Interview with David Speers, ABC Insiders program

DAVID SPEERS: Chris Bowen, welcome to the program.

CHRIS BOWEN: Thanks, David. Good morning.

DAVID SPEERS: I want to start on the new emissions objective that was agreed on Friday. It is the first change in the national energy objectives in 15 years and you and your State counterparts certainly were talking this up as a pretty big deal. I'm not sure there is a great understanding, though, of what it actually changes, what it means. Can you explain to us because some energy companies aren’t happy you’ve have done this. What will it actually mean in practice?

CHRIS BOWEN: It is a very important step forward, David. The national energy objectives really decide how our three market bodies, the Regulator, the Operator and the Commission work and they have to comply with the objectives and all the work they do. Now of course, electricity generation is Australia's largest source of emissions, 33%, and our laws, our objective, haven't given our three bodies the capacity to consider emissions reduction. It has just been bizarre and ridiculous and we fixed it. The Federal Government and the States and Territories working together, we fixed it. It will make a material difference as to how these three very good bodies do their work because they can only comply with the objectives in all the decisions they make and that has led to really silly and perverse outcomes in the past and we've stepped forward to fix it. It really builds on the progress of the Government, passing our climate Bill through the House, 89-55 showing we are getting on with the job and making the rules really more sensible.

DAVID SPEERS: Just getting to what it means in practice, if an energy company wants a new gas-peeker plant commissioned, how will this emissions objective apply to that? Will it mean that the regulator will have to say no?

CHRIS BOWEN: Let me give you a real-life example, David. A little while ago TransGrid wanted and suggested that to help Broken Hill they would put in a micro grid of renewable energy, it was much more reliable, much lower emissions and they were told at that point, "No, you've got to keep your old diesel generators running." It wasn't the Regulator’s fault, it was what the objective said. Of course, climate and emissions reduction will sit aside the other objectives of reliability, price and safety, but finally they will accept the reality of climate and provide that certainty to the regulators so it is a big difference.

DAVID SPEERS: What happens if it is a gas plant that TransGrid or AGL or Origin were saying, "We want to build a new gas plant here in the Hunter," or whatever, what does this new emissions objective mean?

CHRIS BOWEN: There is a whole bunch of decision-makers around that, not just the regulators. There’s State and Federal Governments et cetera and that's quite a different perspective, but in relation to the regulator's job, they are making decisions every day, the commission is looking at the rules every day.

DAVID SPEERS: I'm trying to establish what this new thing you've agreed on means. Does it change anything when it comes to a company wanting to build a new gas plant?

CHRIS BOWEN: Well, it certainly changes things in relation to transmission. It certainly make it is easier to get new transmission up, certainly makes it is easier for energy companies to make sensible decisions about renewables, it provides certainty to investors which is what we’re all about. We’re sending a message to the world that we are open for investment, in renewables, in transmissions and storage. It is a big change, unanimously agreed between myself and the States and Territories. The previous Federal Government had vetoed it. It has been ridiculous, we've gotten rid that have block and we are getting on with the job.

DAVID SPEERS: But it doesn't stop fossil fuels? I just want to be clear on this, does it change anything in relation to fossil fuels?

CHRIS BOWEN: Well, what it does, it sits alongside reliability, price and security as the objectives of our market regulators. Now, the market regulators aren't really the decision makers about new gas plants, for example, they’re  decisions for Governments, as has been the case, but the regulators do-- the operator runs the system every day, the regulators, if you like, manage the behaviour of all the generators, and that's a very important job and they haven't been legally able to take into account emissions reduction, and it's been ridiculous and we’ve fixed it.

DAVID SPEERS: So running the system each day, they they're often purchasing, you know, minute by minute or five minute by five minute the cheapest power that might be available that time of day or night. Now they have an emissions objective to consider as well. So does that they might go for the lower emission power option rather than the cheapest?

