Tax breaks call by IEA to keep coal firing

The head of the IEA has called on Australia to follow the US lead and provide tax subsidies for carbon-capture technology.

IEA executive director Fatih Birol. Picture: Kym Smith

The head of the International ­Energy Agency has called on Australia to follow the US lead and provide tax subsidies for carbon-capture technology to drive down electricity prices and secure ­supply.

IEA executive director Fatih Birol also warned state governments that bans on gas exploration had ­become a “major issue” and would have to be lifted as Australia needed to increase its gas production.

A five-yearly report by the peak international energy body into the Australian energy market, to be released today, will strongly endorse the Turnbull government’s National Energy Guarantee as a “promising” model to ensure reliability and ­affordability while helping to meet targets set out in the Paris climate change agreement.

In an exclusive interview with The Australian yesterday, Dr Birol said the government needed to start providing tax incentives to fund carbon capture and storage projects as coal would remain an important part of Australia’s ­energy mix well into the future.

He said the $10 billion Clean Energy Finance Corporation should be used to fund CCS projects, citing the US budget bill to extend generous tax incentives to CCS.

While the government has legislation before parliament to change the mandate of the CEFC for this purpose, Labor and the Greens are refusing to support it.

“It is time for Australia to provide some incentives (for CCS) through the Clean Energy ­Finance Corporation,” Dr Birol said. “There is huge potential with CCS. There has been substantial decline in costs in US and Canada ... and the US is pushing through landmark CCS tax credits. It is time for Australia to provide some incentives through the Clean Energy Finance Corporation.”

Dr Birol will brief Malcolm Turnbull, Energy Minister Josh Frydenberg and Resources Minister Matt Canavan on the report today.

He said his report would endorse the Nat­ional Energy Guarantee.

“I believe it is a promising opportunity to integrate relia­bility, ­affordability and climate polices. This is not always very easy … it’s a challenge many countries are also struggling with,” he said.

Dr Birol said the issue of state bans on gas exploration needed to be resolved but would need “social contracts” to be entered into to ensure production was increased in a responsible way.

“We need to see more production from Australia ... there are huge resources,” Dr Birol said.

“(The states’ moratoria) is a major issue.”

However, he also warned of potential global reputational risks over the government’s threat of gas export restrictions to increase domestic supply, saying Australia enjoyed a triple-A market rating ­because of the openness of its markets.

“I hope it is used as a temporary tool ... and there is no need to trigger it,” he said.

Mr Frydenberg welcomed the IEA’s endorsement of the ­Coalition’s energy policy and jumped on Dr Birol’s calls for CCS subsidies, saying Labor and the Greens were standing in the way of cheaper power for consumers and business.

“The government has legislation in the parliament to ­remove the prohibition on the CEFC to allow it to support ­investment in CCS technologies, which can reduce emissions by up to 90 per cent,” he said.

“Access to finance is one of the barriers to investment in CCS and a change to CEFC legislation will provide a significant signal of support and reduce risk for potential investors. Despite CCS being acclaimed by the Intergovernmental Panel on Climate Change and the International Energy Agency as critical to helping the world to meet its emission-reduction targets, the Labor Party are inexplicitly blocking the CEFC from supporting CCS projects.”

Labor climate and energy spokesman Mark Butler has ­described the use of CEFC for clean-coal funding as “a stunt from a government unable to ­effectively deal with the energy crisis under its watch”.

“It is also time the Victorian and Northern Territory governments dumped their mindless bans and moratoriums on gas ­exploration and development,” Mr Frydenberg said.

“More gas would help put downward pressure on electricity prices for Australian families and businesses.”

The IEA report confirms warnings by Senator Canavan this week that Australia’s energy markets were at risk from US ­export expansion if Australia’s fossil fuel industry could not be secured.

Senator Canavan said “anti-fossil fuel groups” were placing energy exports at risk, aided by Labor, which had cast doubt on the $16.5 billion Adani coalmine and opposed new gas developments at state level.

“We have plenty of gas left to develop but the US will be a competing supplier for Asia — there’s no doubt about that,” he said.

“We still have a good opportunity because we’re closer, but we’ve got to be sharp.”

As gas is cheap domestically in the US, that “frees up (its) coal ­potentially to find other markets”.

Australia exported a record $56.5bn worth of coal last year, and $22bn worth of LNG.

Echoing US President Donald Trump, Senator Canavan ­described the coal industry as “a beautiful industry full of beautiful people who I constantly try and fight for”.