Business leaders have warned that skyrocketing energy prices will force some enterprises to close their shutters, leading to job loses and that Australia is unlikely to win over any big manufacturing investors.
Glencore has threatened to cease its copper processing operations in Queensland, citing the volatility and cost of energy. The Glencore ultimatum – in which it will not guarantee its Mount Isa copper smelter and its Townsville copper refinery beyond 12 months – has injected urgency into the political debate, but there was no sign of the bipartisan policy approach which business says is desperately needed to provide investor certainty.
Other manufacturers said more refineries and smelters would close unless the price and security of energy was resolved. Big-gun manufacturers including BASF warned there was limited chance of new investment in Australia and that further job cuts were likely. Alumina Ltd chairman John Pizzey was also quoted in the Australian Financial Review as saying that company boards across the nation were now making decisions based on energy security. “The cost of energy is becoming an investment decision criterion, more and more people will be making Glencore-type decisions,” he said. Tomago chief executive Matt Howell, who runs Australia’s largest aluminium smelter in the NSW Hunter region, said the company was considering cutting production due to “ridiculously high” wholesale electricity prices which would result in job losses.
Business, industry, federal Labor and the energy market regulators are advocating an emissions intensity scheme (EIS) to bring down emissions over time while creating long-term certainty for investors to provide new forms of energy.
Finkel Energy Report to be presented next week
An EIS is also likely to be a key recommendation of chief scientist Alan Finkel when his final report on energy market policy is handed to the Prime Minister and Premiers on Friday next week. But the federal government blamed state Labor’s 50 per cent renewable energy target plus price gouging by local coal-fired power generators for the Glencore threat, while federal Labor said it underscored the need for the Turnbull government to adopt an EIS.
At the same time that the government ruled out an EIS, it cemented its belief in coal as an ongoing source of power generation by introducing legislation to enable the Clean Energy Finance Corporation to invest in carbon capture and storage.
The CEFC is a $10 billion taxpayer-funded loan facility established by Labor to invest in the development of renewable and other clean energy sources. Months after first flagging the move, Mr Frydenberg announced the government will legislate to expand the CEFC’s mandate so it can invest in carbon capture and storage technology which, if ever successfully developed, will enable emissions from coal-fired power stations to be kept out of the atmosphere. The CEFC will not be investing in other so-called clean coal technology such as the construction of a High Efficiency Low Emissions (HELE) power station.
The AFR said Mr Frydenberg said coal had a future, more so if emissions could be reduced using CCS technology which, he claimed, was “a proven technology with 22 large-scale projects either in operation or under construction overseas”. “Given that CCS technology has received such strong support from the likes of the International Panel on Climate Change and the International Energy Agency internationally as well as the Chief Scientist and the CSIRO here at home, it is now only appropriate that we unshackle the CEFC and allow it to support this low-emissions technology,” he said. The move was welcomed by the Business Council of Australia as well as miners BHP Billiton and Rio Tinto but condemned by the Greens and environmental groups.
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