Interview with Sri Jegarajah, CNBC

SRI JEGARAJAH: Minister, thanks for your time. India launches the Global Biofuel Alliance. Is Australia in and how will this change the narrative in terms of the transition to clean energy?

CHRIS BOWEN: We haven't made a decision to join that yet. I'll have a look at it, obviously. There's a range, as you know, Sri, a range of pledges, alliances, groups around this space all of which do good work in some form or another, but then not all are right for every single nation. We've joined a number of them since we came to office, a bit over a year ago. This is a new initiative which we will take our time to work through. Can I just say that India has done an excellent job of chairing this G20 and progressing international discussions and focussing the discussions on practical things like supply chain, the best kind of supply chain, etc. So I just want to pay tribute to RK Singh's leadership.

SRI JEGARAJAH: At what point will you be able to make a decision as to whether Australia is in the GBA, and what can Australia offer in terms of innovation on the biofuel front?

CHRIS BOWEN: Again, I will look at it and, you know, perhaps these things tend to get considered around G20, COP, over important gatherings. So perhaps COP will be the next opportunity for me to provide an update on Australia's consideration of that.

In relation to biofuels generally, of course this is very, very important. I mean, perhaps aviation fuel is where rubber hits the road, maybe not an entirely appropriate phrase. But, you know, you look at the charge of decarbonising aviation and green hydrogen will play a role, electric planes will play a role. Sustainable aviation fuel and biofuels will play a big role as well. So this is important, very much so for decarbonising hard-to-abate sectors like shipping and aviation in particular. Less so road transport, because we know what to do there, electric vehicles and hydrogen. But those other sectors, this will play an important role.

SRI JEGARAJAH: All options need to be on the table. And the challenge for policymakers is to advance the clean energy agenda, but also invest in hydrocarbons to ensure we don't have the energy shortages that we experienced just recently, and they lead to inflation shock. Are these mutually incompatible issues? And this is something that the G20 is wrestling with, COP28 is going to be wrestling with this as well. So what's the way forward?

CHRIS BOWEN: I think ultimately - it's a fair question, but I think ultimately the way forward is to double down on our investment in renewables and storage and transmission, because not only is that good for emissions, it's also good for energy security. I mean, Vladimir Putin can't turn off the sun or the wind, he can turn off the gas pipeline. I mean ultimately, for those countries that are blessed with abundant renewables, harnessing those renewables and increasing their share of our energy mix, and then exporting as much as possible in due course is vital for national security as well. So, yes, there's some short-term management challenges which countries are all dealing with in their own different ways, but ultimately the direction of travel is entirely consistent and clear. 

SRI JEGARAJAH: What takes priority, though? Is it investing in hydrocarbons to take the edge off inflation and to ease the burden on consumers? Or is it, as you say, doubling down on renewables?

CHRIS BOWEN: From Australia's point of view I don't see - I wouldn't term it as “investing in hydrocarbons.” I mean, I see it as ensuring a sensible mix as you make the transition to renewables. In our case, gas plays an important role in firming the grid. As coal-fired power leaves the grid, gas is much more flexible, can be turned on and off. Increasingly nowadays, Sri, at two minutes notice when it used to be 15 minutes notice. Now with invest in gas fire-powered stations, two minutes' notice which means you're minimising emissions by simply having the plant off. We have negative prices during the day a lot in Australia and yet coal-fired power stations are churning away and gas pipe-fired powered stations can turn on and off. That's just one example in our context. That's not the same context for everyone. So I don't see it, as you put it, investing in hydrocarbons, I see it as keeping a sensible mix and a sensible supply of fuel to old plants as you're making the transition to new energy.

SRI JEGARAJAH: I know you're having this debate back home. Should nuclear power be part of the plan?

CHRIS BOWEN: Not for Australia. I mean, I'm not here to tell other countries what to do and nuclear plays a role in various countries' mix, but in Australia it never has, never has. And for Australia, you would be starting from worse than scratch because we don't have a nuclear industry. So, why doesn't Australia go down this road? It's very expensive. It's the most expensive form of energy, all our indications and evidence shows that. It's not flexible - we just talked about the flexibility of a gas-fired power station and a nuclear power station is not flexible. It's not peaking and firming, it's base load, and when you're peaking and firming. Waste is an issue. I mean, Stanford University shows that a small modular reactor could generate up to 30 times more waste proportionately than a large nuclear reactor. And we don't have - what would we do with the nuclear waste in Australia?