CHRIS BOWEN: Look, I don't think it'll change the way the Australian Energy Market Operator runs its day to day five minute operations 

DAVID SPEERS: So what does it change? 
 
CHRIS BOWEN: Well, as I said, David, I’ve given you a real life example a moment ago of TransGrid and Broken Hill. It will change the way the Australian energy market Commission has been thinking about, and I'm sure we'll talk about the capacity mechanism, it just gives them another opportunity to really be sensible in the way they make the decisions and makes it legally possible for them to consider emissions reduction in the decisions they make, whether they be daily decisions or monthly decisions. It puts it in the heart of the decision making. It should have happened a long, long time ago. It's finally happened now under a new Government.

DAVID SPEERS: Let's talk about that capacity mechanism you mentioned. A couple of months ago people remember the Energy Security Board recommended proposed this model for capacity mechanism to ensure reliable supplies was always there, the proposal they put forward could have included coal and gas. I know you and your counterparts discussed this on Friday. Did you officially kill off that proposal?

CHRIS BOWEN: No what we did, David, let's just step it through. We agreed that we need a mechanism, the transition has been too slow and too disorderly under the previous Government, we've had four gigawatts of power supply come off, and only one gigawatt come on, which has been in a very real sense the cause of the crisis we've been through in recent months. So we all agree, we need if you like, a safety net, to help us with that transition to ensure that we have capacity and firming of new renewables. And we're all agreed all of us that we need to encourage new renewables, new transmission, new storage, and we need to firm it as we go. And it's really important. So we looked at the work of the Energy Security Board, we've taken that and we've said we'll continue to work on it as Ministers. And we'll consider it at our next meetings in October and December and work towards a final decision. 

But we all agree we need a mechanism and we need a mechanism to help us with the inevitable closure of coal fired power stations, we need a mechanism to help us get the new investment on to ensure the transition is more orderly, because it hasn't been orderly, and it hasn't been fast enough. And we're going to take the system to 82% renewables and this mechanism that will we Ministers, State and Federal and Territory will hold the pen on will help us manage that transition, because we all want their transition to happen more quickly. But we all want to ensure the reliability. And that's been lacking because we've had four gigawatts come off and one gigawatt come on and that doesn't add up and hence we've been in a crisis over recent months. 

DAVID SPEERS: But will it include any payments to coal fired power to prolong the life of coal generators?

CHRIS BOWEN: Well look there's various ways we could work this through, we can have a one size fits all model, or we can have various mechanisms to help us with the various sectors. The Ministers have been talking about that, but we haven't made any final decisions. Again, it'll be a consensus unanimous approach, if you like, which is what we got, in our six hour meeting on Friday, a very, very constructive approach taken in the room by all the jurisdictions because we're all trying to do the same thing, which is, which is manage a very complicated transition, but manage it more quickly. We're all trying to get more renewables into the system. And we are determined to keep reliability as we do. 

DAVID SPEERS: I want to turn to your plans for the safeguards mechanism. And apologies to anyone struggling to keep up with all the different mechanisms that you're working on here. So this is the one of the main tools you want to use to achieve the emissions reduction that you're legislating 43% And then Net Zero. It'll apply to the 215 biggest emitters in the nation. What penalties will they face if they don't gradually lower their emissions as you lay out?

CHRIS BOWEN: Well, again, David, this is very important because you don't reduce emissions as a country unless you reduce them from your biggest emitters, the 215 emitters. 28% of our emissions as a country are covered by facilities within the safeguards mechanism. So this was a very important policy we took to the election, and we sought a mandate to implement it. And that's what we'll get on and do. Now, in relation to some of the finer implementation detail; the trajectory is very clear, we're putting these emitters on a pathway to net zero by 2050. As you would expect, that's the nation's objectives. Now, there's, again, some detail to be worked through, I'll be issuing a discussion paper, in the next week on some of the finer details about how we help emissions intensive trade exposed industries, for example, those facilities based on the principle of comparative impact to ensure the emissions don't just get taken overseas. 

