House of Representatives

Clean Energy Bill 2011

Second Reading Speech

Ms Gillard (Prime Minister)

(12:01): I move:

That this bill be now read a second time.

This House has been debating climate change for decades. Parliamentary debate of this issue predates this building itself. My predecessor as member for Lalor, Barry Jones, once said this about climate change, 'If we are only prepared to plan five years, 10 years, 15 years or 20 years down the track all the dangers that are feared can be avoided.'

Those words were spoken 24 years ago next week.

We have now had decades of heated public argument and political opinion.

Alongside decades of enlightened scientific research and economic analysis.

After all those opinions have been expressed, most Australians now agree:

our climate is changing

this is caused by carbon pollution

this has harmful effects on our environment and on the economy

and the government should act.

And after all that analysis has been done, most economists and experts also now agree:

The best way is to make polluters pay by putting a price on carbon.

So that is the policy of the government I lead.

And that is the plan which is before the House now.

A plan for a carbon-pricing mechanism which means around 500 big polluters pay for every tonne of carbon pollution they put into our atmosphere.

A plan to cut carbon pollution by at least 160 million tonnes a year in 2020.

A plan for tax cuts, increased pensions and increased family payments.

A plan for clean energy jobs and investment. A plan for a clean energy future for our country.

Today we move from words to deeds. This parliament is going to get this done.

There will be a price on carbon from 1 July 2012.

The carbon-pricing mechanism which begins its course through our parliament today is the product of years of public policy discussion and development.

In the late 1990s, the Australian Greenhouse Office published papers setting out how a carbon price might work and sought public submissions.

Then the National Emissions Trading Taskforce established by the states and territories, and the Shergold report set up by the Howard government, embarked on extensive consultation processes.

Each generated wide-ranging recommendations on designing the mechanism for a carbon price.

Further consultation on detailed design issues occurred through the Garnaut review, the green and white papers, and in response to draft legislation supporting the former Carbon Pollution Reduction Scheme, defeated in the Senate.

In September 2010, the government convened the Multi-Party Climate Change Committee to agree a way forward.

In February this year, the government released a climate change framework for public discussion.

In July, the government announced the carbon-pricing mechanism and, later that month, released draft legislation.

We received over 300 submissions on the draft bills and had extensive discussions with businesses, non-government organisations, other governments and legal stakeholders.

All adding to the literally thousands of submissions which have been made to the government on this issue over the years.

Many advocates and advisers have worked enormously hard.

I am grateful for the tremendous energy and seriousness with which so many have treated these exhaustive-even exhausting-discussions.

All part of the years of research and analysis which underpin the policy embodied in the legislation I introduce today.

I firmly believe no stone remains unturned, no voice unheard.

So this is the plan for Australia's carbon price.

A modern policy approach, with efficient allocation and incentive to innovate, linked to global markets.

A fixed price for the first years-a well designed market from 2015.

Assistance for emissions-intensive trade-exposed industries.

Evidence based emissions targets. Abatement at the lowest economic cost.

All adding up to a new bottom line: where polluters pay.

The legislation before the H ouse

Let me turn to the main features of the Clean Energy Bill 2011.

Application of the mechanism

The bill provides that the carbon price will be paid by liable entities, which have facilities that emit 25,000 tonnes or more of carbon pollution a year.

It will also cover landfills that emit 10,000 tonnes or more, where these are within a specified distance of landfills that emit 25,000 tonnes or more.

Large users of natural gas will be liable parties in their own right, while natural gas suppliers such as retailers will pay a carbon price for the emissions that arise from the use of natural gas by smaller customers.

Around 500 entities will have mandatory liabilities under the carbon pricing mechanism.

Around 500 polluters will pay

To determine liability, the carbon pricing mechanism will draw on information reported under the National Greenhouse and Energy Reporting System, an established measurement system for greenhouse gas pollution developed under the Howard government and which commenced on 29 September 2007.

The carbon pricing mechanism will not apply to agricultural emissions, legacy emissions from landfill facilities and emissions from landfill facilities closed before 1 July 2012.

The bill recognises that there are different ways in which businesses structure their affairs.

It specifically deals with joint ventures-a common feature of resource and energy projects.

And it allows businesses to transfer liability under the mechanism within their corporate groups.

Moving from a fixed to a flexible price

The bill provides for a fixed carbon price for three years, starting at $23 per tonne of carbon pollution.