I mean, wherever you look there's issues - from our point of view - in nuclear energy, and when we have such abundant renewables, which we need to firm and we need to provide the storage, we need to provide the transmission. But even, Sri, when you take into account all those costs, renewable is still cheaper from nuclear, from our point of view.

SRI JEGARAJAH: Does coal have a future in Australia and can clean coal technology and carbon capture rehabilitate this most polluting fuel?

CHRIS BOWEN: Coal plays a role in our energy mix today, of course, always has, but it's reducing. As coal-fired power stations leave our grid - we just had one big one leave and the next scheduled one is 2025. And they're not going to be replaced with new coal-fired power. It's just not going to happen.

Anybody who suggests it is having a lend of those who want it to happen. It's not economic, it's not the future, the emissions are bad.

We can talk about the carbon capture and storage, if you like, but the one place where carbon capture and storage, in my view, will not and never will play a role is in coal-fired power. It's been tried, doesn't work, it's just not effective for coal.

SRI JEGARAJAH: Help us understand why you think the prior Morrison Government's net zero 2050 plan is a fantasy, as you call it, and why sector-by-sector decarbonisation has more merit?

CHRIS BOWEN: Well, let's look at each question in turn. The previous government's 2050 plan sort of just assumed we'd get to net zero. It assumed technologies will emerge and it will be fine. Now technologies - we all want to emerge. But they're not going to emerge without investment, they're not going to emerge without the framework to drive that rigour to encourage and require companies to invest in them. So it basically said we're going to do this bit and then the rest will be okay, new technologies will deliver the rest of the emissions reduction. That's not a plan. It's a hope. It's not a plan.

Sector-by-sector plans are important, from my point of view, for Australia because each sector is so different and I've been struck - we run a very consultative Government, my door is always open to investors. I've been struck by the number of investors and investor groups who said, "Look, we really need to know what you think of each sector" and I say, "Well, you're the ones who are investing the money, I want to know what you think." They say, "No, we need to know the government framework. You've legislated your targets, that's great, that's why we're interested in you, that's why we're, you know, working with Australia, but we need more. We need the sector-by-sector view, government's view of how this decarbonisation is likely to happen, so we know where to focus our investments." Okay? I've listened to that and so we'll develop these sector plans.

SRI JEGARAJAH: So is Australian business and industry on board with the plan?

CHRIS BOWEN: Oh, yeah, absolutely. I've been struck by the level of support and engagement from Australian businesses, big and small, from international investors. I mean the number of chief executives and very senior renewable executives who come from Australia these days is enormous and very welcome. We are one of the most exciting offshore wind markets in the world now because we made offshore wind lawful and we're getting on with it at a rapid pace. And as you know, we have to be all in. Governments can do so much, governments are the essential staffing point. But after that, we need to be all in and Australian business is.

SRI JEGARAJAH: Where is Australia on the Hydrogen Headstart Program?

CHRIS BOWEN: So, that was a very big commitment in our recent budget, $2 billion of commitment to the Hydrogen Headstart Program to keep us in the game. It is, I'll be honest with you and straightforward with you, it is a response to the Inflation Reduction Act. We believe we have massive advantages to bring green hydrogen, but that sector is going to need a hand in response to the Inflation Reduction Act. We welcome the United States' return to the table in dealing with climate change after an absence.

But we need to ensure that the investment created by the Inflation Reduction Act is additional, not distortionary. So hence, in green hydrogen, our Hydrogen Headstart, we're currently out consulting on the finer details of the implementation but I want to have it all finalised in the next couple of months and I want to see that program starting to work. Now, I don't see, Sri, that $2 billion spreading very thinly. We want big projects delivering lots of green hydrogen from Australia to the world.

SRI JEGARAJAH: The difficulty that many have with getting to green hydrogen is that right now, in terms of the production process, it's still carbon intensive. So at what point in that cycle in the evolution do we really get to green hydrogen and how much is this going to cost? Where is the money and the funding going to come from?

CHRIS BOWEN: Well, the technology is improving all the time and I've been, again - one of the big virtues of a gathering like the G20 is not so much sitting around the plenary all saying what we think, but the opportunities you can have for workshops and for bilateral engagements. You talk to the Faith Birol from the IEA and their latest projections on green hydrogen costs coming down very dramatically, for example, the technology improving. As I said in a round table on green hydrogen yesterday, I think it was, there's a lot of hype about green hydrogen and so there should be. I mean, it's storage, which is what we need so desperately, and apart from submarine cables, that's the only way you can export renewable energy.

I had a great meeting with Robert Habeck today, you know, Australia and Germany, absolutely key partners together. They want our green hydrogen, and we want to make it. The economics stack up from their point of view and ours.