It's a very sensible approach in the same methodical way the new Government setting about all our big reform agenda, we're bringing people with us consulting carefully, I was in the Hunter this week talking to coal mines, who will be dealt with and talking about how it's going to work and had very constructive and positive discussions. I am looking forward to feedback from industry from climate groups from other MPs and senators about the detailed design. We're getting off with it but we doing so in a way that's consulted, even taking some varying views around the sector, as you would expect about how it can best be achieved.

DAVID SPEERS: As you mentioned, the trade exposed sectors, so an Aluminium Smelter, for example, will there be anything here that puts them at a comparative disadvantage? 

CHRIS BOWEN: Well, it look, aluminium smelters are obviously big emitters. I was again this week at Tomago, they were talking to me about their plans to transition to renewables. I mean, they want to make the transition to renewables and they are in the process of doing that and they're doing great work…

DAVID SPEERS: If they don’t or if that can’t?

CHRIS BOWEN: As is the Portland smelter are also committed and they're very excited about our offshore wind, both of them Tamago and Portland very excited about our offshore wind initiatives I announced last week because they will link directly to offshore wind farms. Now, what we will do is there'll be a range of mechanisms available to facilities like aluminium smelters to either reduce their emissions directly which they're working on doing or offset and the integrity of our offset market is really important..

DAVID SPEERS: So they’ll have to buy offsets

CHRIS BOWEN: Well, of course offset is an option available To them, they will be able to work through how quickly and again the safeguards design will take into account that say an Aluminium Smelter might have options at a different timeframe than, say, a gas facility or a coal mine or indeed Qantas and Virgin who are also covered. They've all got different technologies available to them. They can use offsets in various ways, we will ensure we are ensuring the offset market has integrity. Hence, we've appointed Professor Ian Chubb to conduct that review. It's very, very important, because net zero does involve offsets. And that ability will be available to safeguards facilities. 

DAVID SPEERS: Another important question of principle for this design of the safeguards mechanism. What happens to new gas projects like the Beetaloo Basin, will they have to offset all of their emissions from day one, because otherwise, that's going to increase Australia's net emissions?

CHRIS BOWEN: Well, in relation to Beetaloo, the particular example you used, both the Northern Territory and Commonwealth Government have accepted the recommendations of the Pepper Review, the Pepper Inquiry conducted by The Honourable Justice Rachel Pepper, who said this should only happen if there's no net increase in greenhouse gas emissions. So there will have to be offset…

DAVID SPEERS: But there is debate about who's who should who should fund the offset.

CHRIS BOWEN: Well there's a long way to go on the Beetaloo, there's, you know, there's a lot of investment decisions that companies are yet to make. But the principles that are in that are carried in the Pepper Review, will be implemented. Now in relation to other new facilities, any facility which emits more than 100,000 tons of carbon a year, whether it's a new facility or an existing facility, which is just increasing its activity, we're not changing that architecture, they'll be covered by the safeguards mechanism. And they will be put on a trajectory to net zero facility by facility in a flexible way, which is why we've designed it this way, in a very sensible way. We want to work with those facilities

DAVID SPEERS: Will they have, sorry to interrupt you, but will they have to fully offset their emissions from day one, because otherwise, every other 215 big emitters will have to do even more. 

CHRIS BOWEN: No David, this is done facility by facility. And as you'll see in the discussion paper that I release, it's a very comprehensive paper, which runs through options in a very consultative way. But new facilities, as I said, whether it's a brand new facility, or what's more likely is an existing facility, which is increasing production because there are some places where they're sort of in or out or you're right on the edge of the safeguards mechanism. They'll be given a trajectory down to net zero, it'll be developed in full consultation, looking at the emissions reduction technology available to them at any particular time that will vary. Looking at their competitive tensions and looking at what constraints are on other people. I want to make this point David, this is actually important too for Australian industry because increasingly around the world, the most competitive industries will be those decarbonizing, increasingly Australia and other countries will be exposed to carbon tariffs, this will help us avoid us by showing that the EU and the rest of world “No, no, we're getting on with it. We've got this safeguards reform, you don't need to slap tariffs on our manufacturers and our producers, because Australia now has a Government that gets it”. And we're working with industry to get emissions down in a very sensible way. And that's exactly what our safeguards reforms, which had been backed by the Business Council, the Australian Industry Group, the Australian Chamber of Commerce and Industry will achieve. 

