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TONY JONES:

The Federal Government has deferred releasing its long-promised energy white paper. The paper's expected to give industry and consumers a clear view of Australia's energy mix in a future likely to be dominated by concerns about climate change.

But how can Australia reduce its carbon emissions and still cater to a growing population while domestic oil is running out and the nation's electricity infrastructure needs an urgent $100 billion overhaul?

Well to talk about these issues, Martin Ferguson, the Resources and Energy Minister, joined us a short time ago from our Parliament House studio. Martin Ferguson thanks for joining us.

MARTIN FERGUSON:

It's a pleasure.

TONY JONES:

Right now Australia imports 55 per cent of its oil needs. The latest report of the Jamison Group says that by 2020, that will rise to more than 80 per cent, representing a projected trade deficit of $25 billion.

If they're right, Australia is rapidly heading for an oil crisis. Do you agree?

MARTIN FERGUSON:

On current trends, clearly we will be importing more. That is all related to whether or not we achieve further exploration, development and therefore produce more of our own domestic alternatives.

I can also say, where we end up in 2020 or 2030 is also going to be related to where we end up in alternative fuels such as second generation biofuels, and what we do in terms of the encouragement of the expansion of public transport. And I must say on second generation biofuels, we've got a small research and development program out there and there is a significant amount of interest - both domestically and internationally - from the automobile industry and, I might say, the airline industry in this type of development.

TONY JONES:

Okay, let's talk then about the alternative fuel options. The most controversial would have to be coal-to-liquid. What's the potential for that technology in Australia as far as you're concerned?

MARTIN FERGUSON:

Look, be it second generation biofuels, gas to liquids, coal to liquids - they're all potential developments but the market will determine actually whether or not they actually come to fruition.

And that's why, in a lot of ways, the sooner we get a price on carbon the better, because this will actually go to drive some of these market decisions and potential investment decisions in terms of what we actually develop and where we end up in 2020 or 2030.

TONY JONES:

It isn't only the market, of course. Coal to liquid is being done in South Africa, China's building a plant. Two problems: of course, it's very expensive - you've just pointed out the issues with the carbon price - but also these plants, these coal to liquid plants, are huge greenhouse emitters themselves. Given the risk, would you encourage that kind of development in Australia?

MARTIN FERGUSON:

Well, that'll be a commercial decision for investors. They're the ones that'll have to take the risk.

TONY JONES:

So, coal to liquids is purely an investment decision for outsiders to make. The Government would have no say one way or the other as to have that kind of technology in Australia? Is that right?

MARTIN FERGUSON:

It's not the role of Government to actually pick market winners.

Our job, be it through a CPRS or our taxation regime et cetera, is to act to create the environment for the purposes of investment.

TONY JONES:

Well, I mean, you just said the Government is involved in promoting second generation biofuels through its own research. It is also involved in promoting the coal industry through carbon capture and storage. It's a Government investment, it is not purely commercial in that regard. Otherwise you wouldn't be putting money into carbon capture and storage.

MARTIN FERGUSON:

We have an obligation to work with industry and, I might say, universities, to actually invest in research and development - to actually prove whether or not these technologies are available and capable of commercial development.

But in the end, as to whether the research and development outcomes are actually taken to a point of commercial development is a question for the market to determine, and the major business houses to actually take that risk. We are not involved in picking winners.

TONY JONES:

Alright, so would you promote research and development into coal to liquid technology, given the vast supplies of coal in Australia?

MARTIN FERGUSON:

No, I don't believe we have to promote investment, for example, in R&D for coal to liquids or gas to liquids. They are proven technologies.

TONY JONES:

Okay, you've talked about second generation biofuels. The industry actually says they can now produce biofuels from the waste from the sugar industry, also even from eucalyptus oil, from gum trees, so what's the potential there, as far as you can see?

MARTIN FERGUSON:

I actually think it's huge, and I must say, one of the R&D opportunities I think is very important to Australia is the focus on algae, not just the by-products for example of sugar production.

There is considerable interest by the private sector in the potential development of algae as a second generation biofuel and, I might say, something that the airline industry and the automotive industry is having a hard look at.

TONY JONES:

You're talk about converting algae - or the fat in it, in fact - to diesel, is that correct?

MARTIN FERGUSON:

Correct.

TONY JONES:

The suggestion is that that can be done by locating pools of algae alongside coal-fired power stations, pumping the carbon dioxide into the algae to make it grow. Is that the sort of technology you're talking about?

MARTIN FERGUSON:

That's one opportunity. Alternatively, in a number of places in Australia there's potential for the development of algae farms as a stand-alone process for the purposes of development of second generation biofuels. There are a variety of alternative development prospects.

