Keynote address at CEDA 'Future Direction in Energy Technologies' event, Sydney

Sydney

ANGUS TAYLOR: Thank you to CEDA for having me here today, and the role you play, the enormously important role you’ve played in shaping the agenda, the economic agenda and the broader agenda here in Australia.

I remember the last time I spoke at a CEDA function, I think, was when I was the Cities Minister and we were talking about the Western Sydney City Deal, the so-called “Aerotropolis” and that’s a good example of the agenda-shaping debates that you’ve been involved in - one where you can see the impact happening for those of you that spend time in the west and south-west of Sydney - and we are having right now. CEDA have played a role in that in what I thought was an agenda-shaping speech was important, but there are so many other areas where CEDA is helping to shape the agenda – so thank you for that.

Today’s speech is an important step from the Government’s point of view in our emissions reduction journey, setting the scene for the next Glasgow COP which will be held later this year.

We all know that the climate and emissions reduction challenge is truly one characterised by the tragedy of the commons.

Where the net benefits of global emission reductions, whilst very real, are distant from the costs.

It’s a debate that has become incredibly polarised.

Between the keyboard warriors and the quiet Australians.

Between the establishment and the disruptors.

Between the inner-city and the outer-suburbs and regions.

Between the opposition and the Government.

Between emotion and economics.

It is truly like no other agenda in modern Australia.

But, I believe, there has never been such a clear choice.

A choice that unfortunately though is fundamentally misunderstood by some.

We hear commentators – some informed and some not – talk of silver bullets.

They talk of policy détentes and they talk of science as if it is a personal sword to strike down their opponents.

And they do this because they feel rightly that this is the defining moment of this agenda, and this will be one of the defining agendas of our time.

But just like the other side of my portfolio - energy affordability and security - there are no silver bullets.

If there was one, the world would have used it.

If setting a target today would lower emissions - then today’s speech would be a very short one.

I wouldn’t have to outline our plan and I wouldn’t have to outline the work that has led to today.

If I could stand up today – announce a target and see the CO2 emissions fall – then I would.

But sadly a target without a plan is meaningless – it is the worst part of the emissions reduction debate.

A target without a plan lets people – who I know mean well – it lets them say something and then ignore the hard work.

Because to reduce emissions globally, and that is the challenge, this is a global challenge, there is a lot of hard work to come, particularly if we are to avoid damaging economic growth.

The world needs to go through rapid technology development and adoption if we are to achieve substantial and ongoing reduction of emissions on a global scale.

I firmly believe Australia is well placed to take advantage of this and contribute to it.

Now it is not all international - Australia must do its bit to reduce emissions to address climate change, and we are doing our bit.

But we must do it in a way that secures our way of life – not just the way of life in inner Sydney, but the way of life in Newcastle, in Roma and in Townsville.

To be clear – Australia does not have to choose between reducing emissions and keeping our economy strong.

But, that is not assured.

If we do this the wrong way, if we compare ourselves to the wrong nations or we blindly jump into the dark - then we will inadvertently wreck our economy.

Now, I strongly support robust debates in these areas because, as I said, there are strong views on both sides.

What I won't accept is others talking down Australia’s achievements to make a political point.

Australia has done exceptionally well over the last decade-and-a-half, despite facing particular challenges with an economy focused on energy intensive exports.

While other countries’ emissions continue to rise Australia and Australians have gotten on with the job.

During the year to September 2019 we saw emissions fall yet again to 530.8 Mt of CO2 equivalent, over 100 million tonnes lower than what was forecast in 2012 with a carbon tax. 100 million tonnes lower.

That is a 13.1% decrease from 2005 levels.

We will meet and beat our 2020 targets by almost a year's worth of emissions.

And what is more remarkable about these achievements is that unlike almost anywhere else in the world we have done it while our emissions intensive exports have sharply increased, and our population has increased faster than most developer countries.

The value of our exports has increased 71 per cent on 2005 levels and the corresponding emissions have also increased 54 per cent - but we have managed to get our emissions down by those levels I mentioned earlier overall.

So that growth in exports is a very, very good thing. We need to increase our exports so that we can pay for the essential services that Australians have come to rely on and should rely on.

But despite the upward pressure from exports - the emissions per capita and the emissions intensity of the economy continue to fall and are at their lowest levels in nearly three decades.

Emissions per capita have fallen 40 per cent and the emissions intensity of the economy has fallen 62 per cent since 1990.

So if you step back, what do all these numbers mean?

They mean that Australia has been rapidly decreasing its domestic emissions in the midst of an export boom, particularly for LNG.

And that gas is an important part of the emissions reduction story as well – just ask our chief scientist.

Typically, Australia provides a lower emission alternative to our customers, particularly in Asia, reducing emissions compared with the alternatives to using our products.

