Climate change – a shared economic plan, a shared challenge

Speech at the AFR Energy & Climate Summit, Sydney

A few hundred metres from here, 234 years ago, eleven ships entered that magnificent harbour. The lives of the Gadigal people who watched those strange ships sail in, and the lives of all Indigenous people were changed irrevocably. 

I know you join me in acknowledging the elders of the Gadigal people and First Nations people who are present. 

And while some criticise corporate leaders for involving themselves in the national discussions like the need to enshrine a voice for our First Peoples in the constitution, we in the Albanese Government welcome corporate involvement in important conversations in our country. 

I want to tell you about Reuben Smith. 

Reuben grew up in Gladstone. No Australian City has a bigger claim on being the traditional energy capital of Australia. 

Reuben is part of that story. 

He qualified as a Boiler Engineer and worked at the Gladstone Power Station, Queensland’s biggest coal-fired electricity generator.

Although I’m a regular visitor to Gladstone, that’s not where I met him. 

In fact, I met Reuben on my recent visit to the United States. 

Because Reuben is now a Fulbright Scholar at Washington State University, studying hydrogen engineering. 

I asked Reuben what took him from Gladstone to Pullman, Washington. 

He told me about how he had grappled with how his community, which has provided so much of Australia and the world’s energy for so long, would deal with the decarbonising the global economy.

So he decided to do something about it. 

We talked about how his research into hydrogen fluid mechanics and adapting traditional infrastructure could help communities around the world leverage their experience with traditional energy industries to help drive a renewable future. 

And he spoke about his ambition to bring some of that knowledge back to Queensland, being part of its energy transition and seizing new opportunities for heavy industries.

He isn’t just studying the energy transition, he is living it.

And the journey Reuben is on is the same journey Australia is on. 

The fact is that for too long, the conversation in Australia has been skewed towards the costs of climate change action – instead of the opportunities. 

We have a huge amount of work to do to seize those opportunities. 

We have 86 months until 2030. 

That’s not long for this massive transformation. 

It would be a much easier path if we weren’t grappling with a lost decade of policy, but it means we have no time to waste.

And it also means we need to be all in: Government can’t do it all, and nor should we try to. 

This must be a whole of economy effort, a whole of society effort. 

Now I’m pleased with the progress our new Government has made so far. 

In the first 26 days, the Prime Minister and I formalised Australia’s updated Nationally Determined Contributions - under the Paris Agreement – our 2030 target.

In 109 days, we passed the Climate Change Act, enshrining this target in legislation.

I’m pleased, but not satisfied. 

Not satisfied, because we have a huge amount of work still to do. 

As I said previously – we have 86 months to achieve a 43% reduction by 2030.

Achieving our climate change targets will require an energy revolution.  

An energy revolution that we are engineering at the same time as the ramifications of the previous government’s lack of planning an investment and international energy crisis are being made very clear. 

At home, we’ve just finished a winter in which the market operator was forced into unprecedented action. 

Of course, Europe is in the midst of an energy challenge which has ramifications for global energy security, even here. 

I’ve seen plenty of right-wing commentators in Australia say that what we are seeing in Europe is the result of moving to renewables too quickly. 

This is the latest catch-cry of those who seek to deny and delay action in Australia, like we haven’t had enough denial and delay in Australia over the last ten years. 

That’s one of the risks of the European crisis: that this fundamentally dishonest narrative takes a hold. 

The European energy crisis wasn’t caused by renewables – it was caused by the withdrawal of one source of fuel from one country.  

Run by one war criminal.

The price of gas in Europe is around nine times that of renewables, and yet some geniuses argue the problem is too much reliance on renewables. 

As IEA Chief Executive Fatih Birol has said, blaming the current crisis on too fast a transition to renewables is “an absurd claim” and “when people misleadingly blame clean energy and climate policies for today’s energy crisis they are…moving the spotlight away from the real culprits - the gas supply crunch and Russia.” 

