SKY NEWS BUSINESS
THURSDAY, 8 JUNE 2017
TICKY FULLERTON: Mark Butler, great to catch you there, now what are you making of what might happen tomorrow, because the industry certainly is calling for some bipartisanship on this.
MARK BUTLER MP, SHADOW MINISTER FOR CLIMATE CHANGE AND ENERGY, MEMBER FOR PORT ADELAIDE: Well what we do know is there’s going to be an alternative to the Emissions Intensity Scheme (EIS) model that has been kicked around now for a couple of years really. It was originally proposed by the Energy Markets Commission, and then gradually built up a very broad base of support, obviously not just Federal Labor, but I think every business organisation in the country with the exception of the Minerals Council. The Farmer’s Federation and even the Young Nationals Party supported it. In December Malcolm Turnbull ruled it out after a bit of revolution from Tony Abbott, Cory Bernardi and others, and so Alan Finkel it would appear has been working on a plan B, or as many have described it a ‘second best’ option.
FULLERTON: This is the low emissions target, yes. Now what is Labor’s position on this, because notwithstanding the Government’s position, it’s clearly ruled out, like it or not it’s ruled out the emissions intensity scheme. What is Labor’s position now?
BUTLER: Well we think that’s obviously a pity. We received a report last Friday from the Energy Markets Commission and the Climate Change Authority reaffirming that in their view an EIS is the best model, but we have to accept the reality that there’s not going to be an EIS on the table.
FULLERTON: So you are moving on?
BUTLER: Well the business sector has said to us ‘we are in the middle of an energy crisis’. Wholesale power prices are double what they were four years ago; there’s a very serious crisis in the gas market and if we don’t come to grips with this as a national parliament by putting in place a long term framework we’re going to see tens of thousands of jobs potentially lost. Everyone has said from the business sector to independent experts that the key driver of prices going up and security going down is there is simply not enough investor certainty to drive the investment needed to renew our electricity infrastructure.
FULLERTON: Yes, well we’re all in furious agreement on that but Bill Shorten has said that Labor will consider alternative models and schemes including a well-designed low emissions target (LET) against a number of pre-conditions for endurable, stable energy policy, what does he mean by that?
BUTLER: Well we’re not going to give the Government a blank cheque; the first thing to say is we don’t know what Alan Finkel is going to recommend. There are different views about what a low emissions target might look like. That report I mentioned that was released last Friday from the Energy Markets Commission and the Authority confirmed that there are two possible, quite different versions of low emissions targets. So we want to wait and see what it is. Obviously we’ll study it very closely, talk to business groups very closely about what they think about it, but if it is going to be an enduring policy framework we need to make sure we assess it against some core criteria. I mean, is it going to be fit for purpose over the medium to long term? Is it flexible enough to deal with changing market dynamics, because we’ve seen over the last ten years, and we’ll see over the next ten, that this is a sector in profound transition. Also, we need to make sure that it’s serious about dealing with that third pillar of modern electricity policy, not just reliable supply and affordable prices, but also one that is consistent with our climate change commitments.
FULLERTON: Well, that goes to a risk I suppose from those on the other side, who might say it’s all very well having this low emissions target, but what does that mean in terms of how it is structured and how much renewables end up having to be in the mix as determined by the parliament. Are we going to end up with a risk of not having enough reliable base-load power?
BUTLER: Sure, and that’s the detailed work that would really need to follow over the coming weeks. The real question is whether there’s going to be a veto imposed on this question even being considered by people like Tony Abbott. At the end of the day, the electricity industry and representatives of the big users, like the Business Council and many others, have said that you’re only going to start freeing up investment if policy accepts the reality that business groups now accept, which is that you need a reflection of carbon in the pricing of electricity infrastructure. Now if Tony Abbott gets his way in the Coalition party room and says ‘no we’re not going to support any model that has an element of carbon pricing in it’, then we’re not even going to get to the beginning of this process.
FULLERTON: I don’t think he’s completely ruled it out though, has he? He hasn’t completely ruled it out. I suppose what is, again, a concern is when you say this sort of thing is going to have to be nutted out over the next few weeks now Labor still has its 50% renewable energy target, is it by 2050 or 2030 I’m not quite sure?
FULLERTON: 2030, yep. Now if you use that to head down this track and make sure it’s structured such that there are a very large number of renewables which are required to be part of the mix, will that not raise concerns where you do get a situation where now, in South Australia we are looking at building new gas power stations just for a few days back up and this sort of thing?
BUTLER: Well I think what you’ll see out of the Finkel report is not just recommendations around this particular policy, about bringing together climate and energy policy, but particularly you’ll also see a vast discussion about the changing nature of security systems in the electricity industry, and particularly the role that new battery storage systems are going to play. First of all we’ve got this technology coming in to Australia, but second we’ve got to recognise that our market rules, our National Electricity Market rules, just don’t accommodate those technologies very well, and I know that the Finkel review panel has been considering those models very closely, looking at models in the United States that are doing it better. California and New York, for example, both have 50% renewable energy targets by 2030, and they’re starting to consider ways in which you can essentially hitch a storage requirement to new renewable energy projects that ensure that you’re firming up the system. We’ve got to remember that this system through the 2020s is not going to look the way it looked in the 1990s and the 2000s, with very large base-load power stations, monopoly networks, and entirely passive consumers. The system has changed and we need to get the balance right of reliability, affordability, good climate change commitments, in a way that reflects that market dynamics are changing at a frighteningly fast pace.
