of Agricultural and Research Economics [ABARE] released a report about climate change technology. In the report ABARE noted: Although the introduction of energy efficient and cleaner technologies reduces growth in emissions, global greenhouse gas emissions continue to rise throughout the projection period under each of the enhanced technology scenarios. It was referring to the enhanced technology scenarios that ABARE examined in the report. In its reference case global greenhouse gas emissions were predicted to increase by about 76 per cent in the period 2001 to 2030, from approximately 9.4 Gt C-e-I think they are greenhouse credits in energy-in 2001 to 16.6 Gt C-e in 2030. By 2050 global greenhouse gas emissions are predicted to reach about 22.7 Gt C-e. However, Australia is currently enjoying the financial benefits of the resources boom-particularly in Western Australia and Queensland-of which coalmining is obviously an important part. Earnings from Australia's commodity exports are forecast to rise by 14 per cent to $140 billion in 2006-07 according to the September issue of the ABARE Australian commodities report. The value of Australia's mineral and energy exports is forecast to be approximately $108 billion in 2004-05, a rise of 18 per cent from $92 billion in 2005-06. Coking coal is the biggest export earner, increasing 59 per cent from $6,318 million in 2005 to $17,076 million in June 2006. Yet, the State Government keeps nudging to build new coal-fired power stations, with recent announcements of major coal exports to China, and BHP Billiton if pushing hard to expand its coalmining operations under the Nepean River. It might be noted that involves a lot of longwall mining, which, effectively, is a wall that moves along underground as the roof of the mine collapses behind it. It is as if there is a total extraction. As the overburden-that is the rock and soil between the mine and the sky-falls behind the mining wall, cracks occur all the way from the mine to the surface. Water from the surface will go down through those cracks to the level of the mine. Effectively all the layers of the aquifers that were strataed like a layered cake are broken as if someone had made numerous vertical cuts of the cake. Generally those aquifers are very important for flows of water. The whole lot is destroyed with longwall mining and becomes one layer down to the level of the mine stratum. Potentially that could mean the river and all its surface water disappear to a new level. The levels of water in most land systems are analogous to a sponge. A sponge can be tipped and water does not immediately fall, but lags. If the area is cut all the way down it will pool at the lowest point, which means that the higher ground has no water and will be turned into a desert. That is the trade-off between our coalmining and our long-term sustainable agriculture in many areas. The fight over water rights and accessibility, particularly in the black-soil plains near Gunnedah-some of our most productive lands-are totally threatened by longwall mining because of cracks from the surface to the mine level. A huge open-cut hole, such as in the Anvill Hill development in the Hunter Valley, cuts through all the layers of all the aquifers and the water flows to the central point. Indeed, I am told that cutting through strata for mining at the Mangrove Mountain area west of Gosford will wreck the water tables. Honourable members have to ask what the effect will be on the land from which the coal is extracted. Shareholders in BHP Billiton or other big mining companies can happily look at their dividends and see their share price increasing-and thank all those hardworking Chinese! However, if they want to look at our country's long-term interest they have to look again. This country has technology, particularly developing solar cells and solar hot water systems, but it is squandering its technological advantage by putting its money into coal loaders and putting its agricultural industries at risk for a quick buck. We must think beyond all the money we make from coal exports. It would seem, with this Government's imminent approval of the Anvill Hill mine, and its general cargo-cult mentality of everything for the future and no insistence on higher targets, that at one level it has introduced this legislation and at another it is selling as much coal as it can. The support of John Howard for nuclear energy is also very disturbing. I am amazed that the media has not expressed more outrage at some quick energy results in a half-life of the tailings and waste of 240,000 years. Contents of the Bill The bill amends part 8A of the Electricity Supply Act 1995 extending the operation of the New South Wales Greenhouse Gas Abatement Scheme from 2012 to 2021, or until a national emissions trading scheme is established before 2021. With the Federal Government's stance on Kyoto, it may be that nothing will happen before 2021. Hopefully the Howard Government will fall soon and there will be a more enlightened policy in Canberra. In his second reading speech in the Legislative Assembly Joe Tripodi said that without this bill the New South Wales Greenhouse Gas Abatement Scheme would end in 2012, leaving business without the certainty it needs to invest. He stated: "Many projects encouraged by