Latrobe City Council Submission Emissions Reduction Fund Green Paper February 2014

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1 Latrobe City Council Submission Emissions Reduction Fund Green Paper February 2014 For further information in relation to this submission please contact Allison Jones General Manager Economic Sustainability Latrobe City Council, 141 Commercial Road, Morwell Telephone: (03)

2 Latrobe City Council Latrobe City is made up of four major urban centres: Churchill, Moe/Newborough, Morwell and Traralgon, and smaller townships of Boolarra, Glengarry, Toongabbie, Tyers, Traralgon South, Yallourn North, and Yinnar. With a population of approximately 76,000, the beautiful and highly productive Latrobe Valley is located at the gateway to Gippsland in the South East corner of the state of Victoria. Low Carbon Transformation not just transition. Latrobe City currently supplies over 90% of Victoria s electricity generation requirements and extensive electricity distribution infrastructure links the existing generation facilities to Melbourne. The low cost electricity generated in the Latrobe Valley from brown coal resources has contributed to Victoria s economic prosperity over the last 90 years. However, the high moisture content of brown coal means that the greenhouse gas emissions produced per unit of electricity produced are high relative to other forms of electricity generation. The electricity generation sector dominates the economic profile of Latrobe City. A study by Compelling Economics found that electricity generation accounted for around 21% of Latrobe City Gross Regional Product. Employment in Latrobe City is heavily reliant upon the income obtained from electricity generation and coal mining activities, with about 3,100 (or 11%) jobs linked directly to these sectors. Furthermore, an additional eight jobs are sustained in the local economy for every ten jobs in the electricity sector (Compelling Economics 2008). Therefore, there are approximately 2,500 additional jobs sustained due to electricity sector activities giving a total of 5,600 (approximately 20%) jobs related to the sector. Latrobe City is transitioning towards a low carbon future. Technology advances, the ageing workforce, globalisation together with carbon emission reduction strategies present both challenges and opportunities for Latrobe City. Latrobe City Council is committed to strengthening our role as one of Victoria s four regional cities and Gippsland s commercial centre whilst ensuring quality education, health, community services and facilities are provided to our community. Latrobe City supports international and Australian efforts to address climate change. Council seeks to ensure that the region s economy and community continue to prosper and, with the appropriate transition mechanisms in place, it believes that climate change adaptation, mitigation and economic growth can be achieved. Council s submission is predicated on our low carbon policy position and the extensive work and community engagement that we have undertaken since Council has engaged with over 1000 members of our community as well as business and industry in order to facilitate a smooth transition to a low carbon future. 2

3 Latrobe City Council Submission Latrobe City Council has for a number of years recognised that international and Australian policies are being developed to reduce greenhouse gas emissions in response to growing concern about climate change. These policies, and the likely future constraints on carbon based emissions that will arise from their implementation, potentially have significant implications for the ongoing sustainability, vitality and wellbeing of the Latrobe City community. Latrobe City Council supports international and Australian efforts to address climate change. Council is unwavering in its view that a successful transition relies on proactive transitional assistance from the Australian Government in the area of sustainable employment creation ahead of the transition. Latrobe City seeks to ensure that its economy and community continue to prosper and, with the appropriate transition mechanisms in place, it believes that climate change adaptation, mitigation and economic growth can be achieved. This submission provides an overview of Council s policy and historical context and a response to a range of aspects contained in the Emissions Reduction Fund Green Paper. Latrobe City Council welcomes the opportunity to provide a submission to the Emissions Reduction Green Paper and appreciates the commitment of the Australian Government to consult with both businesses and communities. Council also welcomes the Government s intention, as stated in the Green Paper to work with communities and business to ensure that the Emissions Reduction Fund is designed and implemented effectively. Council would be pleased to facilitate an Emissions Reduction Fund roundtable to assist the Australian Government to engage directly with our industry and community. Another option to engage with partners locally is to host a series of community conversations to facilitate education and awareness in the region. Council understands that during 2014 the Australian Government will release an Energy White Paper and an Agricultural Competitiveness White Paper and seeks to have early discussions with the Australian Government on the potential opportunities and impacts of these, combined with the Emissions Reduction Fund Green Paper on our local economy and community. 3

