Australia Holds On To Dirty Energy


With a dogmatic focus on protecting our resources industry, Australia is quickly sacrificing any long-term competitive advantage as an energy power. The concessions Australia currently provides to its energy and emissions intensive industries are hurting the budget and are likely to be detrimental to the long-term sustainability of the Australian economy.

There are lessons to be learnt from some of our biggest trade partners on where Australia should be prioritising industry support, and fortunately for the environment, clean technologies are the answer to our long-term future prosperity.

It is important to scrutinise where the current Federal Government has chosen to prioritise its backing for industry and particularly the concessions it has provided under environmental policies like the Carbon Price Mechanism and the Renewable Energy Target.

Three of the largest beneficiaries of industry concessions under the Government’s carbon pricing and renewable energy schemes are activities related to the use and production of fossil fuels. Coal-fired generators are set to receive the largest allocation of free carbon units, followed closely by petroleum and natural gas production.

The total value of free permits issued to these industries is worth more than $6 billion between now and 2014-15. In last night's budget, the Australian Government removed $3.43 billion from the Clean Energy Future package, including taking funds away from the Australian Renewable Energy Agency, Carbon Capture and Storage Flagships, the Biodiversity Fund and Low Carbon Communities. The Government cited the collapse of the international carbon price for the cuts, but clearly chose to punish the clean energy sector for the revenue shortfall, rather than try and reduce the protections offered to the fossil fuel industry."

The three energy sources complicit in the cause of global warming are being provided a momentous free ride under policies intended to address the same environmental problems they are responsible for. Joining the club of easy riders are the aluminium and steel manufacturing sectors. These industries are highly energy and emissions intensive, and are likewise complicit to the climate problem.

While it is easy to find objections as to why these concessions are detrimental to the environmental effectiveness of current climate change policies, it is important to recall the introduction of a carbon price was also billed as significant economic reform.

These concessions for industry were intended to maintain Australia’s competitive advantage in a global export market. This makes it politically easy to justify such concessions. However, while Australia’s resources are currently in high demand, it is by no means guaranteed that the prosperity derived from this will continue in the long-term.

A recent report co-authored by Carbon Tracker and the Grantham Research Institute suggests that a major devaluation of fossil fuel reserves is required if we are to avoid the worst effects of climate change.

It is time that Australia begins the shift to new industries.

One needs only to look to the two emerging economic powers of China and India to get a glimpse of which industries will be prominent in the future. Each has invested heavily in renewable energy technologies, and significantly, the ability to commercialise and bring these technologies to the global market.

China and India have taken a no-limits approach to building their clean technology industries. This strategy has been followed to such a degree that several countries have instigated action under the World Trade Organisation with claims that some of the tactics used, usually involving protective subsidises, are in breach of international trade agreements.

Despite the questionable tactics, industry analysts have ranked both China and India highly for their attractiveness and proactiveness in encouraging investment in their domestic renewable energy industries.

In 2011, China and India were already leaders in investment in renewable energy technologies. The PEW Charitable Trust ranked China and India second and fifth respectively for renewable energy investment, while Australia trailed in twelfth place.

In November last year, consultancy Ernst and Young ranked China and India first and fourth respectively for their attractiveness for new investment in renewable energy. Australia ranked tenth.

In April this year, consultancy KPMG ranked China and India sixth and tenth respectively for their effectiveness at using their tax systems to incentivise investment in renewable energy. Australia ranked seventeenth.

These emerging economic powerhouses are already moving strategically to take advantage of an energy sector in transition. Conversely, Australia has been holding steadfast onto the industries of the past.

Initiative is needed to seize upon our home grown innovations, and to streamline their transition from conception to commercialisation. By doing this, Australia can build it self up with the potential to remain a major player in the energy sector of the future. By reprioritising where we direct support for local industries and innovation, we can take advantage of a win-win scenario; increased environmental and economic sustainability.We owe it to future generations, not just to protect our environment, but also to set up an economy that is prepared for emerging technological innovation, particularly those in the energy sector.

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