Fraser faults surplus strategy
The former governor of the Reserve Bank, Bernie Fraser, says pursuing a surplus in the current economic environment is harming Australia's economy. Mr Fraser now heads the Federal Government's Climate Change Authority, which today released its final report on the Renewable Energy Target. The Authority has found the 20 per cent renewables target should stay, even though it could add more than $60 to households' annual power bills. Mr Fraser says it's worth the cost, because it would also cut carbon emissions.
Source: The World Today | Duration: 5min 34sec
ELEANOR HALL: The former governor of the Reserve Bank, Bernie Fraser, says pursuing a surplus in the current economic environment is harming Australia's economy.
Mr Fraser now heads the Federal Government's Climate Change Authority, which today released its final report on the renewable energy target.
The authority has found that the 20 per cent renewables target should stay, even though it could cost householders $64 a year more on their power bills.
The authority's chairman, Bernie Fraser, told our chief political correspondent Sabra Lane that it's worth it, because it will cut carbon emissions.
SABRA LANE: The 20 per cent of power by 2020 is expressed as 41,000 gigawatt hours of power by large scale energy producers but the authorities actually found that 41,000 figure will actually mean that Australia's producing 26 per cent of its power from clean sources by 2020, and you've agreed to stick with that target. Why?
BERNIE FRASER: The target is of the 41,000 gigawatts hasn't changed. It's the denominator of the total electricity generator that's come down so the target share has gone up. But the costs of it going up are also modest as detailed in the report. And to keep that investment going in renewable energy, and this is in large part the wind, is worth maintaining and sticking with the existing target has that effect of working in that direction.
SABRA LANE: Why not lower that figure, given that the authority's done its own modelling here and calculated that households will pay somewhere between $12 and $64 a year on their power bills to help achieve that target. Why should householders bear that cost?*
BERNIE FRASER: Well it's a modest cost in terms of the overall household bills, 1 per cent to 4 per cent and the 4 per cent is very much an upper limit. The actual impact is likely to be closer to the one than the four, probably. But why should they do it? Well, it's a small cost to pay for a significant reduction in greenhouse gas emissions and contribute to a cleaner carbon environment and economy and to sustain the investment in renewable energy that is building up.
And to start sort of adjusting the target downwards when the demand for electricity falls back would have a pretty detrimental effect on confidence on the part of the investors and we don't really want that to happen in these early stages of developing the renewable energy industry.
SABRA LANE: Given the recent warnings that we've been hearing from climate change scientists, can Australia actually make a meaningful difference on reducing carbon emissions, especially given the lack of appetite on achieving a global binding deal to reducing CO2 emissions?
BERNIE FRASER: As a small country in so many ways we have to keep pressing for what we think is the right thing to do, including in the interests of the global economy. If we were to turn up our toes because we're a relatively small country, wouldn't do anything, we wouldn't pursue anything globally.
But I think there's probably a little bit more concern globally, internationally than you perhaps indicated in your question. But, you're right, it hasn't fired the imagination of a lot of countries, a lot of important countries. But it is taking hold now in some of the bigger developing countries. There's growing interest in China and in India, Korea.
The climate science is firming up the probabilities that there is something happening out there that we should be taking notice of and we should be thinking about remedial action more urgently than many countries are.
SABRA LANE: You've also talked about it being a long way off before we have an efficient and agreed price for carbon around the world. How long do you think it will take to achieve that?
BERNIE FRASER: It's going to take a long time. I wouldn't hazard a guess but, you know, decades more. And that's why these transitional arrangements - and they may well become more than just transitional arrangements - that's part of the broad context that encourages the authority to accept the existing target even though it means that we go from 20 per cent to 26 per cent in 2020.
SABRA LANE: You used to be the head of the Reserve Bank of Australia, years ago. This government is concentrating on delivering a surplus this financial year, amid warnings that it actually could be doing the economy more harm than good and might be harming Australia's reputation. Is it harming Australia's reputation?
BERNIE FRASER: I don't know about our reputation, depends on who you ask because there are a lot of other crazy people out there trying to do the same thing - generate surpluses when their economies are falling over. But it is harming the economy.
ELEANOR HALL: That's the former RBA governor and now chairman of the Climate Change Authority Bernie Fraser, speaking to Sabra Lane.
* EDITOR'S NOTE (19th December, 2012): This transcript has been amended to correct a figure quoted by Sabra Lane.