FULLERTON: Well, equally, I think one of the good things about the original ETS, you know the emissions trading scheme, was that it did have an element of putting pressure on consumers, making consumers think about the demand side as well, now that’s something for which an emissions intensity scheme has been criticised for it’s not actually touching on that. Where would we be with a low energy target on that side of things?
BUTLER: Well again, we don’t really know because we don’t know the design, except that a low emissions target is more likely to place more of the responsibility on retailers and consumers for, I guess, the transaction costs involved in this, rather than an EIS which really ensures there’s a closed market for generators dealing with the overs and unders that come through the scheme. I think given the power prices we’ve seen across the system over the last 10 years there is already a very serious price pressure on households and businesses, as you’d know. So there is a built in incentive I think to pursue more energy efficiency, to pursue more affordable power options, if the market structure is right, and we just don’t have a market structure.
FULLERTON: Mark Butler, if Alan Finkel comes out with this design as expected, what about other models? I was speaking earlier to economist Mike Young from South Australia, now he’s looking at something along the lines of how the water trading system is designed – everybody being given climate shares and a share register and carbon accounts, and I must say I was quite captivated by that model.
BUTLER: Yeah, I’ve talked to Mike as well about that, and the water market is a model that is regarded around the world as world leading, and there is much I think we can learn from it, but I think we’re going to have to see what Dr Finkel recommends, and see whether that at least is the basis for a mature and constructive discussion in our national parliament, because we haven’t had many of those discussions really, over the last ten years. So if it’s something that is workable, that will protect consumers, and really change the market dynamics, and be scalable in the future because we need to recognise that over this medium term period to 2030 things are going to change, and I think through the Paris Accord there’s going to be more pressure on Australia to lift our climate change commitments. We need a system that is flexible enough to deal with those changing market dynamics; certainly that’s a flexibility that an EIS provides, but we’re not so sure that the LET model provides it.
FULLERTON: And presumably one that everyone can agree on. Before you go let me just ask you a couple more questions, one on the Adani coal mine. Adani has greenlit its project. Now the remark has been made that while Bill Shorten and Jason Clare are clearly behind this project provided the Government doesn’t have to fund it, you on the other hand have raised concerns about Carmichael maybe displacing other mines, costing jobs elsewhere. Is there a very different, a chasm between you guys?
BUTLER: No, I think we’re entirely united on the core principle or issue before the Commonwealth, which is whether the Commonwealth is going to provide a very substantial loan to Adani to build a railway line. Federal Labor is strongly opposed to that, whether it’s Bill, or Jason Clare, or myself. I think the green light that you refer you can be overstated, I mean there’s no real financial close in the general understanding of the term because only about half the funds have been raised by Adani yet, and it seems pretty clear that to proceed to an actual project they’re going to need to know what the Government response to their request actually is.
FULLERTON: You’re not downplaying it a little more than say either Bill Shorten or say Premier Palaszczuk, because I notice the Whyalla Times was very enthusiastic about the last two days, because obviously their steelworks could be dependent on it and that means jobs there.
BUTLER: Well it’s not going to be dependent on it; it would be a very small part of Whyalla’s turnover. We would hope that all major projects, all major infrastructure projects would be looking to source Australian steel including the structural steel that is made in Whyalla. The point I’ve made on the Carmichael mine is that it’s built and been presented to Australia on a false premise, which is that the Indian economy is thirsty for more Australian thermal coal. If you actually look at what’s happening in the Indian energy market there’s a very different picture indeed. The Indian government, particularly through the Indian Energy Minister Piyush Goyal, has made it very clear that they intend to phase out thermal coal imports by the end of this decade. They’ve lifted the production quotas for Coal India, the state-owned coal company very dramatically; they’re already rising about 10% a year. Thermal coal imports are already down about 35% just since 2015, and the year on year figures that we’re seeing at the moment are as high as 25%. So this is built on some argument that India wants Australian coal to be able to provide energy to all Indian households, and we can all agree that electricity is good for humanity and the work the Modi Government is doing to electrify households is fantastic, it’s just that the market dynamics are not what people like Matt Canavan and Malcolm Turnbull pretend they are.
FULLERTON: Finally, can I ask you, GetUp has been very vocal on the whole Adani issue, they are now on the board of the Australian Press Council, what do you think of that position given that even the Union now has called it out as a conflict?
BUTLER: Well our Shadow Minister Michelle Rowland, I think very recently, over the last 24 hours or so has also been in the press expressing concerns that this would have on the reputation of the Press Council, and I’ll leave further comments to Michelle about that, but I think that’s something that Federal Labor has also started to talk about as well.
FULLERTON: Mark Butler, thank you very much for your time.
BUTLER: Thanks very much.