Point of difference

09 May 2009Archived News Energetics in the News

PUBLISHED: The Australian - Business Footprints: Special Report Climate Series 2: By Giles Parkinson, Jonathan Jutsen Founder and Director, Energetics Pty Ltd says 30 per cent greenhouse gas reductions are achievable in Australia. Much of this can be done at no cost and may involve aspects as simple as a change of behaviour.


The impression that most businesses oppose measures to cut carbon pollution is inaccurate, writes Giles Parkinson

THE debate about the design, timing and desirability of an emissions trading scheme in Australia has been fierce. Legislation for the federal Government's proposed carbon pollution reduction scheme is due to be put before parliament this month, and its passage through the Senate is uncertain. The Coalition and the Australian Greens are lined up against it, albeit for differing reasons. The independents also have divergent views.

But there is one inevitability for corporate Australia: whatever the final shape of the legislation, or even if the bill does not get through, international developments mean Australian companies will have no choice but to manage their carbon exposure as diligently as they manage any other business risk. This, say experts, is one of the most misunderstood aspects of the debate, which is often inaccurately pitched as a disagreement between the business lobby and the green movement.

As submissions to the Senate inquiry reveal, most businesses accept the need for a carbon price, even a trading scheme; the differences lie in how the transition to a low carbon economy should be managed, how quickly and how much assistance should be provided to those whose businesses suffer. These differences often arise between those seeking to protect existing businesses and those keen to exploit opportunities for the future.

Many companies have operations that straddle the divide. Industry groups such as the Australian Greenhouse Industry Network, the Australian Industry Group, the Australian Coal Association and the Australian Petroleum Production and Exploration Association argue strongly in their submissions that the carbon pollution reduction scheme should be delayed, reduced in ambition or at least modified to increase compensation for trade-exposed and other emissions-intensive industries. Individual companies such as Woodside, OneSteel, Bluescope and Xstrata have warned of carbon leakage, job losses and the potential closure of mines and industrial installations.

These warnings are well known, but many companies have a different view.

Transport and logistics giant Asciano, for instance, which transports almost all the coal produced in NSW for export, says in its submission to the Senate inquiry that the broad mechanism of the reduction scheme is sound and there is no case for further delay. ``While the diabolical nature of climate change policy means that there will be winners and losers as a result of introducing such policy, the threat of climate change and the need to implement a framework for the future should not be drowned out by the complaints of the political stakeholders and those who will have to change their businesses in response to climate change,'' it says.

Schlumberger, the world's leading provider of services to the oil industry and one of the leaders in the development of carbon capture and storage technology, has urged the Government not to repeat the mistakes of the European scheme, where too many permits were allocated, and says any compensation should be used only to implement technologies that can reduce emissions.

``If the compensation flows back to the bottom line, then little has been achieved other than a net transfer of wealth from the taxpayer to a private enterprise,'' Schlumberger says in its submission. ``Indeed, we would further argue that the issue of climate change is not new and that the boards of many of these exposed companies should have been dealing with this issue long before now.''

Even those that may have most to lose from the threatened closure of industry and energy installations -- their bankers and investors -- have expressed a strong desire to go forward with the emissions trading scheme.

The Investor Group of Climate Change, which represents institutional investors who manage about $500 billion of Australian superannuation funds, has accused some of the companies it invests in of favouring narrow self-interest over longer-term economic and environmental prosperity.

``The IGCC does not support the views of many of these companies that the CPRS will be damaging to the Australian economy and to Australian jobs. On the contrary, IGCC is of the view that the costs of the CPRS to the Australian economy are manageable,'' it says.

The Australian Bankers Association says a delay in the CPRS will create uncertainty, deny businesses and households the chance to adjust gradually, and create difficulties with regard to financing terms and investment decisions. ``Australia needs leadership and early action to provide business, investment and operational certainty,'' it says in its submission. ``It is important for Australia to take action now and take advantage of the opportunity to position itself as a carbon hub within the Asia-Pacific region. Delays in introducing the CPRS will result in infrastructure and skills development opportunities going overseas.''

It is developments overseas that could have the biggest effect on Australia, regardless of whether it goes ahead with an emissions trading scheme.

Andrew Petersen, head of sustainability and climate change practice at PricewaterhouseCoopers, says Australia's main trading partners -- the US, Japan and even China -- are moving to price carbon in some form. These initiatives will affect Australian companies. ``Our major trading partners are becoming carbon literate,'' Petersen says. ``And we have to make sure that our industries [and companies] are carbon literate, too. Companies' boards have to analyse and manage the risk.''

Petersen also argues that if the CPRS does not go ahead, the Government inevitably will have to resort to discreet taxes and other specific regulations, a piecemeal approach that would not be welcomed by business.

It is clear from the articles in this special report that there are numerous opportunities for companies to reduce their energy consumption, their carbon emissions and their costs, and much can be achieved through a focus on energy efficiency.

The International Energy Agency estimates that energy efficiency has the potential to achieve more than 35 per cent of the globe's greenhouse gas reduction task. Jon Jutsen, founder and director of Energetics, and one of the country's leading energy efficiency experts, says a 30 per cent cut is achievable in Australia. Much of this, Jutsen says, can be done at no cost and may involve aspects as simple as a change of behaviour. Some initiatives would be at negative cost, meaning the money saved outweighs the initial investment. Jutsen says a price signal, even the modest one envisaged by the carbon pollution reduction scheme, will encourage Australian companies to adopt those initiatives, as well as others that require greater investment in new technology.

Without it, Jutsen says, Australian companies will struggle to compete globally, particularly when energy prices rise again. ``Australian business has enjoyed low-cost energy and assumed it will remain low-cost into the future, and a lot of our facilities and business practices and systems reflect low-cost energy,'' he says. ``But we have built ourselves a competitive disadvantage.''

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