DOORSTOP, SYDNEY 18 MAY 201
QUESTION: Minister what carbon price do you think we need to make a dent and meet the 5 per cent emissions target?
FERGUSON: Well obviously the cabinet hasn’t focussed on what an appropriate carbon price might be at this point in time. But the reports I released today – the Deloitte report plus the Investor Reference Group – clearly point to the difficulties we create if we don’t resolve a price on carbon. They throw up the fact that we need new investment in electricity generation in Australia, otherwise you undermine the reliability of the electricity system.
We’ll continue to go through a process of consultation and in due course the cabinet will determine an appropriate price on carbon.
QUESTION: What price do you think needs to be set?
FERGUSON: As to ball park figures – they are matters I will turn my attention to in cabinet discussions. I’m not going to conduct a debate in the public media about those issues.
QUESTION: You haven’t got a firm decision on that?
FERGUSON: I think Greg Combet and I have made it very clear that the Government has not determined a price on carbon at this point in time.
QUESTION: Will petrol be included?
FERGUSON: They are matters to be determined by Government as we go forward and finalise the framework.
QUESTION: The 30 per cent increase in electricity prices that you’re talking about does that include a carbon price?
FERGUSON: No it doesn’t, it reflects the system as it currently is. But also you have got to appreciate that the reports I released today clearly now start to focus on the additional cost to the Australian consumers through a lack of certainty arising from the fact that we have not got a price on carbon. You cannot bank new investment in generation in Australia without having a price on carbon. And that’s why we are so focussed as a Government on resolving these issues once and for all. The price increases we’ve got at the moment are basically related to maintaining the existing system. And that is simply not good enough. We need certainty for investment in new baseload capacity in Australia.
QUESTION: Minister at the CEDA conference about two weeks ago you said the Government was going to have to make some tough decisions very soon. Would setting a carbon price and letting the public know about that price be one of those tough decisions?
FERGUSON: That’s why we are going through a detailed process to get it right. You actually go through the issues that I have discussed here today at the conference plus properly examine in an objective, factual way the detailed matters raised in the reports I released today, you’ll understand how complex this is. And getting the electricity system right is so central to the outcome of a price on carbon because that goes to the strength of our economy in the future.
We need the existing investment that maintains the system as we know it, one of the most complex but efficient in the world, but we also need new investment. Because if you don’t get a price on carbon you are potentially looking at costs of another $1 to $2 billion per year in terms of maintaining the existing system from a generation point of view in a highly inefficient way because you can’t get certainty for baseload investment in Australia.
QUESTION: Is there a discussion underway about whether petrol should be initially excluded?
FERGUSON: Obviously petrol is one of the issues the Government has got to think about. It was an issue that we focussed on in the CPRS in the lead up to November 2009. And clearly, as is evidenced in the media today, it’s an ongoing question that is being discussed by Government.
QUESTION: And there was a bit of criticism about some of the ministers not driving clean energy cars. Do you drive one of those? Do you think you should be?
FERGUSON: I’ll drive the car of my choice. If other ministers want to drive hybrid cars then so be it.
QUESTION: Do you think it’s hypocritical?
FERGUSON: Not at all.
QUESTION: Two of twenty cabinet ministers, you wouldn’t like to see more? I know you’re not one of the hybrid car drivers.
FERGUSON: If they want to drive a hybrid car then so let them. Let’s focus on the real key issues in the economy at the moment. If you want to attend to abatement the biggest change you can make is in the electricity system. And that’s very much focussed on our legacy brown coal assets in places such as Victoria. That’s the key to this debate. I simply say hybrid cars are interesting but if you want to make a dramatic change in our emissions as a nation then you focus on putting a price on carbon and very much focus on the legacy assets in the electricity system.
QUESTION: To drive that change Minister the Deloitte’s report is suggesting at least a $40 per tonne…
FERGUSON: No they don’t say that. They say in terms of $40 you might then get a decision at some point in the future to go from black coal-fired power stations in Queensland and New South Wales to alternatives. But I want to make this point. The focus is not on the coal fired power stations in New South Wales and [Queensland], they are regarded in relative terms as clean energy options compared to Victoria. That’s where the focus is on. The focus is on the legacy of electricity generation capacity in places such as Victoria. We’ve got to make sure that as we effect this transition we do not undermine the asset value of those electricity investors while also bringing on new investment. The last thing we want to do is impair those assets because that will undermine our capacity as a nation to attract new finance for new electricity generation in Australia.
QUESTION: Are you concerned by the report in the Australian that the coal and electricity generators plan to keep their power generators operating well beyond 2030?
FERGUSON: Well that is premised on no price on carbon. If you put a price on carbon then some of those electricity generators have got to think about whether they get out of the market. Our job in working with them as to whether they withdraw from the electricity market is to bring on at the same time new electricity generation and it’s primarily going to be in gas, which in the end maintains reliability in the system and makes a smooth transition to a low abatement outcome in terms of baseload energy in Australia.
QUESTION: But how easy is it going to be to transfer from coal to gas. That’s going to take a lot of money particularly when you are needing money for infrastructure as well?
FERGUSON: Well that is the complex challenge confronting the Government but if you actually have a market based system, which encourages for example some of the legacy assets to withdraw from the market at a point in time then you create a market opportunity for new investment in baseload capacity in Australia. And the obvious market opportunity is for gas. That’s about why we are trying to put in place a market system which creates opportunities for new investment in Australia to actually see a gap in the market with some capacity retiring at a point in the future which basically underpins new investment in Australia.
QUESTION: So just to be clear the 30 per cent increase that’s without a carbon price?
FERGUSON: Yes that’s the projections over the next three years.
QUESTION: So what could it be then, the increase?
FERGUSON: Well that will be determined as we determine a price on carbon. You can then focus on the emissions target when that kicks in, the operation of the trading system, all those issues are matters that have got to be determined by the Government in finalising its approach to putting in place a price on carbon.
QUESTION: There has been reporting that suggests that its creating further – no clearer idea on what’s happening with the carbon tax will create uncertainty in the industry and push prices up further. Is there any way of combating that or addressing that?
FERGUSON: The reports today are about I suppose in a factual way putting in front of the Government and the community the fact that a lack of certainty on a price on carbon in Australia at the moment is in fact leading to higher prices. And that could get worse over time because what we need is new investment in new capacity in Australia.
QUESTION: When will industries like LNG, petrol and electricity find out about how much they’ll get excluded…(inaudible)
FERGUSON: There’s a detailed process of consultation underway at the moment. So let’s take LNG – my department has been meeting with the major LNG investors over the last couple of weeks. The Government will in due course think about where we end up on the question of a carbon price on petrol. They are all issues being considered by Government at the moment.