Our LNG exports have the potential to reduce global emissions by up to 163 million tonnes and we have grown the largest LNG export sector in the world in around a decade. It is an absolutely extraordinary achievement.

Those exports are reducing emissions by displacing more emissions-intensive fuels overseas.

Now, it’s a peculiar feature of the global carbon accounting system that countries producing a product for another customer country wear the emissions associated with that product. That’s how it works.

Countries like Canada, New Zealand and Australia have suffered under this system, whereas Europe, which has pushed much of its manufacturing to China, has clearly benefited.

Those are the facts. To put it simply Australia and Australians should be extremely proud of their accomplishments.

Now there has been a lot of talk in the media lately about long-term strategies.

Let me say up front - a long-term strategy is not a substitute for focussing on 2030.

A long-term strategy though does need to be scenario based, it will need to be modelled, and it should seek to take advantage of emerging global and domestic technologies.

That might seem like a subtle difference between our 2030 approach and our 2050 approach but it is important. Our 2030 targets are supported by tangible projects, tangible investments and a clear fully costed $3.5 billion Climate Solutions Package to meet our commitment.

It is effectively top-down.

It includes the $2 billion Climate Solutions Fund, Snowy 2.0 – and it is great to see the team from Snowy here today - and Marinus and a range of energy efficiency initiatives. We have made a commitment and we plan to meet it and beat it.

However, a long-term strategy, a strategy that covers 30 years needs to be bottom-up.

The top-down approach is historically how the world has attempted to reduce emissions.

But it has largely failed. Internationally, targets are missed.

Australia is one of the few countries to substantially over-achieve on its Kyoto obligations.

And we did it because we adopted the right technologies and focussed on a tangible plan.

I should emphasise, over 70 per cent of the world’s GDP has not set a net zero 2050 target.

But if you look at many of those same countries – the US, China and India for example, they are excellent at adopting and exploiting technology advancements – and that is the key for the world.

The Australian Government will take a technology-based Long-Term Emissions Reduction Strategy to Glasgow later this year.

We want to lead the world on this.

Our strategy will be based on a series of detailed pieces of work that we will complete over the rest of this year - much of which has already been done and the National Hydrogen Strategy that Dr Alan Finkel led is a good example of that work.

Fundamentally this will take time and it must include key stakeholders from across industry and across the economy to be involved.

That work will need to evaluate, prioritise and progress technologies to full commerciality and deployment as quickly as possible, without massive government subsidies once full scale deployment is viable.

Whether it’s a migration from gas and coal to hydrogen or widespread use of low cost geological and biological sequestration – it is crucial that we take that approach.

Technology offers the best prospect of maintaining and even strengthening our position as an energy export leader, while supporting reductions in global emissions.

But ultimately someone has to beat the blank page – and of course that is the role of the government and that will be the focus of our technology roadmap when we release it in due course.

The roadmap will be the cornerstone of what we take to Glasgow as our strategy later this year.

It will provide guidance to the public and the private-sector on what future energy and emissions-reduction technologies the Government will prioritise.

But we can’t do this alone - the private sector will need to be front and centre in driving these changes.

We as a Federal Government have an important leadership role – particularly in stimulating R and D and the early deployment of emerging economic clean technologies.

We have already invested over $10.4 billion into more than 670 clean technology projects with a value of $35 billion primarily through CEFC and ARENA, much of which was solar and wind.

But wind and solar as standalone sources of energy are now commercially viable.

We are seeing world leading investments in wind and solar in Australia - $9 billion last year and a similar amount this year - and the challenge for these sectors now is to address complementary storage and back-up, as well as to address connectivity to the grid.

Complementary investments in back-up and storage, particularly flexible gas, pumped hydro, and transmission are now critical to the future success of these sectors, which is our focus through the Grid Reliability Fund and the Underwriting New Generation Program.

It is crucial the Government not crowd out private sector investment.

We must move our R and D investments and early deployment to the next challenges.

Hydrogen, carbon capture and storage, lithium and advanced livestock feed supplements, further work on biological sequestration just to name a few.

Integration of distributed energy and improvements in transmission and demand management also offer opportunities.

We have to be comfortable managing an R and D investment portfolio and we must be comfortable changing horses' mid-race if they don’t perform as expected.

And we must have a transparent process so that our investments continue to encourage equivalent or more private sector investment.

And that is what the Technology Investment Roadmap is all about.

The first step in this process will be the consultation paper that we will release in due course to engage with industry and stakeholders more generally.

That paper has been developed from six months of initial work by the Department of Industry, Science, Energy and Resources, the CSIRO and other Government agencies.

And the key to that has been independent advice.

If we are going to focus every possible research dollar – both private and public on the largest technology problem in history, we have to have some element of coordination and prioritisation in how we do it.