DAVID SPEERS: Can I just ask you a bit more on this? It's a key question about the safeguards mechanism, will it stop new coal and gas projects?

CHRIS BOWEN: It's not designed to do that, it's designed that all facilities whether they be old or new, are reducing their emissions. Now, of course, you know, we've had the discussion about new coal and gas and you know, Tanya Plibersek’s taking her role very seriously, as Environment Minister, her approval, she's showing that acting very diligently and professionally, as you would expect, of a Minister’s calibre like Tanya. And that's what we'll continue to do. But the safeguards mechanism is not about that. The safeguards mechanism is taking our 215 biggest emitters and working with them to reduce emissions because if we don't, we're just going to continue the sort of 10 years of no reduction in emissions from those facilities, and it's not going to cut the mustard.

DAVID SPEERS: Look, as part of this huge energy transition we're all on there is going to be increasing demand a huge increase in demand for the minerals that are required for solar panels, wind turbines, batteries, and so on. The International Energy Agency's spelt this out, it says not only will the demand soar, prices are likely to shoot up as well. What are you doing now to ensure that Australia has adequate supply secure supply at a decent price for these critical minerals?

CHRIS BOWEN: Well, that's 100% right David, in everything you've just said. We are right at the forefront of the world's supply of these minerals. Whether it's lithium or the other things. We need to ensure we're adding value and energy supply chains are a real issue. This is what I've just talked about with my quad energy Ministers colleagues in the first ever energy Ministers meeting of the Quad, which I hosted in Sydney a couple of weeks ago. Frankly, it was mainly about those supply chain issues. For example, around 85% of solar panels in the world are currently made in China. Over the next few years that will rise to 97%. Now that provides real challenges and real opportunities for a country like Australia because we should be making more solar panels in Australia, we put 60 million solar panels on our roofs over the last 10 years 1% of them are made in Australia, we can do a lot better than that.

DAVID SPEERS: The minerals there, when we talk about a gas reservation mechanism in Australia do we need to have a mechanism to reserve some of these things like lithium in Australia?

CHRIS BOWEN: I want to, I want to and the Government and Ed Husic and Madeline King and the Cabinet wants to be adding more value to those minerals in Australia, we want to be actually taking the lithium and turning them into batteries in Australia. That's why we have a battery manufacturing precinct policy that Ed Husic has written, that's what we'll implement. That's really important. You're right, David about the question. Yes, we need to be concerned about this and yes, we are and we're getting on with it.

DAVID SPEERS: Finally, I mentioned earlier the result of what's been happening around Taiwan. China has suspended climate change talks with the United States. Now clearly, you know, these two big emitters, we need cooperation between them if we're going to have progress on what is the global challenge. How worried are you about this?

CHRIS BOWEN: Look, internationally, David it has been a case of good news and bad news over the recent days, I think good news overnight from the United States to pass their climate bill through the House of Representatives. That's a big step forward and I very welcome it and congratulations to the Biden administration and the Congress for getting on with it. Bad news. I agree with you that those talks have been suspended. In all the tensions between China and the United States the one thing that's been ring fenced up until now has been climate discussions. They've agreed they've got a lot to do to get it together. We want the world's two biggest emitters talking with each other. I do hope those talks are resumed and that suspension is lifted because that is a blow and it would be better if those talks resumed 

DAVID SPEERS: Chris Bowen, thanks so much for joining us.