Big emitters want detail on Labor climate action

More detail please

Labor has proposed strengthening the existing “safeguard mechanism” to require big industrial polluters to sit down and negotiate with the Clean Energy Regulator about how they will cut their respective emissions to achieve Labor’s aggregate target of 5 million tonnes of less carbon each year.

The current mechanism, devised by then energy minister Greg Hunt in the Abbott government, has applied to 215 of Australia’s biggest industrial polluters, whose annual carbon emissions exceeded 100,000 tonnes a year, and excludes electricity. Critics have long claimed the safeguard mechanism needs more “teeth” because companies could move their baselines to avoid penalties.

The lack of detail on how Labor will overhaul the mechanism has many industry executives looking for more information.

One is Vik Bansal, chief executive of Australia’s second-largest steelmaker, InfraBuild, which is part of British billionaire Sanjeev Gupta’s global empire. 

“We embrace, and are supportive of moving towards a zero or low emissions economy as fast as practicably possible,” he said.

Mr Bansal said a clear framework from the new government is needed. “We look forward to a clear, pragmatic climate change policy framework under which we as industry can be confident to work and commit,” he said.

Infrabuild runs two electric arc furnaces and 10 manufacturing mills in Sydney, Melbourne and Newcastle, and a national network of steel distribution sites and recycling operations. Mr Bansal said the furnace plants are the “lowest carbon emitting, commercially viable, and competitive steel making technology available today”.

InfraBuild is regarded as the best performing asset in Mr Gupta’s GFG Alliance, which is still trying to complete a $6 billion refinancing of funding which had previously come from the collapsed Greensill Capital.

Other oil and gas executives hoped Labor would win a majority in its own right to avoid having to cut deals with teal independents, who won a swathe of once blue-ribbon seats across Sydney and Melbourne on a platform of stronger climate action.

“We will be better off under a majority Labor government, Labor will have more policy freedom and flexibility on energy,” said one Melbourne-based gas executive.

Energy security

Stronger climate action comes at a time when Australia is experiencing near record prices for wholesale electricity generation amid a global energy crunch, and the country’s fossil fuel sector warned about exacerbating that.

Wholesale electricity prices rose 140 per cent across Australia in the first three months of 2022, which are widely expected to flow through to customers later this year. Increased utility bills will fuel concerns about the cost of living and raise inflation – which could fuel further interest rates rises.

Much of the rise in wholesale electricity generation prices has been spurred by soaring prices for coal amid a global energy crunch fuelled by Russia’s invasion of Ukraine that left much of Europe looking to switch away from Moscow’s gas supplies.

The situation was further exacerbated when some 30 per cent Australia’s coal power capacity was offline as the country’s ageing infrastructure requires regular maintenance and suffers unplanned outages.

Soaring electricity prices has left some manufacturers warning they may have to shutter.

Zlatko Todorcevski, chief executive of Boral, one of the biggest cement, asphalt and quarry supplies companies in Australia, said Labor must be mindful of unintended consequences of climate action.

“While geopolitical issues are impacting the rise in energy costs, clear and concise policy is needed to help high emitting industries manage the energy transition and inflation,” Mr Todorcevski said.

Climate coalition

“We have always encouraged a bipartisan approach to Australia’s energy transition and as we continue to decarbonise and reach our own sustainability targets we look forward to collaborating with the Government on policies that further drive the uptake of low-carbon technologies while managing a responsible exit from fossil fuels,” he said.

While emitters are urging the incoming government to tread carefully, Prime Minister-elect Anthony Albanese can ill-afford to ignore the wishes of many voters who cast their ballots to deliver stronger climate action.

Business Council of Australia chief executive Jennifer Westacott said Mr Albanese had the opportunity to reach a consensus agreement as companies struggle with a wide array of issues.

“Notwithstanding low unemployment, we’ve got a labour supply shortage or crisis across all sectors of the economy,” said Ms Westacott.

“There is a business investment problem, and a really serious issue of how to manage the clean energy transition.”