Download Isaac Regional Council – Submission to the Energy White Paper

Isaac Regional Council – Submission to the
Energy White Paper – Green Paper
PO Box 97 MORANBAH Q 4744 | 1300 ISAACS | [email protected]
Isaac Regional Council (IRC) welcomes the opportunity to comment on the Energy White Paper
(EWP) Green Paper. The intent of this submission is to highlight key areas of interest and concern
regarding the contents of the Green Paper in the context of the Isaac local government area (LGA).
About the Isaac Local Government Area
The Isaac Local Government Area (LGA) spans an area of approximately 58,000 km2 in Central
Queensland within the Tropic of Capricorn. The area is strategically placed to capitalise on the
economic opportunities associated with developing Northern Australia and the rise of Asia. Located
1,000km north-west of Brisbane and 900km south of Cairns, the Isaac Region is located in the heart
of the Bowen Basin and neighbours the emerging Galilee Basin. The Isaac region’s proximity,
connectivity and accessibility to Abbot Point, Hay Point and Dalrymple Bay ideally connects the
region to world class rail and port infrastructure and crucial export markets.
The region’s estimated resident population is 24,215, although with an additional 14,950 resource
sector workers housed in temporary accommodation at any one time the full-time equivalent
population can fluctuate to an estimated 39,165i.
Isaac boasts a strong economy, largely driven by the resource sector. 2014 The resource operations
industry contributes 85.4% ($7.23 billion) to the regions total GRP of $8.58 billion, produces 46% of
Queensland’s total saleable coal and generates 1.2 billion in royalty payments per year.
Agriculture is another key industry for the region. The gross value of Isaac Agriculture Commodities
produced is $168.7 million.
The Isaac LGA alone produced 46% of Queensland’s total saleable coal in 2012/2013, and generated
in excess of $4.7 billion in royalty payments to the Queensland Government between 2010 and
2013ii. The Isaac LGA accounts for approximately 3% of Queensland’s Gross State Product (GSP) and
based on the size of its population Isaac’s contribution to GSP is five times higher than the state
average.
Tourism also features on the economic landscape with the Isaac coast identified as an emerging
tourism precinct for development in the Mackay Destination Tourism Plan 2014. The coast also hosts
commercial fishing and aquaculture operations. Isaac’s established inland corridors include ‘the
mining trail’, extending from Mackay to Clermont, and ‘The Great Inland Way’, connecting Clermont
to Charters Towers. Both trails present visitors with an opportunity to experience the rich culture of
early European settlers in the area, against a backdrop of modern industry. The ‘Copper Trail’
connects Clermont in the west to Isaac’s coastal community of St Lawrence, and closely follows the
historical route used to transport copper and other commodities from the hinterland to the then
Port of St Lawrence.
However our world is changing and like many regional economies the Isaac LGA faces challenges to
continued socio-economic sustainability and growth. The CSIRO highlights global megatrends that
will change the way we live. Depletion of the earth’s natural mineral, energy, water and food
resources; climate change and it’s impacts on the natural world; the restructuring of the global
economy from east to west and north to south; and ageing population; increased digital
connectivity; our expectations as consumers for experiences over products; and the rising
importance of social relationships; will all be experienced to varying degrees at the local level.
Largely reliant on export commodities such as coal, a small number of minimally processed
agricultural commodities and tourism, means the Isaac economy is largely export dependent and
vulnerable to global trends and volatility. The downward trend of coal prices since 2012 has resulted
in coal mines ceasing operation in the Isaac Region, over 7,000 state-wide job losses and significant
socio-economic impacts for local communitiesiii.
Overarching concerns regarding the EWP green paper
IRC has a number of concerns regarding the EWP green paper. While the Green paper is intended to
build on the Australian Government’s pre-election promise of ‘coherent, consistent energy policy to
protect jobs and investment’ some of the provisions of the paper could be seen to be detrimental to
the socio-economic viability of regional economies, particularly those regions whose economic
landscapes are largely dominated by the resources sector.
