Energetics’ Jon Jutsen says within five years – and probably as soon as two years – there will be a price on carbon as well as much tougher regulations on energy use in buildings and appliances.
It’s time for Australia’s businesses to get serious about how they use energy despite the federal government’s backflip on emissions policy, according to Jon Jutsen.
The executive director of consultancy Energetics says “They shouldn’t get bogged down with climate change science or the ETS. They need to focus on their energy cost numbers. Managers and directors should understand that within five years – and probably as soon as two years – there will be a price on carbon as well as much tougher regulations on energy use in buildings and appliances.”
Even without the ETS, Jutsen points out, the $40 billion in infrastructure investment approved by the Australian Energy Regulator for electricity networks to spend between now and 2015 already represents a much higher cost environment for all consumers, and especially large ones. The renewable energy target will also add to power prices.
They may also face higher eastern seaboard gas prices once the projects to export LNG from coal seam methane are built. As well, there is potential for crude oil prices to rise again. Jutsen says: “Australian business really has to deal with a massive issue of energy efficiency.”
The national commitment to achieve a five per cent cut in greenhouse gas emissions from 2000 levels by 2020 is a significant challenge for all companies, not just miners and power generators, he says.
“The target is daunting. At its minimum level of 140 million tonnes by 2020, it represents a need to improve energy intensity between 40 and 60 per cent after taking in to account GDP growth averaging 2.5 per cent a year. This means that each dollar of GDP must be produced with 40 to 60 per cent less carbon emissions – yet Australia has not even begun to curb its carbon intensity growth.”
The national long-term target, Jutsen says, is to drive down emissions 60 to 80 per cent below 2000 levels by 2050. “This equates to a 90 per cent reduction in carbon intensity when GDP growth is factored in and the later we start to deal with this task, the harder it will be.”
Some of Australia’s largest companies are already on the path to decarbonisation despite the policy confusion, he adds. “These businesses recognise the brand value of effective action and they are finding that major investments in carbon reduction are paying off in an environment of escalating energy prices.”
He cites Woolworths as a company that has set out to reduce its emissions against floor area occupied by its stores and offices by 40 per cent over eight years. In the finance area, he says, the Commonwealth and National Australia banks are substantially reducing their emissions and their energy costs.
Energetics sees a significant move among large companies towards obtaining a comprehensive analysis of their emissions and their abatement opportunities for the decade ahead. This involves examining opportunities to improve end-use efficiency, pursue fuel substitution, source power supply from renewable generation and adopt range of options to offset emissions.
However, says Jutsen, he still encounters companies that tell him many of their board members are climate change skeptics. “My response is that I am not interested in their religious beliefs – only in whether they want to mitigate their business risks and take advantage of new opportunities.”