A fixed carbon price, set out in legislation, provides businesses with certainty as our plan begins-and allows for a manageable transition to carbon pricing.

After three years, the scheme automatically transitions to a fully flexible cap-and-trade emissions trading scheme.

From this time on, a cap will be placed on national emissions and the carbon price will be determined by the market.

The bill also provides for a price cap and a price floor to apply for the first three years of the floating price period.

This will limit market volatility and reduce risk for businesses as they gain experience in having the market set the carbon price.

Pollution caps

At the heart of our emissions trading scheme is a cap on carbon pollution.

These caps will guarantee reductions in carbon pollution and allow us to achieve our long-term target of an 80 per cent reduction from 2000 levels by 2050.

Achieving this target will take more than 17 billion tonnes of carbon pollution out of the atmosphere between now and 2050.

In 2050 this will cut nine out of every 10 tonnes of pollution compared to what would happen without our plan.

Under the arrangements that this bill would put in place, pollution caps will be set by the government with advice from the expert, independent Climate Change Authority.

If caps are not set, then default caps will apply, which reflect Australia's unconditional, bipartisan commitment to reduce our greenhouse gas pollution by five per cent below 2000 levels in 2020.

To provide stability and notice for business, cap-setting regulations will be made well in advance.

International linking

The bill makes provision for the Australian carbon-pricing mechanism to interact with credible international efforts to reduce carbon pollution.

International linking gives liable parties access to a broader range of abatement opportunities, which helps contain costs and helps promote international action on climate change.

Liable parties will be able to meet up to half of their obligation through the use of international carbon units.

This will ensure that only robust, environmentally credible international units are allowed to be used for compliance.

Jobs and Competitiveness Program

The government understands that there is nothing more important to families than having a job.

So we will take special measures to support jobs and keep Australia competitive internationally.

The bill makes provision for certain industry assistance measures, which will ensure that our industries are in the best position possible to manage a smooth transition to a clean energy future.

The Jobs and Competitiveness Program will assist emissions-intensive, trade-exposed industries in making that transition to a low-emissions economy, while protecting Australian jobs and competitiveness.

It will allocate around 40 per cent of the revenue raised by the mechanism to this purpose.

The effectiveness of the program will be subject to ongoing review by the independent Productivity Commission.

The many activities the program may cover are dealt with in regulations, to be published in draft by the Department of Climate Change and Energy Efficiency later this month.

These regulations have been designed in close consultation with the affected businesses and can be adapted over time as needed.

Energy security

The move to a low-emissions economy will pose an adaptive challenge for our energy supply industry.

The government will implement measures to underpin a successful energy market transition and maintain secure energy supplies.

The bill provides for an energy security fund to provide assistance to Australia's most emissions-intensive coal-fired generators.

This will underpin ongoing confidence in the sector and support new-and much needed-investment in new energy sources and infrastructure. Assistance will be conditional on meeting tests relating to maintaining energy security, as well as publishing clean energy investment plans setting out their intentions for new investments and other matters.

In addition to these legislative measures, the government will seek to close around 2,000 megawatts of highly polluting generation capacity by 2020.

Closing down some of our high-pollution coal fired capacity makes room for investment in low-pollution plant and starts the transformation of our energy sector in a responsible way.


The carbon pricing arrangements will be supported by robust and independent governance arrangements.

The Clean Energy Regulator will work with liable entities to ensure compliance with the mechanism and is specifically charged with educating and advising them about it and how they may comply.

The regulator will have appropriate and proportionate powers to monitor compliance and, where problems emerge, to take action to address them.

Enforcement and penalties are focused on those who have obligations under the mechanism-not on the general public.

The regulator is a public body, bound to act in the public interest and in accordance with the constraints imposed by the bill and by other Commonwealth laws.


In addition to the specific advice to be provided to the government on issues like pollution caps, the bill provides that the mechanism will be reviewed over time by the independent, expert Climate Change Authority.

This scrutiny will ensure its ongoing relevance, robustness and integrity.

Package of Bills

This bill is part of the government's total package of clean energy legislation implementing the carbon pricing mechanism and related reforms.

The Clean Energy Bill 2011 sets out the core provisions of the carbon pricing mechanism-its architecture and its review arrangements.

Consequential amendments are made to other Commonwealth laws to integrate the carbon pricing mechanism with existing laws on climate change, economic regulation and taxation.