Far from undermining the need to transition to renewables, the energy crisis underlines the need for a faster and more orderly transition, wherein we manage the changing role of coal and gas generation by concerted efforts to expand renewable generation and storage. 

Not only are firmed renewables cheaper, but the one supply chain that no geopolitical crisis can disrupt is the supply of sunlight and wind - as long as there is the infrastructure established to capture, convert and store it.

Likewise, the winter energy crisis in Australia was not caused by renewables – it was caused by the breakdown of ageing coal infrastructure and extreme weather events which flooded coal mines, exacerbated by the general international pressure caused by Russia’s illegal invasion. 

Again, this reiterates the importance of increasing the role of renewables and associated storage and transmission to make our energy system fit for the future.

It’s been clear for some time that the role of coal generation in Australia’s energy mix would necessarily change. But the previous Government resisted this inevitability for a decade, and the current east coast energy market challenges are the result.

Make no mistake, renewables aren’t just important to cut emissions, they are important to ensuring Australians have secure, reliable energy supply. 

That’s why the Albanese Government is targeting 82% renewables in our electricity grid by 2030.

As analysts from the World Bank point out, the sharp increases in coal, oil and natural gas prices mean that – and I quote – “policy makers need to prioritise policies that encourage greater energy efficiency and accelerate the transition towards low-carbon energy sources.”

And that’s exactly what we are doing.

Our Re-Wiring the Nation policy will see a massive upgrade to our transmission infrastructure to bring on new renewables. 

I also want to highlight the National Energy Transformation Partnership, which was agreed by all the states and territories in August. 

This is our national roadmap to get to net zero. 

For the first time, we will have an integrated national plan which covers all the investments needed to move to a renewable economy.

It puts all states and territories on a unity ticket to cooperate on plans for generation and storage adequacy, demand evolution, and workforce, supply chain and community needs. 

And it will better progress the timely delivery of critical projects by identifying and declaring transmission of national significance.

But the energy sector alone won’t deliver our 2030 and 2050 targets.

In fact, the industrial sector is projected to overtake electricity as Australia’s leading source of emissions.

With emissions from heavy industry going up under the previous government, one of the key planks of our election policy was the reform of the Safeguard Mechanism - so it actually works to drive down emissions.

In August we released a consultation paper on some of the detailed design elements of our reforms. 240 submissions were received, of a high quality.

I’ve enjoyed reading them and they will help us on the detailed design of the mechanism reform in coming weeks and months. 

We continue to work through the issues canvassed in the consultation paper very carefully and consultatively and I’ll be having more to say about all those elements of course. 

One of the elements of the reform of the mechanism is the introduction of below the baseline crediting. The vast majority of submissions to the consultation paper supported this innovation.

Whereas most of the changes to the mechanism will be executed by regulation, below the baseline crediting requires legislation. 

Today, I am releasing draft legislation which will enable the Safeguard Mechanism to provide credits to those large industrial facilities which come in under their baseline. 

This creates a key financial incentive for Safeguard facilities to make the step changes needed to reach net zero emissions by 2050.

To be fair, below the baseline crediting is not a new idea. 

The previous government accepted a recommendation to establish such a scheme, they just never got around to actually doing it. 

As a result, this legislation should be bipartisan. It’s consistent with the Opposition’s policy when they were in Government, and I accordingly would expect Opposition support. 

Consultation on the draft bill starts today for around three weeks, and I plan to introduce this Safeguard Mechanism Credits Bill into Parliament in November.

One other element of reform under consultation which would require legislation, not regulation, is access to international credits for the purposes of achieving Safeguard requirements.

There have been strong views expressed on this topic on both sides of the equation in submissions to the consultation paper.  

My position, and the Government’s position remains as I have previously indicated: any move to provide access to international credits for this purpose would need to be accompanied by strict requirements to ensure real abatement that can be counted in Australia’s 43% emissions reduction target. 

Even strong advocates of the use of international credits recognise that we are several years off being able to assert that these requirements can be met. 

