Governments must face reality and cut energy consumption

Weekend Australian
Saturday 24/3/2007 Page: 2
Jonathan Jutsen

AFTER 10 years of tinkering with issues relating to energy and global warming, we can only hope that Canberra is starting to recognise that Australia failed to come to grips with a number of critical issues relating to its energy use which can only be addressed with an integrated energy and carbon policy.

These issues include:
*Global warming: Global warming is largely a result of the consumption of energy from the combustion of fossil fuels, with the most carbon dioxide per unit of energy output coming from brown coal, then black coal, oil and the least from natural gas. Climate scientists tell us that to achieve an acceptable level of climate risk, we will need to reduce emission of greenhouse gases by 50-60 per cent by 2050 to stabilise atmospheric CO2 at 450-550ppm. The most cost effective way to reduce emissions is by improving the efficiency with which we. use energy in our businesses, government, homes and transport, as well as the efficiency of conversion of energy in power stations.

*Oil supply security: Australia's dwindling oil production combined with increasing demand means that our oil self-sufficiency. has plummeted from 96 per cent in 2000 to 70-75 per cent now and could fall as far as 50-55 per cent by 2015 in the absence of major new finds. Any disruption to import flows will now rapidly affect our ability to function. The most cost effective way to reduce import dependency is to increase energy efficiency to reduce/reverse growth in consumption.

*Balance of payments: Australia's balance of payments has been hit hard by increasing import volumes each year, combined with the rapid increase in world oil prices. Fortunately this has been largely offset by increasing gas and coal exports. In future there will be increasing international pressure to constrain coal exports due to efforts to contain greenhouse emissions. As coal exports become more constrained and ultimately start to fall, it becomes increasingly critical to reduce oil imports while increasing LNG (and probably also uranium) sales to maintain a surplus in our energy balance of payments. The best way to reduce our oil import bill is to improve energy efficiency in the transport sector.

*Resource efficiency and business competitiveness: Businesses rely on energy to operate and energy is an increasing cost in business expenses. The best way to reduce operating costs associated with energy use is to improve energy efficiency.

A common theme in key actions to resolve these major issues is improving efficiency of energy use. Energy efficiency is likely to deliver at least half of all the savings in emissions needed to meet our long term greenhouse gas reduction targets, with the other half being made up of a mix of renewable energy generation (from wind, solar thermal, photovoltaics, biomass), perhaps nuclear power, carbon capture and storage from coal fired combustion, reduced deforestation/tree planting, and a myriad of other measures. Despite this, there has been very little Federal focus and less funding on energy efficiency measures.

The NSW Government has taken important steps to improve energy efficiency through implementation of BASIX for new home energy efficiency, Australian Building Greenhouse Ratings to encourage commercial building efficiency, mandatory Energy Savings Action Plans and associated energy savings grants to encourage energy savings projects.

The federal Government has, until very recently maintained its theory that the "market' will fix energy efficiency without government intervention - their economist passionately believe that if it is cost effective, then people and businesses will invest in energy efficiency without further coercion or incentives, despite the overwhelming evidence that direct initiatives are required.

The most significant measure that it has taken is the mandatory reporting requirement for the top 250 corporations in Australia, the Energy Efficiency Opportunities (EEO) Act. This is a very useful measure, but should have been backed up by very significant funding for incentives to accelerate businesses investment in energy efficiency measures, to ensure savings rather than just requiring that reports be prepared.

But to achieve a 50 per cent reduction in greenhouse emissions (compared to the expected 20-30 per cent-plus increase in emissions predicted if we do not act), will take a lot more than a couple of introductory measures. It will require a major mobilisation of resources toward the common goal of saving the globe from over-heating - a moon Mission, a Snowy hydro scheme running for 50-plus years. It requires substantial funding; performance mandates, government support infrastructure, and the building of capacity to deliver rapid changes in our patterns of energy use.

Here are a few energy efficiency measures that will all be necessary to improve energy use.

*Carbon tax and efficiency incentives: we should immediately establish a carbon tax set at, say, $15 a tonne of carbon. The proceeds would be required by law to be entirely used for major energy efficiency improvement incentives. There is a good example of a similar tax in the UK which has been well accepted by the public and contributed to the reduction in emissions in the UK. This step could be followed by a carbon trading scheme involving a cap on emissions for all major users including end users.

*Minimum energy efficiency performance standards: These would be regulations for new investment in residential, commercial/government sectors and cars. This is critical as capital stock being build/ purchased now is in the market for many years - for example, the average age of cars on Australian roads is 10 years, and houses and commercial buildings can be 20-plus old years before major refurbishment.

*Education and information programs should be implemented including, efficiency labelling (for example, cars and appliances) and mandatory building ratings, and the EEO program should be extended to smaller businesses.

*Investment in public transport, and broadband internet/communications to reduce the use of private vehicles.

*There should be changes in taxation law to reverse perverse incentives, for example FBT reducing on cars with increased mileage travelled, and the government should provide leadership by improving energy efficiency in government facilities to world best practice levels.

It is time for our federal Government to show leadership in this area and enact an integrated energy and carbon policy focuses on energy efficiency. These measures will not only reduce emissions but also provide a net economic benefit for the community. As a first step we should immediately enact measures to achieve zero energy demand growth within 5 years.

Jonathan Jutsen is a director of Energetics, providers of sustainable energy solutions