4 Latrobe City Council Policy Context Council Plan Latrobe City Council on behalf of our community has identified its vision and key themes which will shape the future of our City. The Council Plan recognises a range of local and nationally significant issues and emerging opportunities and provides our response to them. The five key themes are: Job creation and economic sustainability. Appropriate, affordable and sustainable facilities, services and recreation. Efficient, effective and accountable governance. Advocacy for and consultation with our community. Planning for the future. Positioning Latrobe City for a Low Carbon Emission Future (2010) Latrobe City Council has developed a comprehensive policy designed to assist our community to successfully transition to a low carbon future. The development of Positioning Latrobe City Council for a Low Carbon Emission Future (2010) (included as attachment 1) has allowed Council to identify the expected implications of Government greenhouse gas emission mitigation policies on the City. The policy proposes transition arrangements, including interventions and support mechanisms, to enable Latrobe City to optimise its transition. Economic Sustainability Strategy Council s Economic Sustainability Strategy (attachment 2) aims to identify actions that will consolidate Latrobe City s position as a major regional city and service centre for the Gippsland region and drive economic growth by: Facilitating sustainable economic development in Latrobe City. Diversifying the economic base. Capturing opportunities arising from a low carbon economy. Delivering growth in employment opportunities and job security for the Latrobe City community. 4

5 Securing Our Future 2013 Council has recently completed the development of Securing Our Future 2013 (included as attachment 3) which outlines Latrobe City Council s key priorities for local projects that can create real and sustainable growth and jobs within our municipality. Council s goal is to ensure that our community is well positioned to take advantage of structural adjustment funding opportunities and other initiatives. The key directions contained within Securing Our Future 2013 are: Advocacy - government to government support and support for our community. A new resource - leveraging innovation and jobs from the brown coal asset. Economic development - infrastructure enabling job creation. Liveability - Gippsland s regional city. Latrobe City Council Low Carbon Transition Historical Context Latrobe City has long been identified as a community likely to be exposed to significant structural adjustment pressures as a result of the introduction of greenhouse gas mitigation schemes. A successful transition to a low carbon future is critical to Latrobe City as the municipality currently supplies over 90% of Victoria s electricity generation requirements and extensive electricity distribution infrastructure links the existing generation facilities to Melbourne. The low cost electricity generated in the Latrobe Valley from brown coal resources has contributed to Victoria s, and indeed Australia s, economic prosperity over the last 90 years. However, the high moisture content of brown coal, used for electricity generation, means that the greenhouse gas emissions currently produced using existing technology are high relative to other forms of electricity generation. Latrobe City Council has been preparing for the introduction of greenhouse mitigation schemes since 2009 through the development of a comprehensive strategy and plan to assist our community and economy to transition smoothly to a low carbon future. In more recent times Council has formalised a list of projects for funding and assistance that will create real and sustainable jobs for the municipality. Council has worked tirelessly to inform the community as to what is expected to occur and to advocate for a smooth transition where our economy is not adversely and disproportionately impacted. An influence and key driver of Council s work in the area of transition has been the lessons learned from the privatisation of the former State Electricity Commission of Victoria. The post privatisation era saw long periods of poor investment in community infrastructure and planning. These impacts are still fresh in the minds of many of our community as they face the transition to a low carbon future. 5

