Interview with Paul Culliver, ABC Capricornia

PAUL CULLIVER: How do you see Central Queensland playing a role in reaching not only our 2030 emissions targets but also net zero by 2050? Clearly, there is going to have to be massive reduction in emissions from many of the facilities across Central Queensland.

The federal Labor Government plans to use the Safeguard Mechanism. Last week they unveiled new plans of how to use it and how it would impact Central Queensland. Chris Bowen is the Federal Minister for Climate Change and Energy. Good morning to you, Minister.

CHRIS BOWEN: Good morning, Paul. Good to be with you.

PAUL CULLIVER: How will the Safeguard Mechanism implement in Central Queensland?

CHRIS BOWEN: So last week I was in Gladstone and I released what we’re calling a position paper, which is how we think is the best way forward to get this change underway. It’s open for consultation. So, people will give me feedback over the next month or so and I’ll take on board that feedback and see if any changes are necessary. So, it’s the next stage in the consultation. But I’ve been pretty pleased with the feedback so far, and, you know, comments from people like Rio Tinto that say this is a very good framework going forward.

Now, as you said, Central Queensland is really the centre of the action here, and there’s a couple of points to make I think in broad terms. One, you know, this is really about giving businesses the certainty they need to make their decarbonised investments, also helping them through the process. Around the world, investors and consumers are increasingly demanding to know what the plans are to net zero and that’s important for competitiveness. And without this sort of action Australian businesses would increasingly be subject to carbon tariffs and what’s called carbon border adjustment mechanisms, so that would be a competitive disadvantage. So, we’re putting Australian business on a better footing.

And, yes, we also need to get emissions down. You know, industrial emissions are about to overtake electricity. Electricity emissions have come down around 20 per cent while industrial emissions have gone up 25 per cent. So, we really need to get this underway, and we need to do so in a way in partnership with businesses, and that’s exactly what the Safeguard Mechanism is intended to do.

PAUL CULLIVER: Now, my understanding is that facilities will be required to reduce – I think this is an average – of about 4.9 per cent every year. How are they expected to actually do that if you’re talking about a coal-fired power station or a mine or whatever it might be in Central Queensland?

CHRIS BOWEN: Well, coal-fired power stations aren’t covered; electricity generations aren’t covered by this. But basically, what will happen is that each facility will work out their best way forward, and there’s a lot of flexibility in the system because people have – facilities have – different technologies available to them at different times. So, you know, I’ve spent a lot of time talking with the alumina industry, for example, and bauxite and their plans and their conversions to renewable energy, and that’s very different to, say, a coal mine or a gas facility or the two airlines that are covered. So they have capacity to work that through. They can do it through buying carbon credits, ACCUs, and we’ve got a separate process underway to reform those and make sure they’re working properly. That’s where basically companies can say, “Well, we’ll buy basically carbon reduction that other people are doing to help us on our journey.”

Also, if a facility – and facility is a term we use for, say, a bauxite refinery or a gas plantation – if they reduce emissions by more than they’re required to do, they’re going to generate what we call a safeguard mechanism – sorry, a safeguard credit, which they’ll then be able to sell to another facility to acquit their responsibilities.

So, there’s a lot of options there. Obviously, we want people reducing their emissions, you know, at the facility, you know, straight up. There’s different technologies available. Where that technology is taking longer to come on board then there’s other mechanisms available to those facilities.

PAUL CULLIVER: Why isn’t coal-fired power covered under this?

CHRIS BOWEN: Never has been. It’s the design of the previous government when they put it in place, and we had different policies in place for electricity generation as opposed to energy – or as opposed to industrial producers I should say. That is working, emissions are coming down from electricity as we transfer to renewable energy. This is a different problem and there’s a different approach, and one of the things that we decided to do is keep the architecture of the Liberal government in place on the Safeguard Mechanism because that architecture was relatively sound. But the baselines and the way it was being implemented was not sound and we were seeing emissions go up instead of down under the old design of the Safeguards Mechanism.

PAUL CULLIVER: Colin Boyce, the federal member for Flynn with the LNP, said this was a carbon tax on regional Australia that’s going to force job losses. Will it?

