Safeguard Mechanism (Crediting) Amendment Bill 2022
We all agree credible action towards creating a cleaner environment and safer world is vital. It is truly the most important issue of our generation. But killing our economy to do it is a complete fallacy, and to pretend you're doing this for future generations is condemning them to a life of poverty. I was lucky enough to attend COP27 in Egypt last year, and one thing was abundantly clear: the transition to net zero emissions is happening. There are no ifs or buts about that. But how we get there is important. I've done a mountain of work—and more than any of the Greens; I promise them that—looking at how to do this. It is a fact that all countries have been slow to act, but that's the very nature of a transition, especially a transition as big and as difficult as the one we face when aiming to decarbonise our economy, which must be the objective.
The globe at some point in time will reach net zero, ideally sooner rather than later. However, net zero does not mean zero emissions. Under this proposed bill the government want to expand the safeguard mechanism to cover 215 of Australia's biggest emitters and force them to cut their emissions by almost five per cent every year. Those that cannot meet this must either buy carbon credits or pay a fine—in other words, a carbon tax. However, there are some industries that are key to the Australian economy and will continue to produce carbon dioxide regardless of developments in technology and regardless of whether they use green energy. Take, for example, the production of cement, which I think everyone in this place would know is a vital component of the building and construction industry. The very building we're in is built with it.
With the production of cement, about two thirds of total emissions result from the process of calcination. That's a chemical reaction that occurs when raw materials such as limestone are exposed to high temperatures. Often, these industries have been at the forefront of reducing their emissions through reducing their energy mix, but they still will not be able to meet the government's mandated reductions. Businesses such as those in the cement industry will be forced to either buy exorbitant amounts of carbon credits, constantly pay a carbon tax, or, worse, leave the Australian economy.
If we plan on continuing to build and grow, the production of cement will be part of our future for a long time, which is why our investments in technologies such as carbon capture and storage, blue hydrogen and healthy soil technologies will be vital to get to net zero. Even the Grattan Institute's energy executive Tony Wood has warned that this carbon credits scheme is flawed, saying that taxpayers will be forced to fork out billions of dollars to compensate high-emitting companies if the price of carbon spikes above a proposed $75 cap, and we all know that that $75 cap is a floor, not a ceiling. With the price of carbon offsets subject to changes according to the supply and demand on the market, the federal government may be forced to buy carbon credits at a price above the cap and then sell them off at a fixed $75.
Make no mistake: this is a flawed bill, as it will only result in carbon leakage occurring as the government forces Australian businesses and industries out of the manufacturing business and into the importing business, which will only serve to promote and result in carbon emissions from offshore coming into Australia. Carbon leakage occurs due to costs related to climate policies, forcing businesses to transfer production to other countries with laxer emission constraints. This means the economies of other countries—such as China, which is the No. 1 producer of cement and the No. 1 emitter of carbon dioxide; India, which is the No. 2 producer of cement and the third largest emitter of carbon dioxide; and Vietnam, which is the third largest producer of cement and 17th largest emitter of CO2—are going to pick up the business that this government is forcing out of Australia.
Remember: reducing emissions is a global effort. We can't simply push the problem offshore and make it someone else's problem. The issue with this bill is that it will promote carbon leakage, meaning the globe will actually be worse off. Yes, Australia will reduce its emissions, but that is simply because the government will be driving businesses into the ground and forcing them, the jobs and the emissions offshore.
The reality is that technologies to achieve net zero are on the cusp of being commercially available, and only by investing in the development of these technologies will we be able to reach this goal. The net zero transition provides Australians with an abundant opportunity. Because the fallacy of net zero has been conflated with zero emissions, the common debate around emissions reduction has been tarnished by this government's political opponents who see or do not understand or wilfully ignore the fact that, in a net zero future, there will still be emissions generated. All the government wants to do is flood Australia with wind and solar, and ignore other zero emissions generation and storage technologies.
The government must prevent carbon leakage occurring by implementing something along the line of a carbon border adjustment mechanism. Despite the EU's faults in their mechanism, and their absurd penchant for radical and unattainable energy policies, at least they recognise that they need to prevent carbon leakage from occurring. Without a mechanism like this, Australians will suffer. The government needs to be honest with the Australian people that the road to net zero will be incredibly hard and incredibly costly. We know this. There are no two ways about it. But there are technologies, Australian technologies, that are worth pursuing and worth backing to get into reducing emissions.
However, ARENA and the CEFC seem bent on only backing Chinese companies in doing this, not Australian companies.
What we do not need is the government making the transition even harder and even more costly through poor policy. As we've seen, power prices are already going through the roof, despite the 97 times that the Prime Minister said he would reduce power bills by $275. Tonight we've seen that the government's deal with the Greens will only make the transition even more costly and even harder. Energy sources, such as gas, which will be crucial in the transition to achieving net zero, will be absolutely trashed, as will our economy, in that process.
The Prime Minister himself recognises this, saying last month that:
…gas in particular has a key role to play, as a flexible source of energy – providing peaking power today and continuing to provide firming power.
However, we've heard loud and clear that this government like to say one thing, then do another. Remember when they promised not to touch super? They did that anyway. Remember when they promised cheaper mortgages? We've all seen that they lied about that too. Remember when they promised an aged-care worker pay rise but then failed to deliver that? I could go on about the list of broken promises, but the point is that this government continues to say whatever they would to get a deal done, and then fail to deliver.
The Australian Energy Market Operator is already forecasting gas shortfalls from winter this year to at least 2026. Gas shortfalls mean higher power prices, blackouts and an increase in the cost of living for Australians. Those that can afford to turn on their heating will be paying higher prices. Gas shortfalls also mean an increased risk for energy and security, which will stifle investment and increase cost. We know that new gas supply is needed to help avoid the forecast in shortfalls identified by the ACCC and AEMO and to put downward pressure on prices. This amendment will prevent this happening. Let's not forget, energy insecurity equals national insecurity; the two are intrinsically linked. By failing to secure our energy security, the government is failing to secure our national security.
Make no mistake, when the government agreed to the Greens' amendment, they agreed to higher power prices and an increase in the cost of living. Importantly, in the medium term gas will, and should, serve as an important firming fuel as we bring more renewables onto the grid. Right now, no better firming technology exists. AEMO's 2022 ISP states that we need to:
Treble the firming capacity from dispatchable storage, hydro and gas-fired generation to firm renewables.
As I have said before, anyone who starts talking about renewables without talking about firming isn't serious about bringing down emissions. If they start talking about batteries as the answer to firming, then they doubly do not know what they are talking about. The government's answer to the question of how we treble the firming capacity is to hamstring our best firming source available right now. JPMorgan 's 2022 Annual Energy Paper explicitly states:
…countries that reduce production of fossil fuels under the assumption that renewables can quickly replace them face substantial economic and geopolitical risks.
If energy transition is to succeed, we cannot disconnect the generation methods we have before we have a replacement for them.
Despite Labor claiming before the election that they had conducted, 'The most comprehensive ever done for any policy by an opposition in Australia's history since Federation,' it is clear that they have absolutely no clue and absolutely no idea about how they are actually going to drive down power prices. Make no mistake, life is getting harder and harder under the Albanese Labor government. I cannot, in good mind, support such a flawed and poorly designed bill, and I ask the Senate to vote it down.