6 Emissions Reduction Fund Green Paper Emissions Reduction Fund Latrobe City Council Submission Government commitment to reduce Australia s emissions to five per cent below 2000 levels by Council supports international and Australian efforts to address climate change. 1.3 Sources of Low-Cost Emissions Reductions Climateworks bottom-up modelling to develop an emissions reduction cost curve to estimate size and cost of emissions reduction opportunities across Australia for the year That the Australian Government provides early assistance to the Gippsland region to utilise the work already completed for the Gippsland region through the Low Carbon Growth Plan for Gippsland. The Plan demonstrates that Gippsland could save almost $100 million a year across the regional economy while reducing greenhouse gas emissions by up to 10% below 2000 levels by 2020 (excluding the power sector). 1.4 Direction Action The Government will work in partnership with businesses to meet Australia s emissions reduction challenge. Council supports this approach and advocates that a smooth and successful transition for the Latrobe Valley and broader Gippsland region will require a partnership approach between community, business and industry, Council and the State and Federal Government. Council requests that the Australian Government consider piloting, in the Gippsland region, a community education and awareness component of the Direct Action Plan and the Emissions Reductions Fund (once finalised). The rationale for this pilot would be the impact that a range of proposed schemes has had on the confidence of our local community. Council would be pleased to facilitate a roundtable with industry and community leaders to further scope this approach. 6

7 The extent to which businesses will be able to minimise costs, identify opportunities that flow from the Australian policies to reduce carbon emissions and implement these opportunities will depend on their understanding of the workings of the scheme and their capacity to respond. A well informed, well-resourced business community is a necessary precursor to delivery of business innovation in the context of a carbon constrained economy. As outlined in Council s adopted policy Positioning Latrobe City for a Low Carbon Emission Future, funding is sought for a number of full time Carbon Assist positions over three years, and located in the Latrobe City Council offices to provide support for businesses under an Emissions Reduction Fund. The proposed model is similar to that used to manage the GST transition process and Latrobe City could potentially support an early pilot of the concept prior to a broader roll-out of the scheme. The Carbon Assist positions could focus specifically on households, community groups, and small to medium enterprises. The positions would work with local households and industries to: keep them up to date with developments in the roll-out of Australian Government emissions reduction policies as well as new policy initiatives; provide training on energy and carbon management and methods to minimise their costs; and assist businesses and individuals to identify and capture opportunities arising from Australian Government emissions reduction policies. 7

8 1.7 Consultation and Review The Government will work with communities and businesses to ensure that the Emissions Reduction Fund is designed and implemented effectively. There remains in the local community a variable awareness and understanding of the potential implications of policies to reduce carbon emissions. Additionally, the extent to which businesses will be able to minimise costs, identify opportunities that flow from the Emissions Reduction Fund to reduce carbon emissions and implement these opportunities will depend on their understanding of the workings of the Fund and their capacity to respond. Latrobe City Council continues to advocate for the delivery of an ongoing community awareness program in order to adequately engage our community on this issue. A review of the Emissions Reduction Fund will commence towards the end of Council supports continuous review of policies and programs but seeks confirmation from the Australian Government that the 2015 review will be undertaken in a manner which will minimise community and business uncertainty and confidence levels. 3.2 Contracting for Successful Projects Duration of Contract The duration of the contract is the period over which the Government will guarantee to purchase emissions reductions at a price awarded through the auction process. Contracts would have a maximum duration of five years from their date of effect. Council s view is that a five year timeframe for major projects and investments is insufficient. Council requests that the Australian Government undertake further consultation on the payback period that firms require when making investments. Council submits that the period is more aligned to a year timeframe to provide commercial viability of proposed investments in the region. 8

9 4.4 New Investments New investments will typically be made in the most efficient, commercially viable technology available. The Emissions Reduction Fund would put in place a framework that supports new facilities or significant expansions at best practice. A carbon constrained world presents opportunities for Latrobe City to diversify its economy by attracting new industries as well as capitalising on existing businesses, services and skills in the region. Low emission serviced based industries such as health and education provide opportunities to enhance Latrobe City s reputation as the service hub in Gippsland. The significant brown coal resource in the Latrobe Valley presents coal based manufacturing opportunities in: Liquid fuel production Fertiliser manufacture Biodegradable plastic manufacture Petrochemical manufacture. In addition to these opportunities Council is highly supportive of the manufacturing sector which has seen significant investment in Latrobe City in recent years including: Australian Paper Recycling Plant $90 million. National Foods Expansion $55 million. Mahindra investment for majority ownership of Gipps Aero $22 million. Safetech Expansion $39 million. In order for such investment to continue, Council s position is that it is vital that Emissions Reduction Fund provides investors with long term investment certainty and confidence. Council requests that the Australian Government consider the development of communication strategies to ensure that investor confidence is maintained. Latrobe City Council notes the Australian Government position of welcoming and supporting growth in new economic 9