the Greenhouse Gas Abatement Scheme require significant capital investment, and investors will only receive a payback over a long period of time. Without a clear signal that carbon trading will continue beyond 2012, investment in environmentally friendly technologies under the Greenhouse Gas Abatement Scheme may dry up." The Government has reviewed the penalty required to maintain the incentive to reduce emissions from electricity retailers, and will increase the penalty from its current level of $11-50 to $15-50 in four equal steps of $1 each, starting in 2010 and ending in 2013. I suspect that those penalties have not been colleted and that supposedly modest targets have been set and agreed, within which it is an incentive to stay. The bill also contains a consequential amendment to the Electricity Supply (General) Regulations 2001 to ensure that both the current and new penalties will be adjusted correctly for inflation in accordance with movements in the consumer price index. In the Legislative Assembly Joe Tripodi said: The New South Wales Government has called for national leadership from the Commonwealth in ratifying the Kyoto Protocol and establishing a national emissions trading scheme. That is fine, but on the other hand the Commonwealth Government has refused to do so and this Government, with its coal exports and lack of mandatory support for things like solar power, is trying to play both sides of the equation. Certainly the excess coal that it is exporting will do far more damage through greenhouse gases than this bill will ever do good! The scheme administrator is required to keep a register of accredited abatement certificate providers and a register of greenhouse abatement certificates. I would like a reassurance from the Minister in reply that the problem of multiple registration of abatement certificates has been solved, but I wonder whether I will get it. The bill will also allow the scheme administrator to make available consolidated information compiled from the registers. The Minister said: This will improve market transparency and correct an anomaly whereby members of the public could compile and publish this type of information but the Scheme Administrator could not. As greenhouse abatement certificates cannot be registered until after they have been created, information compiled from the register will reflect past events, not current ones. As far back as 2000 I argued that reporting transparency is lacking and the lack of publicly available data often makes it difficult to assess how a particular project created New South Wales greenhouse abatement certificates, and the likelihood that the underlying emission reduction activity was additional. I raised this issue with former Minister for Utilities, Kim Yeadon, and with Treasury in 2000. In 2005, during debate on a similar bill, I referred to research by the University of New South Wales Centre for Energy and Environmental Markets, which produced an analysis of the New South Wales Gas Abatement Scheme Certificate Registry for the 2003 compliance period. The key findings of this impressive think tank, comprising the Faculty of Engineering, the Faculty of Commerce and Economics, and the Australian Graduates School of Management, were that most 2003 New South Wales Greenhouse Abatement Certificate [NGACs] came from just a few types of projects. First, waste coalmine gas and landfill gas projects were the main sources of New South Wales greenhouse gas abatement certificates for 2003, registering just over two-thirds of the total between them. Together with natural gas-fired plant they made up just under 84 per cent of the total, and these three with coal-fired plant made up just under 92 per cent of the total. Second, project accreditations for 2004 included more waste coalmine gas, landfill, demand site abatement, bagasse and fossil-fuel power stations as well as two new activities-sequestration projects and large user abatement certificates. Third, just over 40 per cent of the 2003 abatement certificates were from projects located outside New South Wales. Effectively, this means New South Wales taxpayers were subsidising abatements in other States. It goes on: ”The analysis also found that there is a high level of market concentration. A single participant, Integral Energy, created almost half, or 46 per cent, of 2003 New South Wales greenhouse gas abatement certificates, and, together with Energy Development Ltd, 17 per cent, and AGL, 8.5 per cent, created over 70 per cent. The Herfindahl-Hirschman Index [HHI], a metric measure used to quantify market concentration, for the supply side of the New South Wales Greenhouse Gas Abatement Scheme in 2003 was around 2,540.” Indicatively, a market where the HHI exceeds approximately 1,800 may be considered highly concentrated, with the implication that the assumptions of a competitive market may be violated. The Government has also moved amendments in this bill preventing the double counting of abatement certificates. This is an issue I have asked the Government to address in this Chamber on numerous occasions. Each time the Government has fobbed me off. I am asking it again, as I did earlier in this speech. I quote again: Renewable energy certificates created through the Australian Government's mandatory renewable energy