These changes are set out in the Clean Energy (Consequential Amendments) Bill 2011.

The implementation of an effective carbon price on transport through the fuel taxation, customs and excise system is achieved through the Clean Energy (Fuel Tax Legislation Amendment) Bill 2011, the Clean Energy (Excise Tariff Legislation Amendment) Bill 2011 and the Clean Energy (Customs Tariff Amendment) Bill 2011.

Charges under the carbon price mechanism are dealt with in the Clean Energy (Unit Shortfall Charge-General) Bill 2011, Clean Energy (Unit Issue Charge-Fixed Charge) Bill 2011, Clean Energy (Unit Issue Charge-Auctions) Bill 2011, Clean Energy (Charges-Excise) Bill 2011, Clean Energy (Charges-Customs) Bill 2011, and the Clean Energy (International Unit Surrender Charge) Bill 2011.

The price impact of the government's plan will be modest-but I know family budgets are always tight.

So most of the money raised from the carbon price will be used to fund tax cuts, pension increases and higher family payments.

The government has taken the opportunity to give pensioners extra help.

Every older Australian who relies solely on the pension will be among the four million Australian households who get a 'buffer' for the budget, with the extra payments being 20 per cent higher than their average extra costs.

And the government has taken the opportunity for tax reform as well.

We have more than tripled the tax free threshold.

Combined with other changes, this means that 450,000 people-who earn between $16,000 and $20,500-will have all their tax cut. They will now pay no tax.

A tax reform which rewards work-which builds on our budget changes to lift workforce participation and spread the benefits and dignity of work to every Australian.

The assistance to households provided through the tax and transfer system is delivered through the Clean Energy (Household Assistance Amendments) Bill 2011, the Clean Energy (Tax Laws Amendments) Bill 2011 and the Clean Energy (Income Tax Rates Amendments) Bill 2011.

The Climate Change Authority is set up by the Climate Change Authority Bill 2011, which also sets out its functions. Similarly, the Clean Energy Regulator is established by the Clean Energy Regulator Bill 2011.

Australia' s clean energy future

We govern in a world of change, a world that is transforming.

My task as Prime Minister, my party's task in government, this parliament's task as it meets today, is to lead our country through this transformation.

Not to hide from change ... to make change work for us.

To use our strength today to build strength for the future.

The jobs of the future are clean energy jobs.

Employment is projected to grow strongly with a carbon price.

Around 1.6 million jobs to be created to 2020 ... a further 4.4 million to 2050.

The investment of the future is clean energy investment.

All up, the carbon price will support $100 billion worth of investment in renewables in the next 40 years.

The Australian economy will continue to prosper while cutting carbon pollution.

Real gross national income per person is expected to increase from today's levels by around $9,000 per person to 2020 and more than $30,000 per person by 2050.

If we can do all this:

Cut carbon pollution.

Keep our economy growing.

Keep growing jobs.

Why wouldn't we act?

So the government will act.

And the parliament should support us.

The right side of history

There is a reason votes on legislation in this House are recorded.

There is a reason these matters are decided in an open vote.

It is so every member in this place can be judged.

Judged on the decisions they make here ... judged on where they stand on the great issues of our national debate.

Judged by every Australian.

Judged now ... judged in the future.

Because the final test is not: are you on the right side of the politics of the week or the polls of the year?

The final test is: are you on the right side of history?

And in my experience, the judgement of history has a way of speaking sooner than we expect.

To newer members of this place-and I see some in front of me-I say, just ask those more senior members who sit opposite.

Ask those who voted in this House against Medicare in 1983.

How smart did that look in 1984?

Ask those who voted in this House against universal superannuation in 1992.

How smart did that look in 1993?

Ask those who voted for WorkChoices in 2005.

How smart did that look in 2007?

Yes, the judgment of history comes sooner than we expect.

And the demand for policy leadership comes hard on its heels.

Nothing hard ever gets easier by putting it off.

And if you do not do what is right for the nation then you should not be in this parliament.

It is time to deliver the action on climate change we need.

It is time to do what is best for Australian families, what is best for future generations, what is best for this country.

To act on climate change.

To cut carbon pollution.

To build a clean energy future.

To create clean energy jobs.

I see a great clean energy future for our great country.

I know we can get there.

I commend the bill to the House.

Debate adjourned.