Energetics advises Senate Inquiry on CPRS

01 Mar 2009Archived News Climate Change Matters

From over 1000 submissions on the Carbon Pollution Reduction Scheme (CPRS) Green Paper, Energetics was one of 50 experts called to speak to its submission during the course of the Senate Economics Committee deliberations (Senate Inquiry) on March 25th 2009 in Canberra.

 

Representing Energetics were Patrick Denvir, General Manager - Consulting and Jon Sibley, Regional CARE Manager - ACT.

To view Energetics' submission on the CPRS Green Paper, follow the link to our website.

With 7 Senators present during the Senate Inquiry, Energetics was able to clearly address key recommendations that were made in its Green Paper submission. The following information covers the key areas that we believe are important to be included within the CPRS.

Energetics believes that:

  • The introduction of the CPRS will help Australian business become more energy efficient, and this can save business billions of dollars a year;
  • The CPRS should be introduced in 2010;
  • A low carbon price on its own will not drive all the energy efficiency opportunities that are available; and
  • The strategic use of the permit auction revenue will be as important as the carbon price in driving business energy efficiency.

Many opportunities exist for energy efficiency

Australian businesses currently spend about $40 billion a year on their energy costs. A 20% reduction in Australia’s energy consumption by 2020 would save Australian business more than $8 billion a year.[1]

While these are big numbers, Australia has relatively low energy prices and this combined with a lack of focus on energy management – has meant that energy use in Australia is growing at 2% per annum.

Over the last 2 decades Energetics has assessed over 2,000 companies and found that over 85% of them have very limited energy management systems – this means there are no formal processes and few people at decision making levels tasked with trying to reduce energy consumption and costs.

Energetics supports the CPRS because it is one of the policy settings that can help the business sector to become more energy and resource efficient. There are enormous untapped energy efficiency opportunities available, and some of these will become more attractive due to the CPRS.

The CPRS needs to start in 2010

Energetics believes the CPRS should be introduced by 2010 – the sooner the start, the sooner the CPRS can help play a role in slowing spiraling energy consumption.

A 2010 start date will also help the growth of the business sector that are creating jobs in the roll out of energy efficiency and carbon solutions. It can also provide the policy certainty that many of our clients in corporate Australia have been looking for.

Energetics does not agree with the view that 2010 is too soon for businesses to put in place adequate emissions measurement systems to manage their emissions liabilities. There are less than 1,000 companies that need to put in place measurement systems to manage the CPRS, and most of these have to report emissions under the already existing National Greenhouse and Energy Reporting System.

Energetics and many other companies provide affordable and efficient emissions data management systems – and having such a system is one of the first important steps any company can make to better manage their energy costs.

CPRS carbon price signal – if it’s too low it will not drive energy efficiency

While we support the important place that the CPRS will have in placing a price signal on carbon emissions we also recognise that a low carbon price will not drive major changes in energy consumption.

Our experience of working in energy management has shown us that energy demand and consumption is relatively inelastic to soft price signals. For example, we service many clients in the procurement of energy and we have seen a large amount of energy price volatility in the last 12 – 18 months due to factors in the electricity market, but these price increases have not been a major driver for companies seeking advice on how to reduce their energy consumption.

Price is just one factor affecting a decision to implement energy efficiency – there are other factors. This is why we believe that the use of the CPRS auction revenue needs to be funnelled back into business engagement programs that ensure business does act to improve energy efficiency and emissions management.

We also recognise that additional policy measures on energy efficiency will be needed in combination with the CPRS.

The strategic use of the CPRS auction revenue may be as important in driving emission reductions as the carbon price signal itself.

The use of the CPRS permit auction revenue will be an extremely important tool to help Australia in its transition to becoming a low emission, energy efficient economy. If used wisely the Climate Change Action Fund may be as important for reducing energy consumption and emissions as the carbon price itself.

The business sector consumes approximately 75% of Australian energy and therefore it is business that will initially feel the carbon price and pass it on to consumers. Efforts to improve the energy efficiency of business will pay off in terms of reducing the inflationary impact of the CPRS.

A large proportion of the permit auction revenue needs to be retained for the Climate Change Action Fund (CCAF) to deliver additional business emissions action and reductions. At least 20% of auction revenue should be retained for the Climate Change Action Fund and this fund should target the business sector. This is where the bulk of energy use and emissions are generated. Our submission to the Green Paper outlined some of our thoughts on the design of the Climate Change Action Fund and we can speak to these in more detail if it is of interest.

Energetics has been asked by the Senators to formally present our advice on the CCAF as an outcome to this inquiry.

For further information on Energetics' submission to the Green Paper and involvement at the Senate Inquiry, please contact Energetics marketing team on 02 9929 3911.

[1] Based on data from ABARE 2008 with $/GJ today and escalated at 3% pa to 2020 forecast GJ by fuel for business

Join the conversation