target can be used to meet participants' liabilities under the New South Wales Greenhouse Gas Abatement Scheme. These are created using low emission generation plant. However, the Total Environment Centre has noted that low emission generation that creates renewable energy certificates under the MRET would occur regardless of the New South Wales scheme. The ability for renewable energy certificates to be used as New South Wales greenhouse abatement certificates effectively results in double counting and overblown claims by the scheme. In 2003, 544,518 of the RECs [renewable energy certificates] generated for electricity sold in New South Wales were converted into 488,432 NGACs. They made up 28.5 per cent of total NGACs surrendered in 2003. This is equivalent to one-quarter of the scheme free-riding on the MRET scheme. The Total Environment Centre proposes that RECs be excluded entirely from the New South Wales Greenhouse Gas Abatement Scheme to avoid any double counting and to increase the real level of abatement achieved by the scheme. With regard to limiting abatement certificate creation to New South Wales, a significant proportion of NGACs are currently created outside of New South Wales and stop the wide area in which NGACs can be created, releasing pressure for abatement beyond business as usual. As a result, the New South Wales Greenhouse Gas Abatement Scheme may not help in reducing greenhouse emissions over the long term by failing to go ahead with significant abatement activities now. The Environmental Liaison Office claims the Greenhouse Gas Abatement Scheme has actually prevented New South Wales from achieving 5 per cent below the 1990 emissions target, and that without changing this target emissions will exceed the target by 8 million tonnes, which is the equivalent of 1.3 million cars. The Environmental Liaison Office proposed that a new emissions target should be set by this bill at 20 per cent below 1990 levels, and that the new target should to be achieved by 2020. I refer to the Total Environment Centre and the Nature Conservation Council submission on extending the New South Wales Greenhouse Gas Abatement Scheme Draft Policy Paper dated the 28 September 2006: 1. The Target The draft policy paper describes a minimalist position with no legislated review of the target or new target and only some minor amendments in relation to fees and release of aggregated information. This is not an appropriate response to the alarming situation of rapidly increasing C02 emissions. The draft policy paper argues that in view of the current discussion about a NETS it is too complicated to review the GGAS target and that this would create uncertainty for the investment and electricity industry. It suggests that once the future development of NETS is clear, or if it becomes clear that NETS is not occurring before 2012, work could then begin on a GGAS target for post 2012. This is, in fact, a recipe for more delay and increased business uncertainty. It is our view that the target needs to be reviewed urgently or GGAS will not deliver the promised reduction in electricity sector emissions. The consultation document itself shows emissions from the electricity sector rising from 2007 with the scheme as it stands. Electricity sector emissions are already 32 per cent higher than in 1990, and consumption is rising at just under 3 per cent per year. Environment groups believe that a target to reduce emissions to 80 per cent of 1990 levels should be set for 2020. This target is seen as a key step in achieving the New South Wales Government's 2050 target. It is vital that this is in place sooner rather than later, so that industry can adjust investment plans and implement abatement to allow a smooth economic transition. Tougher GGAS targets in line with the 2020 target will mean that the electricity sector will be on track to reduce emissions should NETS be implemented. Deferring increasing the GGAS target until after the NETS process runs out of steam means that the period of uncertainty is extended, and the eventual abatement task becomes more difficult as emissions have been allowed to rise in the interim. A parallel process is required to avoid delays while the NETS is sorted out (with no doubt a further transition period). The current per capita target is about to enter a phase where total electricity sector emissions are expected to rise and keep rising. While GGAS may have achieved some measure of CO2 reductions in previous years, it will lose all credibility if total sector emissions are increasing. This situation also indicates the need to move to an absolute target, rather than per capita. 2. Renewable Energy Target GGAS should be part of a suite of greenhouse programs, including a renewable energy target. The renewables industry needs a degree of support at this stage in order for it to provide the zero emissions generation that will be required to meet the longer term targets, at an economic level. Provided technologies are implemented at scale, we can expect costs to fall to equal fossil fuels in the next ten to fifteen years. This will allow clean energy to replace high emission generation capacity as it reaches retirement age. Without the appropriate policy settings, New South Wales will lose its renewable energy industry, and the transition needed will become much more costly. The government cannot claim credit for taking action on climate change and electricity industry emissions during the debate on the GGAS reforms and in the run up to the State Election, unless it provides the means to transition New South Wales to a clean low carbon energy supply. It cannot rely solely on GGAS, even an improved scheme. A renewable energy target should be announced concurrent with the reform of GGAS. We note that NETS also assumes that such programs will continue to operate. 