And so, I will continue to consider the legislative framework around international credits as part of the consultation and design process for our Safeguard reforms. 

We know there is a lot of interest in the use of international credits, but equally there is a need to ensure that any such units, if they are included in the future, are of the highest integrity.

Parallel to this process, the Chubb Review is continuing its work ensure the integrity of the domestic units accepted by the Safeguard Mechanism – because integrity of those units is paramount to the success and environmental effectiveness of the Safeguard reforms. 

My aim is that the below the baseline crediting Bill pass in the 2023 Autumn sittings, and the final Rule amendments are made by the end of March 2023 to allow the reforms to start on 1 July 2023.

Yes – it’s a tight timeframe and there’s a lot to do, but it’s also necessary to act urgently because we have no time to waste in our emissions reduction goals.

Those 86 months are ticking away. We can’t countenance delays in getting on with the task of getting emissions down from our biggest emitters. 

Safeguard Mechanism facilities have over a decade’s experience measuring and reporting their emissions, and a clear understanding of their climate profile and risks

I welcome that many are already working towards climate targets of their own, with the majority of facilities covered by pre-existing pledges to meet net zero by 2050 pledges. 

The fact is, other countries are acting – and if we don’t work hard, we will fall further behind the pack.

Of course this matters for our diplomatic relationships as we’ve seen over recent years, but more importantly it’s in our nation’s economic interests.

One thing that has been clear in my international engagements has been the enthusiasm and goodwill for Australia’s climate reset, and recognition of our role as climate change leader. 

Not just in the targets we set, but in our contribution to resourcing the renewables revolution.

In the US, a key topic of conversation was the recently passed Inflation Reduction Act, and Australia’s position as a critical supplier of some of the most important minerals in the production of clean energy elements such a solar panels and batteries.

The IRA – which really could be called the Emissions Reduction Act – is enormous in its a scope, which is of course a great thing for the planet. 

For Australia, the passage of the Act presents both a challenge and an opportunity. 

The investment incentives embedded in the Act are enormous, meaning that the global race for renewable capital just got a lot sharper. 

Having said that, my conversations with counterparts in the Biden Administration at a very senior level have been dominated by discussion on the opportunities of co-operation on supply chain management and diversification to assist this massive transformation. 

By working with the US – as only a credible climate partner can – and by turbocharging our domestic efforts, we can make the most of that opportunity.

Australia should be a trusted and reliable source of key materials up and down the renewable supply chain, not just of raw minerals but of manufactured compounds and of exported renewable energy itself.

The opportunities are there, the demand is there, and we need to strike while the iron is hot to ensure we position ourselves to take advantage – because if we don’t, as the political momentum of the IRA shows - the space will be filled by others.

In the Albanese Government we have ideas, energy and urgency. 

But we don’t have all the ideas, we don’t have all the wisdom. 

I’ve enjoyed very much my interactions with the business community on this massive economic transformation in our first few months in office.

But I look forward much more to our co-operation to ensure this transformation becomes a reality. 

If I want you to take anything from the first few months of government it isn’t just that we don’t want to waste a day – but that consultation and collaboration is a key part of our reform process.

We took an agenda to the last election which was endorsed by the Australian people. But in implementing it, we know we need to work with every sector in our economy and every part of our community to make sure we strike the right balance.

But to reiterate the urgency at which we need to work – to achieve Australia’s emissions reduction target of 43% by 2030, it’s estimated that we will need to install about forty 7-megawatt wind turbines every month until 2030.

For solar, we still need to install more than 22,000 five hundred-watt panels every day – and 60,000,000 by 2030.

That’s why we need to act so rapidly.

That’s why the Albanese Government has prioritised overdue policy certainty, to drive investment and make sure Australia is at the top of the renewable finance race. 

And that’s why we want to work with everyone in this room and beyond – because it won’t be a whole-of-government effort, it won’t be a whole of-governments effort, it will be a whole-of-economy effort which will see us achieve net zero.