SRI JEGARAJAH: COP28 in December, what are you expecting, Minister, in terms of outcomes and objectives, and what is Australia's message?

CHRIS BOWEN: Well, Australia's message is we've got to make every COP a step forward, in my view. And most people would assume, perhaps, maybe I did naively until I was in this job, that each COP is a step forward. But each COP is not necessarily a step forward. The last COP was more a status quo COP. This COP needs to be a step forward in the world's ambitions.

I do want to pay tribute to Dr Al Jaber. He is being very consultative, deeply engaged, talking to countries about what our objectives are. I've had a lot of engagement with him. I believe he is going to provide a really energetic form of leadership to this COP, which I very, very much welcome.

But, let's best be frank, we still don't have consensus around anywhere near as much as we should around some key matters like tripling renewables, which Sultan put out in his speech a couple of weeks ago as one of his objectives, for example. So we've got a lot of work to do. This COP doesn't necessarily come smoothly. We've got a lot of work to do, and we'll be at the table engaging with countries in goodwill to try to get the best possible outcome for the world.

SRI JEGARAJAH: Do you think the backdrop is more challenging because net zero emissions targets have lost momentum, the transition to clean energy has lost momentum because of the COVID crisis, because of the war in Ukraine, and now because of the higher costs of capital and tighter credit conditions, and possibly even a recession?

CHRIS BOWEN: There are some things which make the environment more complicated, for sure. I probably agree with some of the ones you identified and I query some of the others, but sure. It's more complicated, the war on Ukraine has made it more complicated, the geopolitical tensions have made it more complicated. And that's the case here in G20, it will be the case at COP. But war or no war, the world continues to warm. And so the obligation on all of us to push and push again for better outcomes remains.

SRI JEGARAJAH: When you look at these extreme climatic conditions that we see on an almost daily basis, whether it's the heatwave in Europe, your own country has been experiencing extremes of weather, India, South Korea recently, is that yet another wake-up call for the hold outs, and is that going to really focus the minds?

CHRIS BOWEN: I hope so, I hope so. I mean it should. We shouldn't need more wake-ups. You and I are probably old enough to remember when global warming was a prediction. It's a lived reality now. Natural disasters are increasingly frequent and increasingly unnatural. It's not just the natural disasters, they're just what's obvious and right before us. I mean the slower-burn impacts on human health and heatwaves and coronary episodes are enormous. Are enormous.

So I hope, if any good comes out of these terrible conditions we're seeing around the world, I mean the fact that you can just rattle off some, I can rattle off another five, just reminds us just how serious this situation is.

SRI JEGARAJAH: Minister, if we can get back to the hydrocarbon part of the conversation, Japan has concerns about Australia's reliability as a gas exporter. Just help us understand what's led to this situation, and there appears to be some concern with what Japan says are sudden policy changes effecting existing LNG projects. Can you say whether you are going to be visiting Japan to try and belay these concerns and have a conversation with your counterparts over there, and what's the off-ramp to all of this?

CHRIS BOWEN: I will be visiting Japan, but I see that as a very positive - I've had a very good chat with Minister Nishimura here who I have been going through the lot and have a very good relationship with. But I'm going to Japan as, you know, as part of our normal international engagement.

I completely understand the importance Japan puts on reliability of energy supplies. Australia has been a reliable energy supplier and will continue to be. Will continue to be. But I also know what this Government was elected with a mandate to do, and we've done that, and we will continue to do it, but we'll engage with countries like Japan so that they clearly understand the impact of these things and that we work together. Japan and we have very similar targets. We have huge complementarity. We will be continuing this talk about what more we can do together on this transition.

We want Australia and our government to be a renewable energy superpower and a reliable one, and we will be. And we've been a reliable energy supplier. We are a reliable energy supplier. We will always be a reliable energy supplier. Increasingly that energy will be renewable. That's in the best interests of all of us on this decarbonisation road, and Japan's no different, Korea's no different.

SRI JEGARAJAH: Is that the heart of Japan's concerns, then, that perhaps Australia may not be striking the right balance when it comes to how renewable targets and how energy - hydrocarbon energy reliability are so polarised right now?

CHRIS BOWEN: Look, I'm not here to talk for Japan, but that's not how I would characterise it. I would characterise it as we have a traditional trading relationship - that trading relationship is changing, that's a good thing because we're looking now at the energy of the future. I believe - I believe the relationship between Australia and Japan and Korea and Singapore, I believe the trading relationship will only strengthen, will only strengthen, as these countries need our assistance to decarbonise, and we are more than willing to provide it.