3. Penalty The penalty should be increased preferably to $40 a tonne (the level of the Renewable Energy Certificate penalty), perhaps at $5 per year. This would allow a gradual transition to a realistic carbon price that would support clean energy technologies. The effect of this is to reverse the current situation where the market price for abatement is frequently above the penalty, thus making payment of a fine cheaper than obtaining the essential environmental outcomes. 4. Additionality Sunset clause A number of projects were grandfathered when the voluntary abatement scheme became mandatory, so that pre-existing abatement schemes contribute a very substantial amount of the abatement required under GGAS. While it may have been appropriate to reward early movers under the voluntary scheme to some extent, there needs to be a sunset clause to ensure that the scheme actually results in tangible additional abatement. We suggest the sunset date should be set at 2010, which would have provided 8 years of benefit. The effect would be to ensure additional abatement measures and give the market 4 years notice. Mandatory requirements At present there is little to ensure that NGACs are only created when additional abatement occurs. GGAS rules should be amended to ensure additionality occurs, and to ensure transparent verification of new abatement. For example, methane reduction activities limited under licence requirements should not be allowed to create NGACs. This is particularly important because the scheme is a forerunner to NETS. 5. Physical Emissions The measure of GGAS success must be whether it reduces emissions from the New South Wales electricity sector. At present reporting from the scheme does not include physical emissions from electricity consumption within the State. We have a situation where emissions may rise significantly, even discounting effects from the population base increasing, even while the scheme requirements are being met. As the electricity sector is the most significant contributor to New South Wales emissions, it is important that the GGAS scheme actually delivers electricity sector emissions reductions. In July 2006 the Australian Bureau for Agricultural Resource Economics (ABARE) stated in a report on technology on climate change. Greenhouse gas emissions are expected to increase substantially by mid-century, given projected increases in global population and economic activity and continued reliance on fossil fuels to meet energy demands. To be environmentally effective, any policy framework that aims to address climate change must involve major emitters, that includes polices by the rapidly growing developing countries. However, for most developing countries, climate change is not a primary concern given their more immediate concerns about poverty alleviation and economic development. As such, engaging developing countries on the climate issue is politically challenging and must be undertaken in the context of recognising the importance of developmental goals while simultaneously encouraging reductions in emissions. Technological development will be crucial to achieving significant mitigation in emissions growth while simultaneously allowing countries to pursue improvements in energy security and attain their economic and social development goals. However, the development and uptake of low emissions technologies is associated with several cost and non-cost barriers, including high capital costs, pricing inefficiencies, lack of subsidiary markets and free-riding issues. Massive deployment of low and near zero emissions technologies would be required, greatly exceeding the degree of technological deployment considered currently. With the amount of money being made from the current resource boom, I doubt the commitment of any government to sacrifice short material gain to save us all from long-term pain of global warming. While this bill is to be supported, I must say that I think it is a lot of huffing and puffing for not as much environmental benefit as we might have hoped for. We really need a continuing and better-thought-out commitment to demand management in electricity, zero emission and sustainable electricity generation, as well as a commitment to transport objectives and policies that will reduce greenhouse gas emissions. I regard that is extremely important. It involves both fast rail and heavy rail to take trucks of the roads, and it involves wind power, solar power, perhaps even tidal power. Indeed, it requires a much different approach from that which this Government has taken. At the moment the Government is attempting to play both sides of the fence, approving large coalmines and small greenhouse gas abatement schemes."

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