TONY JONES:

Okay, let's move on. China is planning to become the world leader in building electric cars. Germany wants to build a million electric cars by 2020. Britain is planning a massive roll out of plug-in cars. What is your vision for the rollout of electric cars in Australia?

MARTIN FERGUSON:

Well, the Government is investing heavily with the automotive industry in trying to facilitate this development and clearly it's something that the Prime Minister is absolutely committed to, because it's not just potentially reducing our dependence on oil, it is also about cleaning up the environment.

TONY JONES:

Let's go back to electric cars specifically, another recommendation of the Jamison Report. They say electric vehicles should be powered by renewable energy sources and that the Government should legislate to make sure of that. Will you do that?

MARTIN FERGUSON:

There is no intention of Government to legislate, or to suggest, that green cars should be driven only from energy sourced from renewable energy.

Our commitment is broader. It's to actually create an energy market in Australia which is reliable, and hence we have energy security, but it is based on reducing emissions.

In terms of renewable energy at the moment, obviously the early growth is wind power. That is important. But you couldn't drive a green car fleet in Australia at the moment through wind energy alone because the reliability factor.

I'd also say, there is also a role of Government to work with the renewable sector, not just through the creation of a renewable energy target plus a price in carbon, but also to invest in research and development to prove up, for example, whether we can achieve base load geothermal, ocean power, biomass or whatever.

Research and development will determine what drives green cars in Australia, but our strategy is premised on lower emissions energy security in Australia.

TONY JONES:

One of the problems is the renewable energy target, set to rise to 20 per cent by 2020, evidently effectively declines from that point on so that according to your own report, it sits at 19 per cent by 2030. That means it's going in the wrong direction, doesn't it?

MARTIN FERGUSON:

I actually think you will see an immediate growth in renewables, fuelled by the renewable energy target and it could be even fuelled more if we could actually resolve the complex issue of a price on carbon and the uncertainty on that.

And what is holding back the industry is the Coalition. Now, wind power will grow, as will gas initially, but our real objective is to actually test the other technologies, such as geothermal, ocean and biomass, because it's not just about renewables. If we're going to have real progress in reducing emissions in Australia and people with a reliable energy system, it's based on base-load capacity.

And that is about, for example, geothermal. Alternatively, it's about investing - as we have – on whether or not we can create the storage technology to make wind power an alternative base load capacity in Australia.

TONY JONES:

The Greens' leader Bob Brown says you're actually the problem here. He says, quote; leaving renewable energy in Martin Ferguson's hands is a complete contradiction.

MARTIN FERGUSON:

Well, Bob Brown is entitled to his view. All I can say is I'm committed to all forms of energy. Australia expects reliability, the best possible price and, I might say, a reduction in emissions.

Bob Brown would like to choose one form of energy, renewables. I actually believe we've got to test every potential source of energy to reduce emissions and to guarantee our economic future based on a reliable energy system.

TONY JONES:

Evidently you told The Australian that renewables cannot be relied upon for base load power, but really that's not true, is it?

MARTIN FERGUSON:

Wind energy at the moment is not base load power because of its intermittent nature.

TONY JONES:

But you can - but you can - you can get base load power from solar energy, for example, from solar thermal energy in particular?

MARTIN FERGUSON:

Though our Solar Flagships, we're actually going to test whether we can prove up base load reliable solar energy in Australia under the Government program.

TONY JONES:

Let me ask you this directly. Do you personally believe in the science that says that human-induced greenhouse gases are the cause of dangerous global warming and climate change? Do you personally believe that?

MARTIN FERGUSON:

Not only do I believe in it, that is the view of the Government.

But perhaps more importantly I am actually more focused on how you make practical progress to reduce emissions.

I'll leave the ongoing debate to others such as Bob Brown. I suppose I'm more practical and pragmatic about achieving investments such as the Gorgon investment in Australia, which is regarded as cleaner energy in the transition to a lower CO2 emission economy, whilst at the same time working with the renewables sector to actually prove up once and for all, will solar thermal be base load.  Will ocean power be base load? Will geothermal be base load? I hope they are, because the key to Australia's economic future is reliability at the best available price in terms of the energy system in Australia.

If you do not have energy security reliability, you simply do not have a strong economy. And our barrier to that advancement at the moment is the uncertainty created through the Coalition's actions with respect to a price in carbon, which will actually take our potential achievements further.

TONY JONES:

Have you had a conversion on the road to Damascus here? I mean, have you converted from sceptic into a believer about the science of global warming and climate change because you're widely quoted, as you know, by sceptics as being as one of those people inside Cabinet who doesn't believe in that science.

MARTIN FERGUSON:

Well, you show me where I've said anything to that effect.

TONY JONES:

No, but I am asking you the question.

