The Australian Government’s Energy Efficiency Agenda Presentation to SBA Forum 13 April 2011 Martin Bowles Deputy Secretary Department of Climate Change and Energy Efficiency

Where does Energy Efficiency sit within the bigger picture? Government response to climate change Energy Efficiency Commonwealth measures National Strategy on Energy Efficiency (COAG) Carbon Price Renewable Energy

Australia’s emissions are projected to grow by 1.8 per cent per year out to 2020 without new policy measures Existing measures are built into this baseline: Without the Renewable Energy Target, emissions would be 29.9 million tonnes higher than the baseline in 2020 Without the National Strategy on Energy Efficiency, emissions would by 42.6 million tonnes higher than the baseline in 2020 Source: Australia’s Emissions 2010, Department of Climate Change and Energy Efficiency

To reach a 5 per cent target, we need to ‘find’ an extra 160 million tonnes of abatement in 2020 Source: Australia’s Emissions 2010, Department of Climate Change and Energy Efficiency

Australia’s emissions in the global context Source: Climate Analysis Indicators Tool (CAIT) Version 7.0. (Washington, DC: World Resources Institute, 2010). Total GHG emissions in 2005 (excludes LULUCF )

Australia’s per capita emissions Source: Climate Analysis Indicators Tool (CAIT) Version 7.0. (Washington, DC: World Resources Institute, 2010). Total GHG emissions in 2005 (excludes LULUCF)

Where will the 160 million tonnes of abatement in 2020 come from? Government response to climate change Energy Efficiency Commonwealth measures National Strategy on Energy Efficiency (COAG) (already accounted for in the emissions baseline) Carbon Price Renewable Energy Target (already accounted for in the emissions baseline) Alongside the carbon price, energy efficiency has a key role to place in future abatement

Energy efficiency addresses other issues beyond emission reductions Energy is the greatest single source of greenhouse gas emissions in Australia Beyond reducing emissions, improving energy efficiency can: ─ Help households save money ─ Vastly improve comfort levels in homes and workplaces ─ Help businesses adjust to competitive pressures through reduced costs Energy efficiency complements a carbon price but it cannot deliver the emissions reductions required in the Australian economy on its own

Where can we ‘do’ energy efficiency? Households ─ Building standards ─ Appliances ─ Education and behaviour change Energy infrastructure Commercial buildings Industrial processes Transport

Energy Efficiency in the Australian Context Australia has historically enjoyed relatively cheap energy, meaning energy efficiency has not been a high priority in the past Australians produce more greenhouse gases per capita than any other developed country Household electricity costs have increased in recent years and are projected to increase further into the future There are great opportunities to embrace energy efficiency improvements

Australia’s energy intensity improved at a rate of 1.5 per cent per year between 1990 – Source: IEA, unpublished 2010 update of Figure 45 in Implementing energy efficiency policies: Are IEA member countries on track?, 2009 Note: The following sectors are not included in this analysis: quarrying, fuel processing, electricity, and gas and water supply...But, this was driven predominantly by structural changes to the economy rather than improvements in energy efficiency

Although we don’t compare well in the international context, energy efficiency gains are being made National Strategy on Energy Efficiency measure Expected emissions reductions in 2020 (million tonnes) Equipment Energy Efficiency Program (E3)20.3 Energy efficiency requirements: Building codes11.8 Mandatory disclosure requirements: Buildings<0.1 Framework Cool Efficiency Program0.4 Phase-out of incandescent lighting1.9 Phase-out of inefficient water heaters4.1 Energy Efficiency Opportunities Program4.2 Total42.6 Source: Australia’s Emissions 2010, Department of Climate Change and Energy Efficiency

An example: standards and labelling – 20 years of bipartisan action 1986 LABELLING Refrigerators and freezers Clothes washers and dryers Dishwashers Air conditioners – non ducted single phase 1999 MEPS Electric storage water heaters Refrigerators and freezers 2001 MEPS Three-phase electric motors Three-phase air conditioners MEPS Fluorescent lamp ballasts Distribution transformers Single phase air conditioners Commercial refrigeration Linear fluorescent lamps Electric storage water heaters -Refrigerators and freezers 2009 MEPS Incandescent GLS lamps Compact fluorescent lamps External power supplies Chillers (commercial air conditioning) Televisions LABELLING Televisions 2010 MEPS Incandescent GLS lamps Refrigerators and freezers Air conditioners VOLUNTARY LABELLING Swimming pool pumps

Refrigerators and Freezers – a case study in energy efficiency labelling: Source: Department of Climate Change and Energy Efficiency

Future energy efficiency improvements An opportunity exists in Australia to capture social, economic and environmental gains through energy efficiency improvements Climateworks identifies significant energy efficiency opportunities that are profitable from an investor perspective today The challenge lies in unlocking these opportunities

Climateworks abatement analysis – numerous energy efficiency measures are profitable from an investor point of view today Source: ClimateWorks Australia, Low carbon growth plan for Australia, 2010, p. 24.

What currently stops the market from taking up energy efficiency opportunities? Externalities/pricing Split incentives between tenants and landlords Information Culture and practice Public vs private time frames Utility incentives

Addressing the barriers to greater energy efficiency uptake into the future A carbon price will drive the economy to make energy efficiency improvements into the future......but we know from the Climateworks analysis that price alone isn’t the only driver in decisions to invest in energy efficiency Prime Minister’s Task Group on Energy Efficiency Established in 2009/10 to investigate energy efficiency options to complement a carbon price and deliver step-change improvement in Australia’s energy efficiency Task Group Report released in September 2010 Government response to be finalised

Prime Minister’s Task Group on Energy Efficiency - outcomes Key Findings: Australia’s performance on energy efficiency is mediocre Energy efficiency policy has significant gaps Governance arrangements are confused There is a lack of overarching mechanisms to deliver significant change Multiple benefits and considerable potential in the area of energy efficiency A step change in energy efficiency performance requires a carbon price Foundation recommendations: An aspirational national energy efficiency target of 30 per cent by 2020 A transitional national energy savings initiative to replace existing and planned state schemes Improved governance arrangements Better data and measurement A new culture of energy efficiency In addition, the Report recommends consideration be given to a suite of sectoral proposals across the economy