Short term planning
The Green Paper appears focussed on the short-term and does not consider long term-trends and
challenges for the energy sector. The Climate institute suggests the energy sector is characterised by
investments of hundreds of millions of dollars with operating lives of forty years or more.iv This is
certainly true of Bowen Basin coal mines, with lifespans of thirty years or more, and proposed
developments for the Galilee Basin with operating timeframes in excess of sixty years. Despite this
the paper largely ignores long-term market analysis, appearing oblivious to global trends, technology
costs and rapid changes in energy systems. A short-term planning focus will fail to prepare the
energy sector for more significant longer-term challenges, resulting in uncertainty and instability in
the policy environment and thus as a deterrent to investment.
What are the implications for jobs and investment in regional economies?
The short term planning approach utilised in the paper will inevitably compromise the
capacity of regional socio-economic development efforts to plan for a sustainable and longterm future in resource regions. While coal is likely to remain a significant contributor to the
energy mix in the short-term, it is nevertheless a finite resource. Failing to plan for a future
alongside and beyond coal will place resource regions in an extremely vulnerable position in
terms of long-term socio-economic viability. It is imperative regions act now to facilitate the
development of adjacent economies aligned with a low carbon future.
Further, while there may be some investment in projects located in Australia’s regions, this
does not necessarily translate into jobs and economic benefits at a local level. In the Isaac
context royalties from mining are paid by mining companies directly to the Queensland
Government. The State Government is then free to determine where and when funds are
expended. To date, a relatively insignificant proportion of the royalties received are returned
to the regions which host resource sector operations to fund the critical infrastructure
necessary to meet the needs of current and future generations. More typically funds
received from royalty payments are directed to Queensland’s south-east corner. Further,
workforce practices associated with the resource sector mean that any jobs created as a
result of investment in resource projects can potentially be 100% filled by employees who
reside in large metropolitan areas, often excluding the local workforce.
Recommendation
It is critical the EWP considers long term trends and analysis relevant to the energy sector,
particularly global imperatives relating to climate change mitigation, in order to achieve the
stable policy environment necessary to attract investment.
Focus on extractive fuels
The Green Paper is heavily focussed on gas, coal and nuclear. Text analysis of the green paper
reveals gas is mentioned 434 times in the 78 page body of the document, coal gets 100 mentions
and nuclear 67. Storage is mentioned 32 times, solar 26 and wind energy rates just 13 mentions.v
The extent to which this focus is reflective of Australia’s current and future energy mix is highly
questionable. This is inconsistent with the views of major players in investment and energy
economics. Citi, HSBC, Goldman Sachs and IEEFA consider the emergence of cost competitive
renewables technologies combined with increasing concerns over the climate impacts of continued
fossil fuel usage is already driving a switch to alternative technologies. In particular, the widespread
deployment of rooftop solar in Australia and elsewhere has already dramatically undermined the
business models of electricity generators to the extent where analysts and advisors are cautioning
investors about the longer term risks of stranded assets, for example power stations and other
infrastructure that is no longer cost competitive and consequently unused. Further, the United
Nations has reportedly warned coal has no future in the world’s energy mix.
What are the implications for jobs and investment in regional economies?
The focus on extractive fuels will not necessarily translate to job creation in the regional
context. Beyond gas processing facilities, the workforce necessary to maintain pipelines and
other supporting infrastructure is minimal once the construction phase concludes. In the
case of coal, notwithstanding persistent concerns regarding the structural decline of the
thermal coal market, as reserves are depleted they will become more marginal and difficult
to extract. Coal mining companies are seeking to drive down costs to remain competitive in
a global market and increasingly seeking to automate processes and reduce workforce
numbers as a result of safety concerns and Australia’s high cost of labour.
Recommendation
The EWP green paper appears to lock in coal for the next twenty years. However, while coal
and other fossil fuels may have some way to run, it would be beneficial if the EWP green
paper considered mechanisms for transition to the low carbon economy of the future. It is
also important to understand extractive fossil fuels and ‘clean energy’ are not mutually
exclusive. In fact, there are opportunities for the traditional resource sector to support the
development of a biofuels industry for example as a consumer of biofuels at least while the
industry is in its infancy. Greater consideration of the interplay between extractive and
renewable energy sectors would be beneficial in assisting the transition to a low carbon
economy.