MARTIN FERGUSON:

Come on. No, I am putting a question back to you. You are...

TONY JONES:

I've not - I've not seen you - I've not seen anything specific from you at all, no.

MARTIN FERGUSON:

Correct. Correct. Correct.

TONY JONES:

Absolutely, which is why I'm asking. It flows...

MARTIN FERGUSON:

And I've answered your question.

TONY JONES:

Alright, it flows into a discussion that's happening today because the chairman of the ABC, Maurice Newman, has today attacked the media for being too willing to accept the conventional wisdom on climate change. Do you disagree with him?

MARTIN FERGUSON:

Look, let the debate on climate change go on. I am actually focused on the debate about technology and energy efficiencies because I actually think we've decided as a community we have to move to a low emission domestic and global economy.

And that means we have to make the breakthrough on technology and we have to get more efficient with respect to the use of energy in Australia.

And I might say, in terms of energy efficiency, if you actually reduce the demand for energy you're actually reducing the need for investment and reducing the cost of energy to industry and Australian consumers.

TONY JONES:

What's the timetable for shutting down Australia's dirtiest coal-fired power stations like Loy Yang and Hazelwood? Is there a time table?

MARTIN FERGUSON:

There is no time table on that because, firstly, you've actually got to invest in the alternatives. I can't turn off Hazelwood tomorrow because, frankly, where is my base load alternative?

Where is the proven solar thermal capacity? Where is the proven geothermal capacity? If we were to close Hazelwood tomorrow we'd have an absolute backlash from the Australian community. For example, they couldn't go home over night, put the lights on and cook their evening meal.

We have broader responsibilities. We can't play to the gallery like some in the community.

We will work with business to create a low emission economy, through R and D, a price on carbon, and a renewable energy target.

TONY JONES:

The Government's pouring billions of dollars into the coal industry to promote carbon capture and storage technology. When are we going to see the first fully functioning CCS system on a coal-fired power station in Australia?

MARTIN FERGUSON:

Well, firstly, we're also pouring significant amounts of money into our broader clean energy strategy, which is equivalent to $4.5 billion, including, I might say, $1.5 billion in a solar flagships program.

I am actually trying to assess in the period 2015-16, whether CCS will be proven up, whether solar thermal will be proven up, whether geothermal will be proven up.

If we actually don't make the progress on any of those and associated technologies in the period 2015 to 2020 then Australia will have a challenge, as will the global community, on how we make progress on reducing emissions.

TONY JONES:

So 2015 is the kind of deadline, is it, to find out whether that CCS technology actually works?

MARTIN FERGUSON:

I see the window of opportunity to actually prove a variety of low emission technologies in that time span 2015 to 2020, as I might say, does the G8 because they've actually said in Hokkaido in Japan last year, that by 2020 we have got to have 20 proven CCS commercial operations in the world.

Put aside the coal-fired power station, by 2015 we will have through the Gorgon project the biggest ever commercial deployment of carbon capture and storage in the world. So it's just not for the coal industry, it's also for the petroleum industry.

TONY JONES:

A final question, then, to draw this together. What's the plan that allows Australia to both reduce carbon emissions in line with its international agreements and international pressure and climate change demands, and yet cater to the growing needs for power in Australia? Growing very fast as we know in terms of expense and requirements. As well as that, adding maybe tens of millions of people to our population by 2050?

MARTIN FERGUSON:

Well, clearly on current trends - not just population growth but household demands, for example, for air conditioners - we are very quickly approaching maxing out our energy system in Australia. The gap between base load and peak load is actually fast disappearing so we have to invest in new generation capacity. That will initially, in my opinion, be gas and wind.

In the time span of the immediate future, especially in that period 2015-2020, be it me or any alternative Energy Minister is actually just going to be focused on energy efficiency, which reduces for demand in investment in new energy capacity, and where we end up on the clean energy strategy.

I have got no interest, nor has the Government, in trying to pick winners. If CCS works, it works.

Clearly gas becomes more competitive. I think one of the hopes of the side is geothermal. If we can actually invest in capacity to store energy out of wind, ocean power, or biomass, then we are the winners.

But there's one objective of Government: determine an environment which creates investment opportunities and research and development. The renewable energy legislation is part of that. We then have a variety of other programs, such as the clean energy strategy.

The one missing link is a price on carbon. I actually say it's about time the Coalition got out of the way because to achieve what you posed to me in your last question, we actually need a price on carbon to enable us to drive what the community expects; reliability in energy but lower emissions.

TONY JONES:

Martin Ferguson, that is where we will have to leave it. We waited a while to talk to you. It's always worth waiting for a good interview and we hope to see you again sometime soon. Thank you very much.

MARTIN FERGUSON:

Thanks very much for the opportunity.