CHRIS BOWEN: No, and you know, Colin, with all due respect, is a bit of a climate change denier. He’s never had very forward-looking views and positive-looking views about this important transformation. I mean, the world is changing and we need to help Australian industry to make that change. As I said, I’ve been very pleased with the response from industry, including in Central Queensland. We’ve said we’re planning to make $600 million available to help businesses decarbonise, co investments. I recognise that some of these investments are expensive and it’s a national endeavour, so the national government should be working in partnership with businesses. Again, that’s out for consultation. I’ll take feedback on that. But that seems to me to be a very sensible way forward.

You know, if we can – like, Colin, you can sometimes put your head in the sand and say the world’s not changing and we don’t need to reduce emissions. That’s one approach. It’s not very good for Central Queensland. Of course, the rest of the world will then move to more decarbonised processes and Central Queensland will miss out. That’s not going to happen under our government. We’re going to help Central Queensland through this transition. That’s why we’re consulting. That’s why I came to Gladstone to make the announcement, and we’ll continue that process.

PAUL CULLIVER: As you’ve talked about, a crucial part of this mechanism is carbon credits. There obviously has been some conversation and some concern about the genuineness of those carbon credits that have existed in the system already in Australia. What are you going to be doing to make sure that when we abate, when we mitigate and we have those carbon credits, they’re actually genuine reductions in emissions?

CHRIS BOWEN: Yeah, that’s very important. So, when we won the election we appointed a panel to review carbon credits. It’s led by Professor Ian Chubb. He’s a former Chief Scientist, former head of the Australian National University. You know, very, very well-credentialed and qualified individual, and supported by a panel of others, including a former Federal Court judge, an expert in agricultural economics et cetera, and they’ve done a good job. And they really looked at the process going forward and said, “Look, this has been going 11 years. It’s not really how we would design it, but if we were starting today, we would have a much more independent committee going forward assessing the different models.” My role as minister in determining the various methods will change. Previously the minister determined the priorities. That’s not – I’m not a scientist, that’s not really the best way forward. That will be proponent-led and a very rigorous approach from a new committee which will be set up with a full-time chair, the Carbon Abatement Integrity Committee. So that’s really important going forward.

They’ve also ended one of the methods of deforestation, avoided the deforestation method, and made some improvements to some of the other methods. It’s quite complicated; I won’t bore you with the details, but, you know, it really does have the objective of making sure that that abatement through carbon credits is real, it’s permanent, it is substantial, it’s verifiable and it’s additional.

PAUL CULLIVER: Chris Bowen, the federal Minister for Climate Change and Energy your guest this morning here on ABC Capricornia. Look, there’s been a few stories around this week with regards to gas. Obviously late last year the federal government imposed price caps on both gas and coal trying to bring down our energy prices. There’s been some stories about some of those gas retailers not taking on new customers - The Australian today saying according to their analysis, gas prices are already 20 per cent up on those retail prices. Is the approach here from the federal government working?

CHRIS BOWEN: Yeah, well, we’ve already seen – this is a complicated matter and it’s very tough and we didn’t make this intervention last year lightly. We did it very carefully. And, importantly, because, frankly, we’re just talking about industry. A lot of the industry that we were just talking about are heavy users of gas and energy, particularly in Central Queensland, and a lot of them would have struggled to be viable without the action that we took. You know, we would have seen some industrial closures this year. We weren’t going to stand by and let this happen. This is all caused by the war in Ukraine. Putin has weaponised energy and that has meant energy prices right around the world have skyrocketed, so we had to step in.

Now, in relation to what we did, we put a cap on the price of gas at $12. Now, 96 per cent of the gas sold in 2021 was under $12, and gas companies were making good profits there. So, when we saw gas profits or gas prices skyrocket as a result of the changes in Europe, that is not the fault of Australians, Australian industries, Australians working in those industries, Australians paying those bills. And the cost of production for the gas companies has not gone up one iota. So, it was appropriate for us to act.

Now, we’ve already seen some impact on future prices. So, you know, the markets look at future prices and you see that flowing through. So, they have come down substantially, and that will flow through to the price increases we would have seen otherwise. In addition, we’ve taken other steps, like negotiating with state governments, rebates to consumers to help them with the price rises that will happen despite our intervention. The price rises will be a lot less than what they would have been without the intervention.