Inconsistent with Australia’s international commitments to
climate change
Continued reliance on fossil fuels will have a negative impact on the global imperative to limit
climate change to 2oC, despite Australia’s stated commitment to this goal. Achieving a 75%
probability of keeping global warming below this limit requires global emissions of greenhouse gases
not exceed 870 billion tonnes between 2013 and 2050.vi The Climate Institute estimates Australia’s
share of this carbon budget to be around 8.4 billion tonnes. At its current rate of emissions Australia
would exhaust its 2050 carbon budget before 2030.vii The climate change and mitigation strategy
and policy pose significant challenges to the long term future of the energy sector, however the
narrow focus of the Green Paper, combined with uncertainty regarding the future of the Renewable
Energy Target (RET) and carbon pricing again facilitates legislative uncertainty, and serves as a
deterrent to the investment the Green Paper intends to secure.
The Green Paper heavily promotes the removal of the carbon tax as enhancing Australia’s
attractiveness for new investment. While this may be true for companies primarily concerned with
the extraction of fossil fuels, it also denies regional economies the capacity to capitalise on a ‘carbon
economy’. The CSIRO describes the carbon economy as the set of services, industries and
commodities that will arise as a result of trading of offsets for emissions or through the development
of biofuels or bioenergy industries. The carbon economy has the potential to realise billions of
dollars per annum once enabled, particularly for Northern Australia.
However, a price on carbon is a pre-requisite for enabling a carbon economy. Pricing a previously
free commodity places an economic value on sequestration and emissions avoidance. Carbon prices
and targets for renewable energy also create opportunities for an emerging biofuels industry.viii The
removal of the carbon tax in effectively constrains Australia’s capacity to build a billion dollar carbon
economy, in favour of remaining attractive to multi-national conglomerates.
What are the implications for jobs and investment in regional economies?
The removal of the carbon tax effectively constrains Australia’s capacity to build a billion
dollar industry, in favour of remaining attractive to external investment. In the regional
context this means economic opportunities for regional areas to play a major part in the
development of carbon farming initiatives is denied. The coal sector in particular increasingly
favours a remote workforce model over local employment, with employees being sourced
from major metropolitan centres on a fly-in/fly out (FIFO) basis. This inevitably leads to
population decline in regional communities as workers are forced to relocate to major cities
in order to pursue job opportunities for projects on their doorstep.
Recommendation
Energy policy must be developed in tandem with a comprehensive decarbonisation strategy
and policy in order to achieve the stated intent of protecting jobs and investment. Greater
consideration of the impacts of other countries’ emissions reduction efforts is necessary to
reduce the risk of stranded assets and ‘un-burnable carbon’. Further the EWP should provide
a blue-print for the inevitable transition to a low carbon future.
i
The State of Queensland: Queensland Treasury and Trade (2014) The Bowen Basin Population Report 2013;
http://www.qgso.qld.gov.au/products/publications/bowen-basin-pop-report/bowen-basin-pop-report-2013.pdf
ii
Queensland Resources Council (2014) Queensland Economy Isaac; http://www.queenslandeconomy.com.au/isaac/
iii
http://www.abc.net.au/news/2013-06-28/qrc-cites-thousands-of-job-losses-in-coal-downturn/4786716
iv
The Climate Institute (2014) – Submission to the Energy white paper – Issues paper
Giles Parkinson (2014) http://reneweconomy.com.au/2014/abbotts-energy-green-paper-focuses-on-gas-coal-nuclear90453
vi The Climate Institute 2013 The climate change authority’s ‘Reducing Australia’s greenhouse gas emissions – Targets and
Progress review – submission to the Climate Change Authority
vii Ibid.
viii CSIRO – (2012) The emerging carbon economy for northern Australia – issues and opportunities
v