10 activities and facilities. Council would welcome the opportunity to engage with the Australian Government on the potential impacts of the Emissions Reduction Fund, to ensure current and future investment decisions are not adversely affected. 4.6 Electricity Generation The Government will review the Renewable Energy Target in 2014 to ensure it is operating efficiently and effectively. The review will be an open and transparent process and will consider the impact of the Renewable Energy Target on electricity prices and the needs and future of the Australian manufacturing sector. Latrobe City currently supplies over 90% of Victoria s electricity generation requirements and extensive electricity distribution infrastructure links the existing generation facilities to Melbourne. The low cost electricity generated in the Latrobe Valley from brown coal resources has contributed to Victoria s economic prosperity over the last 90 years. Council supports the retention of existing brown coal related jobs within the municipality and encourages investment in alternative uses and markets for coal. Latrobe City Council submits that the brown coal resource continues to have strong role to play in the provision of low cost generation which will facilitate manufacturing in Victoria. Latrobe City Council supports the balanced use of brown coal as an energy source and supports low emission coal technology research efforts and the development of pilot plants and research facilities in the Latrobe Valley. With the vast brown coal resource, existing electricity generation infrastructure and a university campus based locally, Latrobe City is well positioned to accommodate research and development initiatives. Council acknowledges the 50% of funding contribution by the Australian Government for the $90 million Advanced Lignite Demonstration Fund to support projects to 10

11 develop pre-commercial demonstration scale, coal upgrading processes for raw lignite in the Latrobe Valley. Council would welcome the opportunity to engage with the Australian Government on the opportunities presented by the Emissions Reduction Fund, to attract investment in research and development. 5.1 Carbon Farming Initiative The Emissions Reduction Fund will build on and streamline the existing architecture of the Carbon Farming Initiative. Views are sought on: Options for streamlining the Carbon Farming Initiative How to best encourage the uptake of land sector activities Latrobe City Council is committed to managing and protecting its natural environment to ensure a lasting legacy for future generations. Council is supportive of enhancements to the Carbon Farming Initiative that will create opportunities for the wider Gippsland region which is rich in natural resources, agriculture and forestry. Education and engagement of landowners is critical to establish and support biosequestration and biomass production activities. Council advocates for Carbon Farming Initiative education programs, once the Emissions Reduction Fund is finalised, to outline the risks and benefits of participation and to provide pragmatic advice on how to progress initiatives. One way of doing this is engaging early with the agribusiness sector to support positive outcomes for Latrobe Valley s food production industries and the wider Gippsland agricultural sector. A productive timber and forestry industry operates from the Gippsland region, producing softwood, value-added hardwood and paper products. Council advocates for the establishment of research facilities in the Latrobe City to enable development of innovative technology for the forestry, wood and paper sector. 11

12 6. Administration Management of the Emissions Reduction Fund processes by a single agency from project start to finish would: Provide a one-stop-shop for businesses Help to streamline processes and minimise implementation costs, risks and timeframes Facilitate participation in the Emissions Reduction Fund Latrobe City Council is committed to proactively working with the Australian Government to raise community awareness of the details of the Emissions Reduction Fund. Council is seeking to maintain strong partnerships with both the Australian and Victorian Governments to ensure that our community is well informed of the expected impacts and opportunities of the finalised Emissions Reduction Fund. Council supports processes that are streamlined and reduce implementation costs, risks and timeframes for the business community. Council advocates that the optimal way to facilitate participation in the Emissions Reduction Fund is through education programs to businesses and communities well ahead of implementation. 12

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