Member for Isaacs

Weekend Sunrise 8 April 2012

08 April 2012

Subject: Carbon Pricing

Subject: Carbon Pricing

Andrew O'Keefe: Debate over the carbon tax has been raging for months and even years now, and with it now likely to proceed there does remain an outstanding question. Regardless of whether you believe in climate change or not, will this tax actually achieve what it is supposed to?

Natalie Barr: Well let's explore that very question this morning, Mark Dreyfus is Parliamentary Secretary for Climate Change, Neer Korn is a social researcher and Matthew Wright is from the environmental think tank, Beyond Zero Emissions. Good morning to you all. Let's start with you Mark Dreyfus, as briefly as possible please explain to us the point of the carbon tax and will it achieve anything?

Mark Dreyfus: The question is how we can get dangerous pollution in Australia cut at the same time as making sure jobs continue to grow and the economy continues to grow. And the advice we have from expert economists, expert scientists is the best way to do that is by putting a price on carbon, that's the way we will get dangerous pollution to drop at the same time as making sure we are doing it in a careful transition. That is to grow renewable energies, new industries, as we move Australia in the same direction as the rest of the world is getting on, which is cutting dangerous pollution.

Andrew O'Keefe: So Mark, in a nutshell the notion is that you charge polluters a price per tonne of pollution they emit so either they reduce their emissions, or they have to pass that price onto consumers and therefore the cost of their product goes up. So you are relying on consumers to change to other cheaper - which is supposed to be greener - products. Is that how it works?

Mark Dreyfus: That is pretty right Andrew. It is about getting the heavy polluters to change their behaviour. They have got an incentive to change because they are the ones that are paying the price. That is where the behaviour change has to occur.

At the same time we are cushioning the effect on ordinary Australians. Nine out of ten Australian households as you would see in today's papers are going to be getting assistance, and of course it is up to them to choose how they spend that assistance. The behaviour change we are looking for is from heavy polluters who will be paying the carbon price.

Natalie Barr: And the consumers, where is their point I suppose of stopping in buying that product. Where does that price impact come in? Let's bring in Neer Korn. Will it work? Will consumers move away from those products with the large carbon footprints?

Neer Korn: Well for people to change their consuming behaviour, there has got to be a degree of pain involved because people don't only make the decision based on price. Otherwise we would only buy the cheapest product. People care about what it tastes like? Will the family eat it? What's the quality of ingredients? If the difference is a couple of cents, it is hard to say people will change their behaviour. If the difference becomes a painful one then people have to start experimenting with alternatives. Otherwise they will say, "Look all else being equal, I will buy the carbon neutral one or the lower emission one. Otherwise I will stick to what my favourite brand is."

Andrew O'Keefe: Are you saying Neer that the cost impost to the consumer is not looking like it will be great enough to make carbon heavy products less desirable?

Neer Korn: It's not their only consideration, so the difference of two, three or five cents for a product that costs several dollars is not going to be the be all or end all for them. A good parallel perhaps is that people tell you to buy Australian made products and if the difference is two, three, five or ten cents, then they will choose that product that is Australian made, all else being equal. And I think there is a parallel here. The product has the same quality, same everything else about it, then I will buy the cheaper alternative, but for five cents there are other things going through my mind that are more important than those few cents I'm saving.

Natalie Barr: And that's hard to determine where that kicks in isn't it?

Andrew O'Keefe: Well it is different for different products. Petrol goes up by three cents and everyone tries to burn the city down.

Natalie Barr: Raspberry jam goes up and they still stick with their brand. It's a tough one isn't it? Matthew Wright, is what the government doing on renewable energy going to work? This is the other side of the equation. Explain that to us.

Matthew Wright: At the moment we are in a situation where we have got a coal and gas dominated fossil fuel based electricity sector. In many countries around the world, all the leading economies are moving quickly towards renewable energy. For instance last year, according to Bloomberg New Energy Finance, more than half of the global capital spent on new assets in electricity generation was spent in renewable energy rather than the old fossil fuels.

Now unfortunately we are lacking the ambition here in Australia. We have got Tony Abbott and the Opposition with their "Do Nothing", but unfortunately we have got the Government as the only alternative with the "Do Little" and what we need is a serious ambitious program to install renewable energy across the nation and to decarbonise this economy.

Andrew O'Keefe: Well that is an interesting point and Mark it is one thing to make coal, oil and gas driven industries less desirable by making them more expensive. But you have got to make the carbon neutral industries more desirable by making them less expensive. Are we really investing enough in those alternative energies? We are still investing heaps in traditional energies sources.

Mark Dreyfus: Andrew we have got to get the ball rolling here and that's what this carbon price scheme does. There is about thirteen billion dollars from the carbon price revenue going to go into investing in renewable industries and we can't achieve this change overnight. We wouldn't be intending to. We have got to be conscious that there are communities right across Australia, in Wollongong, Bowen Basin, Hunter Valley, Latrobe Valley here in Victoria that are dependent on heavy industry.

We can't just disrupt those communities. We have got to get on a transition, a careful transition, that's what this carbon price, this pricing scheme that we have now got will do. That's the clean energy future that we are looking for that is going to ensure that jobs in those places across Australia are protected, that the economy continues to grow while we get on the path towards the clean energy future we are looking for.

Natalie Barr: Mark, what if a lot of these big companies just think, "hang the expense, we don't think it is worth us changing the way we operate. Lets stick with the dirty coal and the polluting way of doing things because it is just not worth us going clean.

Mark Dreyfus: We don't think they will. That hasn't been the experience in the countries in Western Europe who have had an emissions trading scheme, a price on carbon for the last seven years or Sweden, where they have had a price on carbon for the last twenty years. Companies move in response to this incentive. They are competing across the world as well and as Matthew just said a moment ago there is a huge market now in renewable industries, in new technologies, some six trillion dollars last year. We are very confident that the carbon price we have got is going to move companies in the right direction towards lower polluting technologies, which is where we want them to be.

Andrew O'Keefe: Well gentlemen unfortunately we are out of time so we are going to have to leave it there and thank you all very much. And Matthew maybe some point in the future we can get you to come back because you say we can move the whole energy system to a carbon neutral system within ten years if we invest enough. I would like to hear how that could possibly be done. Thanks so much for joining us this morning Mark, Matthew and Neer.

Mark Dreyfus: Good to be with you.

Andrew O'Keefe: We are going to get the emails of course saying, what is the point if Australia does this and the rest of the world is not doing it?

Natalie Barr: Which is big feedback you get from families.

Andrew O'Keefe: But one of the points I think Matthew would have made if we had a little more time is the fact that the whole European Union is now working on an emissions trading scheme, China is about to move into an internal emissions trading scheme and most states in the United States have followed suit. We are not alone.

Natalie Barr: It is a start.

Andrew O'Keefe: But still it is a complex system isn't it? Relying on business and the consumer, two elements, opposing elements, and the consumer to work together.

Natalie Barr: And entire ways of doing business changing over the next twenty years.