APPEA Says Carbon Pricing Should be More Efficient, Less Costly (Australia)

In its submission on the Australian Government’s Clean Energy Legislative Package, the peak body representing Australia’s oil and gas industry has suggested a number of amendments to improve the proposed carbon pricing plan’s ability to meet Australia’s greenhouse gas emissions reduction targets at least cost and provide investment certainty.

The Australian Petroleum Production & Exploration Association (APPEA) Chief Executive, Belinda Robinson said: “The introduction of a carbon price mechanism should allow decisions about investments in low emission technology and the mix of Australia’s energy sources to be made in an efficient way, avoiding an approach that picks winners or results in a ‘fashion parade’ of different energy sources.”

APPEA supports a national climate change policy that delivers abatement at least cost and facilitates investment decisions consistent with there being an international price on carbon.

APPEA’s submission recommends the Package be amended to allow the newly established Climate Change Authority to review the effectiveness and cost of the more than 230 other policies and programs regulating greenhouse gas emissions, as well as how these programs interact with the implementation of a carbon price.

APPEA’s submission says: “The growth of separate Australian Government and State and Territory Government policies and greenhouse initiatives and their lack of consistency are increasing costs and uncertainty for Australian industry, including the upstream oil and gas industry.

Such an outcome runs counter to the Objects of the draft Bill which include that Australia’s actions to reduce greenhouse gas emissions should be taken ‘… in a flexible and cost effective way’.”

Ms Robinson said: “The introduction of a carbon price mechanism provides the perfect opportunity to examine whether flexible and cost effective actions to reduce emissions are indeed occurring and whether the policies in place support least cost action.

As part of this, Australia’s abundant natural gas resources place Australia in an enviable position to maintain long-term, clean energy security domestically and internationally. Natural gas makes it possible for Australia to meet the world’s growing energy needs over the coming decades while incorporating a strategy to curb emissions and address the risk of climate change. Developing Australia’s substantial natural gas resources for domestic use and for export in the form of liquefied natural gas (LNG) can provide significant national economic and social benefits, and significant international greenhouse gas abatement.”

With the competitive position and future development of the LNG industry in mind, APPEA’s submission recommends a range of improvements to the treatment of trade-exposed industries and that this treatment be included in the Act itself and not relegated to the regulations, as is currently proposed.

In addition, various aspects of the Legislative Package mean that little certainty about scheme design is provided beyond 2015-16, with almost all key attributes of the scheme, including the treatment of trade-exposed industries, open for review and potential change. This lack of certainty acts as a disincentive to future investment in Australia not just for low emissions technology but across the economy.

The APPEA submission acknowledges a number of improvements have been made to the proposed legislation as a result of consultation with the industry, particularly around the ability to manage liabilities for natural gas supplies and the ability to manage liabilities within joint ventures.

The submission recommends a number of further improvements to these arrangements, particularly the treatment of joint ventures, to increase their flexibility, ensure the policy intent of the Government is fully met, and allow the obligations under the carbon price mechanism to co-exist with established commercial, regulatory and fiscal arrangements.

Source: APPEA, August 23, 2011;

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