Big Business is Now Saying it is the Time to Act

Big Business is Now Saying it is the Time to Act

Global mining company BHP Billiton’s CEO Marius Kloppers has certainly made a dramatic intervention into the Australian climate change debate. He said this week  it was clear that Australia did need to take strong action to reduce its emissions, it needed to look beyond coal and towards other energy sources, and it needed to do so to protect its international competitiveness. TRUenergy and AGL Energy also called this week for an Australian emissions trading system to spur investment to replace coal-fired power plants.

Giles Parkinson in Climate Spectator (16 September 2010):

There can be no doubting now that a carbon price is back on the political agenda. Big business – or, more to the point, the biggest business – has spoken, and there is now no hiding from the issue.

BHP Billiton CEO Marius Kloppers certainly made a dramatic intervention into the debate.

He took three three pillars of the fossil fuel lobby’s defence of the status quo and threw them out the door. He didn’t just skirt around their Maginot Line, he ploughed straight through it. And he’s challenged the nation’s politicians to do something about it.

The three key elements from Kloppers speech was that it was clear that Australia did need to take strong action to reduce its emissions, it needed to look beyond coal and towards other energy sources, and it needed to do so to protect its international competitiveness.

The need for global action on climate change is not, apparently, just a left-wing conspiracy. And it is now, once again, a front page issue.

“We do believe that such a global initiative will eventually come and, when it does, Australia will need to have acted ahead of it to maintain its competitiveness,” he said.

The opportunity of Australia acting ahead of anyone may have already been lost, but you get the picture. Kloppers is now showing the sort of leadership from the biggest companies that has been so desperately lacking in the last 12 months.

The business community largely fell mute after the CPRS was dispatched, and has remained so, despite the massive investments towards the low carbon economy overseas, and some dramatic decisions by many of the world’s leading industrialists to reshape their businesses and invest in what they now freely call the “green economy.”

Kloppers has set the tone and the Australian dialogue can now change. And business can finally wake up to growing cost of inaction – AGL managing director Michael Fraser put the cost of delays at $2.1 billion in energy pries a year by 2020 – that works out roughly to an extra $8 per megawatt hour in energy costs to business, just as a result of doing nothing.

So, it is no longer good enough to allow politicians to put it in the too-hard basket. It’s time for Labor to have the courage to deliver on its election mandate, the Opposition can no longer put their hands to their ears and say “this is not happening”, and the Greens must be brought into negotiations.

The question now returns to what sort of carbon price mechanism should be imposed. Kloppers is keen for action, but he is wary of the economy-wide schemes that were contemplated by the CPRS, no matter the compensation levels.

He said on Wednesday that he favours a simpler, if less elegant solution, and he talked of a mixture of a trading system limited to the energy sector, and a focus on land use initiatives.

As this web site noted yesterday and in the past, a staged implementation that begins with the energy sector is now emerging as the most likely compromise between the government and the business community – AGL added its name to the supporters list yesterday – although it’s not entirely clear which of the Coalition or the Greens would support that.

The Coalition should have no problems with such a concept, but its current embrace of a standing Green Army (sounds like a socialist cliché), its direct action plan (since when did Liberal politics favour big government over a market mechanism?), and its refusal to nominate representatives to the climate change committee, relegates it to a sideshow comedy act. Kloppers should perhaps drop by Abbott’s office to have a quiet chat.

The Greens, of course, will want a broader scheme that affects more business sectors, on the perfectly reasonable assumption that they need to start making their transition to ensure they remain internationally competitive, and can therefore protect jobs.

But if Kloppers is right about the pact of international action – be it at a political or a corporate level – then the imperative for a broader-based scheme in Australia will follow on soon enough. It’s just a matter of getting the pathway in place.


By James Paton for Bloomberg (15 September 2010):

TRUenergy Pty. and AGL Energy Ltd. called for an Australian emissions trading system to spur investment to replace coal-fired power plants and said they look forward to working with new Climate Change Minister Greg Combet.

Continued doubts about whether the government will impose a price on carbon emissions would threaten spending, including as much as A$3 billion ($2.8 billion) Melbourne-based TRUenergy is ready to invest in gas-fired generation, Richard McIndoe, managing director of the CLP Holdings Ltd. unit, said today.

“We all would like a price on carbon,” McIndoe said in an interview in Sydney. “The issue is not about an ETS. The issue is one of transitional assistance. If it’s not done in this government and if this uncertainty continues, not for two to three years, but four to five years, and nobody is building, then you will have power shortages and insufficient capacity.”

Prime Minister Julia Gillard has tasked Combet, a former union leader, with leading an effort to impose a price on carbon to curb emissions in Australia, the world’s largest exporter of coal. Combet, 52, who was sworn in yesterday in Canberra, previously assisted Penny Wong in the climate change portfolio.

“He understands each part of the equation,” McIndoe said. “He understands the investors. He understands the importance of maintaining job security and not closing vast tracks of Hunter Valley and Latrobe Valley power stations. He also understands that an emissions trading scheme, longer term, is the most efficient way to provide a lower carbon economy.”

Coal-Fired Power

TRUenergy has a A$5 billion portfolio of generation and retail assets and operates the Yallourn coal-fired station in the Latrobe Valley east of Melbourne, Australia’s second-largest city, its website shows. Yallourn supplies 22 percent of Victoria state’s electricity needs.

Michael Fraser, chief executive officer of Sydney-based AGL Energy, said the company had discussed government amendments to the nation’s renewable energy target with Combet. AGL has said it accelerated plans for the A$1 billion Macarthur wind farm in the state of Victoria after the Australian Senate approved revisions to laws aimed at encouraging renewable energy.

“He got his head around complicated issues quickly,” Fraser said in an interview in Sydney yesterday. “It’s a difficult portfolio that’s going to require a lot of negotiation skills, and I think he has a demonstrated track record.”

While a price on carbon in Australia is inevitable, “it’s going to be very difficult” to achieve in the next two or three years, Fraser said.

Risk to Investment

“I don’t think anyone can predict how this is going to unfold, but if there isn’t legislative change, you won’t get large-scale investments like replacing coal-fired power stations with gas to make a real difference,” he said.

AGL rose 1.8 percent to A$15.82 at the market’s 4:10 p.m. close in Sydney. The stock has climbed 13 percent this year, compared with a 4.3 percent drop in the benchmark S&P/ASX 200 Index.

Australian lawmakers should consider an emissions-trading system that applies only to electricity generation and excludes transport and agriculture, Fraser said at a conference today.

“When you look at Canberra and you look at the political difficulties, and you look at the interests of stakeholders around the country, one of the things I would reflect on is that perhaps we have been too ambitious in trying to introduce an all-encompassing CPRS or emissions-trading scheme,” he said.

TRUenergy’s McIndoe said the government’s prior carbon pollution reduction plan introduced while kevin Rudd was prime minister would have “impaired the company’s business by several hundred million dollars” and addressed the power industry last. McIndoe said in the interview he supports the AGL chief’s idea.

“I think Michael Fraser is right,” he said


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