In relation to the stories over the last couple of days, most of the gas for 2023 has already been contracted. So those deals are already done, already locked in. This is more a discussion about 2024-25. The gas companies are saying that they are taking some time to look at the new code of conduct. The ACCC yesterday released the guidance on how they intend to impose and deal with the code of conduct, so that should give the gas companies the certainty they say they were looking for.

We certainly, as the ACCC has made clear, the government makes clear, I make clear, we expect gas companies to supply gas at a reasonable price. If you want to argue that gas companies should be able to supply gas at an unreasonable price, they can do that, but I don’t think it’s an argument Australians are going to cop. A reasonable price – this is Australian gas under Australian soil and Australian water, and Australians have a right, in my view, to access their gas.

So, of course this is going to take some time to flow through. You’re seeing some prices that were already in the system before our intervention. Effectively, it might seem like a long time ago - of course, we’ve had Christmas and there’s a lot happening. This only happened a few weeks ago. It’s going to take some time to flow through. And I fully – you know, if gas companies say that they are genuinely looking at the new regime and looking at how they comply with it, okay, I understand that, but we expect gas companies to be getting on with the job now they have the details of supplying gas at a reasonable price.

PAUL CULLIVER: Well, if they’re not taking on new customers because of a purported lack of gas supply, I mean, do you see that as honest dealing?

CHRIS BOWEN: Well, let’s give them a chance to take on board the ACCC guidance – which was issued only yesterday – but certainly my strong and clear and the government’s strong and clear expectation and requirement of gas companies is that they will supply gas at a reasonable price to Australian consumers. And the ACCC has powers if they don’t. There’s anti-avoidance provisions in the package we brought down last year. There’s also what’s called the gas trigger, the ADGSM, which is there available to us if we feel we need to, if we feel there’s a supply problem.

So, we will act and do whatever we need to do in the national interest, as we have said before, as we did last year. I understand gas companies don’t like it. They were quite happy with the prices they were getting, which were generated by the war in Ukraine. You know, these profits were elevated.

I understand they quite enjoyed getting them, but that was not in the national interest, not in the interests of the workers in Central Queensland working in facilities and places which use a lot of gas to make the wonderful things which we rely on out of Central Queensland. It’s not in the interests of Central Queensland to see those gas prices continue, so we acted. And we certainly intend and expect to see gas companies responding and providing gas at a reasonable price.

PAUL CULLIVER: All right. Just finally, on the Gladstone Power Station, how much compensation is the federal government intending to pay for the coal price cap that you imposed in December?

CHRIS BOWEN: Well, compensation is not actually, Paul, the right term. There’s two provisions: there is compensation in relation to where in the very unusual circumstances that coal is being provided at a cost of production over $125. Separately there’s a rebate, particularly for the Gladstone Power Station because Gladstone, as your listeners know very, very well, is one of the most important power stations in the country. Very large and sets the price regularly, and so, we negotiated with the Queensland government to ensure that effectively there’s a price cap there of $125 a tonne. We did that with also New South Wales under a different regime.

Of course, New South Wales works differently; they have more power stations which set the price in a different way, more smaller power stations. Gladstone sets the price predominantly in Queensland. So, we’ll ensure that effectively that cap applies through rebates. But that’s an ongoing discussion with the power station and the Queensland Government. There are a number of factors in play. But it will be very, very, very important in reducing the increase in power prices that we just talked about, and it will be one of the most important factors we have in providing some of that relief to Australians.

PAUL CULLIVER: Do you have a ballpark figure of how much money that might be?

CHRIS BOWEN: Look, as I said, there are, look, discussions that have been ongoing. I’m not in a position to provide that figure. But those discussions have been ongoing.

PAUL CULLIVER: Right. The amount in the media of $450 million, is that close?

CHRIS BOWEN: There are all sorts of figures in the media, Paul. Some of them have been inaccurate. And I understand that, that’s fine, people can speculate. But we’ve got a job to do, which is power prices. That’s what we’re getting on and doing.

PAUL CULLIVER: All right. Thanks for your time, Minister.

CHRIS BOWEN: Good on you, Paul. Any time.