SRI JEGARAJAH: Minister, how would you characterise Australia's relationship with China as it applies to bilateral energy cooperation and energy trade?

CHRIS BOWEN: So, we've sought to normalise that relationship. There will always be matters of different perspectives and we will always act in, one, accordance with our values, and two, in accordance with our interests, and that will mean different perspectives with countries like China. But we've been pleased with the careful - the careful recalibration of the relationship. There's no issue where dialogue doesn't at least improve understanding of the different perspectives, at the very least doesn't make it worse. There wasn't any guile in the past. We've sort to rebuild dialogue carefully, gradually. We're not here to say we've come in and returned the relationship to full bloom at day one. That hasn't happened and shouldn't happen. What we have had is a carefully calibrated arrangement.

I met with my counterpart at the last COP. That was the first meeting, I think, between an Australian climate minister and the climate envoy since 2017. So that's quite a break between drinks. We agreed at that point that we would just continue to talk and when the time was right, we would reengage on climate. That hasn't happened yet. The time may come. But we continue - and the time will come but it may come sooner rather than later, but we'll continue to talk to China, engage. The Foreign Minister's done a first-class job. The Prime Minister is engaged at a different level, as he should, and we'll just continue to take it step by step.

SRI JEGARAJAH: Can you give us some insight, Minister, into what demand signals you are gathering from China given this faltering, perhaps in the post-pandemic economic rebound, and how that applies to demand from China for Australian energy?

CHRIS BOWEN: Well, we haven't had that level of detailed discussion at this point with China. We don't need to. You know, they're big customers of traditional Australian iron ore, that will continue for a long time, for example. The world's going to need iron ore for a long time to come. I see that energy relationships slightly different obviously to the one we have with Japan and Korea, Singapore and many other companies in terms of China has their own huge, massive renewable investments, more renewable investment than any other country in the world at the moment. So, you know, we come to the table with a slightly different offering, given they do so much renewable investment themselves, unlike, say, other countries that are a lot smaller and don't have the room for the big renewables that China does have. So it will be a different engagement.

I think the Australia/China relationship on climate would be more focused on, you know, sharing notes on various technologies, etc, but we're not there yet.

SRI JEGARAJAH: Can you bring us up to speed, Minister, about the build-up of EV capacity in Australia, how are you going about doing it? And I read the target of 89 per cent of new car sales in Australia to be EVs by the year 2030. I don't think that that's an official target, but can you just bring us up to speed with what you are hoping to achieve in terms of developing EV capacity?

CHRIS BOWEN: That's not a government target. That would be a projection by some, but that's not a government target. What we have done is cut the taxes on electric vehicles. That's seen electric vehicle sales lift from 2 per cent when we came to office to 9 per cent now in a little over 12 months. That's not bad. It's okay. I'd like more. But, you know, it's a pretty big lift. But the most important thing we're doing now is we've announced, Catherine King, the Transport Minister, and I, that we will implement fuel efficiency standards. Australia and Russia are the only two major economies in the world without them and that means that manufacturers don't send us the range and depth of electric vehicles that we would get. It's a complicated, detailed policy which is currently well under development. That will be the next big step in encouraging electric vehicles.

SRI JEGARAJAH: What about building out a domestic EV industry, or even have to rely on China, on imported EVs and on Teslas? Is Tesla going to set up a plant, a flag in Australia?

CHRIS BOWEN: Well, we have a flag in Tesla with the Australian chair of Tesla. The chair of Tesla internationally is in Australia, which we're very proud of. And the proportion of Australian lithium and other critical minerals in Tesla batteries driving around the world is very, very high already.

I'm forward-leaning about Australia's potential as a manufacturing country, including electric vehicles, either way down the supply chain of components or the whole thing, or elements of EVs perhaps to start with, electric delivery vans, for example, last mile delivery vans.

SRI JEGARAJAH: Do battery packs manufactured domestically in Australia make sense? You've got the lithium.

CHRIS BOWEN: Well, absolutely. And as you know, Sri, the economics of the renewable economy are very different. It makes more sense to make things closer to where you extract the minerals, and that's our approach. The National Reconstruction Fund, a $15 billion fund of co-investment, for example, has up to $3 billion for renewable-related investments. So we're very upbeat and forward-leaning about the manufacturing capacity of our country.

SRI JEGARAJAH: I'll leave it there, Minister. Thank you very much indeed.

CHRIS BOWEN: My great pleasure. Thank you. Cheers.