Jun 9, 2017










FRIDAY, 9th JUNE 2017


SUBJECTS: Finkel review.

ROSEMARIE MILSOM, PRESENTER: We’re joined by the Member for Shortland and Shadow Assistant Minister for Climate Change, Pat Conroy. Good afternoon Mr Conroy.


MILSOM: Good how are you?

CONROY: Good thanks.

MILSOM: Have you had a chance to digest the recommendations are there any surprises?

CONROY: Oh, there’s a couple of surprises, but Professor Finkel has been very good at telegraphing at what the main recommendations were going to be, so none of it’s a dramatic surprise. And overall I think it’s a really positive contribution to the debate.

MILSOM: Before we get onto the Clean Energy Target, the CET, I suppose for most of us affordability is a key issue. Power is expensive, and it seems to always be climbing. What does the recommendations mean for power prices?

CONROY: Well, if the Government and the Parliament as a whole, because it will require Parliament, adopt a recommendation of either a CET or Emissions Intensity Scheme, we will see lower power prices. And that’s good news for Australian consumers. That’s because we’ve got an energy crisis where no one is making an investment and wholesale energy prices have doubled since 2013. That’s because investors are facing huge uncertainty and they can’t make investments until they know what Parliament is going to do around carbon pricing and emission reductions in this country.

MILSOM: There’s been a lot of chat in the last few of days about the CET, and I gather we’re going to hear a lot more about it. Can you give an outline of what the CET is because it seems to be a pivotal part of this report?

CONROY: Effectively it’s just a different way of pricing carbon emissions. So, what happens is, they set a baseline, which could be something, say around 600kgs of carbon dioxide emissions for each megawatt-hour of power produced. And, if you’re a power producer that’s cleaner than that baseline you get certificates for your production. So for example, wind power doesn’t produce any carbon dioxide so if the baseline is 600kgs, you get 600kgs worth of credits that retailers then have to buy. So effectively you will get a subsidy from retailers because you’re clean. If you’re a gas-fired power station you’re a bit cleaner than 600kgs so you get a smaller subsidy. The good news is it subsidies cleaner energy so we will get new investment that’s cleaner and we will reduce our carbon emissions. Because gas power sets the price in the market anything that subsidises gas will reduce the power prices for consumers so that’s the nub of it.

MILSOM: You mentioned the certificates, and I notice that Dr Finkel hasn’t made a recommendation as to the threshold or the number of certificates to be issued?

CONROY: Yeah, we have to work through those details. One of the issues I’ve noticed which I think is something we’ll have to work through is; you’ll get certificates if you’re a new gas-fired power station but won’t get them if you’re an existing gas-fired power station. That would mean that there’s less incentive for those cleaner gas-fired power stations to produce electricity compared to some of the brown coal generators in the La Trobe Valley in Victoria. So we’ve got to work through the details, but I’m confident that if both sides of politics work together we can finally deliver an outcome that will give certainty to investors to really unleash the wave of investment we need. Because our generators are very old, the average age is over fifty years, and we need urgent new investment to make sure we get security and reliability in the system.

MILSOM: This could be seen as climate change policy which has been notoriously problematic. There’s also the sceptics in the Coalition, and as you said, the details will have to be worked through, both sides of Parliament will have to get on board with this. It could be difficult, how do you think it’s going to fare?

CONROY: We left the door open, and our preferred policy is an EIS, which works in a similar way but we think is a bit better and it’s what most of the industry has called for. But we basically understand that Dr Finkel has said because the Government has ruled out an EIS he’s recommending a CET. We said we’re happy to sit down with the Government and work through the details. We’re a bit nervous about those sceptics in the party room, Mr Turnbull needs to stand up to Mr Abbott and George Christensen and those hard right members of his party room and say ‘the time for action is now and we need to reach a compromise.’ The ball really is in Mr Turnbull’s court. I’m confident, if he can stand up to that fringe group in his party, we can reach a compromise, and we’re very eager to do that because that’s what the industry and consumers are saying is urgently needed.

MILSOM: Getting back to the CET, it’s not a carbon tax?

CONROY: No, it’s not a carbon tax but it prices carbon. So if you’re a generator you get certificates and hence you get money based on your carbon emissions, on how much carbon you produce per megawatt hour. So it’s just a different way of pricing carbon. I’d argue it’s not as good as an EIS, but they’re all methods of pricing carbon. They’re all carbon pricing mechanisms and that’s really what industry is saying. Industry is saying ‘when we invest in a new power plant we need to invest in that for forty or fifty years and we need to have confidence in what the carbon price is going to be over that period otherwise we’re going to do our dough.’

MILSOM: How do you think the energy retailers and big industry are going to react?

CONROY: Well I think most people have been positive. Everyone has their favourite model. They might need to compromise a bit, but I’ve been heartened that there was a full page ad taken out by a whole range of groups yesterday. The big energy companies, the energy users, like the industry group, I think the ACTU was in there, the BCA too. And they’re all saying, ‘please let’s reach a compromise on this because we can’t have another ten years of climate wars.’ We’d be in a much different position if Mr Turnbull hadn’t been rolled by Mr Abbott in 2009 and been able to agree to Labor’s Carbon Pollution Reduction Scheme. We’d be in a very different scenario than we are now. I think people are just sick of it. This is fighting that’s purely political; the science is all on one side, the economics are all on one side and we need to price carbon. Even coal-fired generators are saying we need to price carbon and most people are just saying the politicians just need to get on with it.

MILSOM: I was going to say I think it’s both sides of politics that could be accused of, mucking around and just delaying and playing politics when it comes to climate change policy. I don’t necessarily think you can level all the responsibility at one particular side.

CONROY: Well, I’ll be the first to admit that all sides of Parliament, whether it’s the Liberals, Greens or Labor have made mistakes, absolutely. But we’ve consistent in supporting put a price on carbon pollution since about 2004. If we got it through Parliament in 2009, the world would be a very different place. Now, we should have taken it to a double dissolution election in 2010 instead of saying we’ll delay it. I freely admit that. But we’ve been very consistent in this policy and in fact, the EIS we took to the last election is basically the same policy that Mr Turnbull proposed in 2009. So, I’m not trying to be political about this-

MILSOM: [Laughter] says the politician–

CONROY: It’s second nature, or first nature–

MILSOM: [laughter] I was going to say, well yes. I’ll move it along. The other recommendation is stronger governance and the proposal for an energy security board. That sounds like a very positive move?

CONROY:  Yeah, the decision making in this area is very slow, it’s very bureaucratic. That’s because you’ve got six states and a federal Government deciding on parts of the scheme and others have still got the four or five states involved and we need quicker decision making. I’ll give you an example: there’s a really important rule change that needs to be adopted, which means the generators will get paid in five minute increments rather than thirty minutes. That will stop some of the gaming and rorting by some of the generators. That’s been considered for over two years now and it’s something that we need to be faster on. So those sorts of recommendations and the recommendations around requiring three years notice before a generator closes down, they’re really important things which should be picked up quite quickly.

MILSOM: So what happens now?

CONROY: All sides of Parliament will consider the report, it will be considered by COAG, the central part of it will be the clean energy target. I think, effectively what will happen is Mr Turnbull will need to make a decision about whether he is going to push it through his party room. If he does, the Labor Party, we’ve signalled that we’re very happy to sit down and negotiate and hopefully arrive at some legislation that will get through Parliament to provide some certainty. So the ball really is in Mr Turnbull’s court and I hope he picks it up and we can solve this crisis for once and for all.



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