An important part of the framework is to include stakeholder sentiment.

And I am very pleased that Dr Alan Finkel will be a key figure in that process.

Dr Finkel has kindly agreed to be the chair of the Technology Investment Roadmap Ministerial Reference Group. And I thank Dr Finkel for the work that he has been doing and will do which is enormously important for the future of this nation and the future of this world.

Dr Finkel and I have worked together on a range of issues. But his work on Hydrogen for the COAG Energy Council has been absolutely exemplary.

I look forward to working with him closely on the development of our roadmap.

The reference group will be composed of industry, investment, Government and research leaders.

They will advise the Government on pathways for the efficient development of new technologies.

The group will also identify projects of national significance that will turn the technology adoption dial.

I will announce other members of that group over the coming weeks.

Now, the Technology Investment Roadmap will also feature an annual Clean Technology Statement.

As I said before – the Government must ensure that it stays at the cutting edge of technology investment.

The Clean Technology Statements will be an ongoing and important mechanism that will allow us to do that.

Each annual statement will provide an update on global technology developments and allow us to fine-tune and prioritise our portfolio.

We must be extremely disciplined in continually assessing the economic viability of technologies and any associated investment.

It will be a fine line. We must support technologies that can win, but we must also be disciplined in recognising when technologies are struggling and in leaving deployment of technologies that have reached commercial viability to the private sector.

The first task for Dr Finkel will be to work with the reference group, stakeholders and the Government to develop the first Clean Technology Statement.

I expect to have this statement by the middle of this year. It will be one of the most important inputs in the lead-up to Glasgow.

Now, I said earlier that a target without a plan is foolish.

We have a plan. But we must also track progress.

Obviously there are the regular emissions reduction updates published by the Government. However, that is not enough to drive multi-decade investment.

We will measure the Technology Investment Roadmap in two ways.

First, through measurable economic goals for technologies that will allow us to assess progress and to give a clear signal for when we are reaching commerciality.

The goal for each technology is to compete with higher emission alternatives.

Hydrogen is an example where our work is already well advanced.

We have a strategy, it has serious Federal Government investment behind it - $500 million, over $500 million – but we know despite the very significant benefits that can come from hydrogen it is not yet economic for large scale deployment in our energy systems.

The first specific goal will be “H2 under 2”.

That is Hydrogen at or under $2 per kilogram.

That’s the point where it competes with alternatives in large-scale deployment across our energy system.

With that goal we can track how hydrogen is progressing on its cost curve.

In five years it may be $8 and in 10 years it may be $5. But we will have a reference point on how we can reach our goal.

At $5 it is likely to be well and truly competitive for long-haul transport – assuming continued cost reductions for fuel-cell vehicles, particularly heavy vehicles – but not yet at $5 for broader energy substitution.

By tracking economic progress we can assess progress on reducing emissions at minimal costs. Because once we reach that threshold those technologies can be adopted across the Australian economy and most important, more importantly across economies across the world without economic disruption.

Each technology will have a similar economic goal.

Secondly, we need to track investment in R and D and early deployment.

As I said earlier government investment is important as both a market signal and as a leader.

To be successful from both a portfolio and a technology perspective, we must track how private-sector and other investment follows our own investment.

That is for every dollar we invest, we want to see four or five dollars from the private sector and other levels of government following over the course of our investments.

I am delighted that we have recently penned our agreement with the New South Wales Government to jointly invest in many of these sorts of projects.

That joint investment, that follow-on investment is an important indicator of the success of a technology from the support it is getting from beyond the Federal Government.

A good example is the Hydrogen Supply Chain Project in the La Trobe Valley where we are getting a 1 to 10 multiplier. Every dollar we put in, $9 coming from others.

And importantly, if others aren’t matching our investments, it’s a clear signal that something is amiss.

These two goals - an economic goal for technologies to get them to a point of parity where they can be deployed without economic disruption and an investment goal - will be the key guides for our long-term strategy.

And if you have a series of goals then you can accurately model how far and how fast Australia can reduce its emissions - and the world can reduce its emissions - without damaging our economy.

This is how you develop a bottom-up strategy for long-term emissions reduction.

Now there is a deal of work to do in this process.

At its core, it is about technology not taxes.

It means reducing emissions, not reducing jobs and the economy.

It is an approach based on rigour, discipline and optimism, not ideology.

Humans are endlessly ingenious in solving hard problems with new technologies when we have to and when we want to.

We have done that for thousands of years and at a phenomenal pace in recent centuries.

Scientists, innovators and entrepreneurs have done this driven by the opportunity to improve our lives, not by imposing taxes on the old technologies.

That approach of focusing people on improving our lives has worked for us until now, and it will work for us in the future.

Thank you very much.

ENDS