page 1
page 2
page 3
page 4
page 5
page 6
page 7
page 8
page 9
page 10
page 11
page 12
page 13
page 14
page 15
page 16
page 17
page 18
page 19
page 20
page 21
page 22
page 23
page 24
page 25
page 26
page 27
page 28
page 29
page 30
page 31
page 32
page 33
page 34
page 35
page 36
page 37
page 38
page 39
page 40
page 41
page 42
page 43
page 44
page 45
page 46
page 47
page 48
page 49
page 50
page 51
page 52
page 53
page 54
page 55
page 56
page 57
page 58
page 59
page 60
page 61
page 62
page 63
page 64
page 65
page 66
page 67
page 68
page 69
page 70
page 71
page 72
page 73
page 74
page 75
page 76
page 77
page 78
page 79
page 80
page 81
page 82
page 83
page 84
page 85
page 86
page 87
page 88
page 89
page 90
page 91
page 92
page 93
page 94
page 95
page 96
page 97
page 98
page 99
page 100
page 101
page 102
page 103
page 104
page 105
page 106
page 107
page 108
page 109
page 110
page 111
page 112
page 113
page 114
page 115
page 116
page 117
page 118
page 119
page 120
page 121
page 122
page 123
page 124
page 125
page 126
page 127
page 128
page 129
page 130
page 131
page 132

" "WITHOUT CERTAINTY ON A FUTURE CARBON PRICE,BUSINESSES WILLNOT INVEST INLONG-LIVED ASSETS, BECAUSETHEY WILL NOTKNOW WHAT THEIR RETURNSWILL BE ompared to the rest of the world, we havestrong growth, employment is expanding,investment flows into Australia are high,and we have record terms of trade. At thesame time as the dollar is so strong, I am also consciousthat electricity prices are rising and that this is also hardfor Australian industry.The current price rises in a number of states have beenprincipally caused by a sustained period of under-investment. Over the past three years residentialelectricity bills have risen by more than 40 per centacross Australia. We continue to see electricity pricesincrease. These increases have been overwhelminglydriven by a lack of investment. Significant investmentis required to replace ageing network infrastructureand deliver energy security.State and Territory Governments have no longer beenable to ignore the need for electricity providers torecoup the costs of these investments through higher prices. The Premier of Western Australia haseffectively apologised for the situation, saying: "Iregret it, but it is something that simply has tohappen." A leading industry commentator -KeithOrchison, previously the CEO of the Energy SupplyAssociation of Australia -put it this way in theAustralian newspaper last week: "After almost twodecades in which Australia has coasted, meeting itspower needs with cheap coal and putting off untiltomorrow a higher level of augmentation of networks,while state Governments have reaped a handy dividendfrom the revenue earned by the electricity businessesthey own, the reckoning is at hand." It is not a prettypicture. We will all live with the legacy of thosedecisions. But my commitment is this. I am not goingto allow a repetition of this problem in another 10 years by allowing another sustained period of under-investment now. That is one reason why I am sodetermined to deliver a carbon price. Obviously, thefundamental motivation for our carbon price policy ispollution reduction. If carbon did not create anexternality by warming the planet, we would not bepricing that externality in. However, the industryconsequences are then immediate. Delaying a carbonprice makes the eventual adjustment shaper and morecostly. And the absence of a carbon price is already aproblem. Producers and consumers accept the scienceof climate change. Because they believe it, they arealready responding, and their responses are alreadychanging our energy economics.Without certainty on a future carbon price, businesseswill not invest in long-lived assets, because they willnot know what their returns will be or what theenvironment will be for their competitors. Investorsalready face perverse incentives for solutions which aredriving them to adopt stopgap solutions rather thanlong term investment. This is particularly the case inthe electricity generation sector where uncertainty willdirect what capacity growth there is towards meetingincremental rises in energy demand, rather than long-term baseload growth.Where his predecessor is critical of some stategovernments for lack of investment and policyprudence, the current CEO of the Energy SupplyAssociation of Australia, Brad Page, is imploring policymakers to underwrite investment by injecting a carbonprice into the economy. He has said that without aclear carbon constraint over the next few years,generators will be forced to make stop gap investmentsin technologies like open-cycle gas turbines to meetimmediate increases in demand rather than take longterm large scale investment decision. In Brad Page'swords: "That is not a zero-cost outcome -our lightsTHE ADVANTAGES OF ACTING ON A CARBON PRICE: AN AUSTRALIAN PERSPECTIVE092 G-20 MEMBERSJULIA GILLARD, PRIME MINISTER, AUSTRALIACPhoto: UN Photo/Mark Garten

G-20 MEMBERS093Below: Australian PrimeMinister Julia Gillard(right) and UN SecretaryGeneral Ban Ki-moon would stay on but power prices will rise. Delaying aclear carbon constraint is going to cause electricityprices to go up anyway."Inaction on a carbon price means higher prices. Thereare other significant advantages to acting on a carbonprice. Revenue from the carbon price deliverstransition support to households and industries. Nosuch revenue is available to assist with the costs of thecurrent price rises around the country - nor for futurerises from an on-going investment strike. That isbecause carbon pricing is a major structural economicreform. So unlike the current catch-up round in thestates, any price rises which do flow from carbonpricing bring with them the dynamic benefits of reformfor the long-term. Real carbon pricing reform willensure industry uses energy more productively -increasing outputs compared to emissions. Decouplingeconomic growth from growth in emissions is a keymicro-reform. This reform will also help us compete in a carbon-constrained global economy. Energyproductivity is an emerging new arena for globalcompetition in production costs and it's one whereinvestment decisions now have an effect for years, fordecades, to come. Like all structural reforms, we needconsensus and discipline to deliver good outcomeswhich are sustained for the long term. I know theClimate Change Committee and the business andcommunity roundtables are working hard to deliver thisconsensus. And the Government is determined tomaintain this discipline, by taking the lead in a richer,deeper reform conversation which encourages thinkingabout the long-term. Australia did not come out of thedownturn as the strongest advanced economy byaccident. Government made good decisions. Andindustry did too. nThe above remarks by Julia Gillard, the Prime Ministerof Australia, are excerpts from the Prime Minister'sspeech to the Australian Industry Group in Canberraon 26 October 2010. For more information pleasevisit: www.pm.gov.au.