Launch of Australian Environment Industry Report

Kelvin Thomson - Shadow Minister for Environment and Heritage

Speech

Transcript - Progressive Business Breakfast Launch, Melbourne - 16 April 2002

(Check Against Delivery)

This report was prepared for the Chifley Research Centre by Ernst and Young. Funding for this Project was provided to the Chifley Research Centre by BHP Billiton. I wish to thank BHP Billiton for their generous support of this work, Ernst and Young for carrying out this work, and the Chifley Research Centre for its co-ordinating role in making this Project happen.

The project was completed late last year. It was not released at that time due to the time commitments on my predecessors associated with the Election campaign. It was made available to me as the incoming Shadow Minister prior to Christmas and since then I have been on the lookout for a suitable opportunity to launch it, and I appreciate the opportunity which speaking to an audience of "Progressive Business" affords me to do just that.

In reviewing the Report I can assure you that it has not dated, and indeed the effluxion of time is making it more relevant, rather than less so.

Last week I had the opportunity to visit the Enviro 2002 Conference, held in Melbourne at the Melbourne Exhibition and Convention Centre and speak with a number of the exhibitors. What was significant was that there were hundreds of companies there, all engaged in the business of environment protection and repair. There were waste management companies, there were water quality companies, there were renewable energy companies, running successful and in many cases growing businesses.

Their presence was bearing out, in a very practical way, some of the words the Conference heard from leading business figures.

And indeed not a day goes by without some new initiative of a green character - whether its solar panels or the roof of Melbourne's Queen Victoria Market, or property developers in Carrum giving away electric golf carts to reduce car use on new estates.

For example, as the leader of Westpac Financial Services, Shaun May's role is to drive the bank's intensified focus to be the dominant competitor in the market, delivering better solutions to clients. In his role he oversees the Investment Management, Life Insurance, Customer Service, Retail Business Development, Institutional Business and Custody divisions.

Shaun has also responsibility for the design and implementation of the ground- breaking Australian Eco Share Fund which forms part of Westpac's leadership in the area of Socially Responsible Investing.

Shaun believes a focus on sustainability can mean profits for companies.

"The bonus is that taking a closer look at sustainability of environmental and social performance can actually help companies increase efficiency and profitability.

He believes that "an inventory of existing data must now be developed and consolidated into ratings or benchmarks for sustainability - that will enable investors to look forward and predict what these sustainable companies will look like in the future rather than just knowing how their environmental performance stands today"

He says "Westpac's funds can invest in companies in any industry sector but the manager will give preference to companies with superior environmental, social and financial performance".

And take the outspoken Greg Bourne, Regional President/Director of Australian and New Zealand BP. Greg has been a leading voice for sustainability in business, who at every opportunity talks up the "business of the environment as a growing, exciting, rewarding and ultimately profitable business". And this is not just hollow rhetoric.

At the global level BP's Chief executive has given the company's "ambitious international commitments to reduce greenhouse gas emissions, boost energy efficiency and develop alternative renewable energy sources the status of hard financial targets".

In Greg's words "the old unsustainable paradgim - that you went for economic growth first, and cleaned up afterwards, is mistaken because in the process of growing you can achieve improvements in environmental and social as well as economic performance"

In reflecting upon his own industry, Greg suggests that the traditional drivers of energy policy have been low cost and supply security, and that these have been joined more recently by a new one - environmental protection.

I would suggest that the time has come for business and industry to examine what has driven them in the past, how environment protection and improvement relates to what they do, and set a new path towards sustainability - environmentally, socially and economically.

Greg's thoughts on the energy industry are once again instructive on the need to adapt to the growing push towards sustainable business practices.

"More forward looking players - companies and countries - are already focussing on the more diverse technologies of the 22nd century, which will be the century of renewables like wind, solar and tidal power generation".

The Australian Environment Industry Report takes as its starting point that in the year 2000 the world market for environmental goods and services was estimated at approximately $AUD 1 trillion. It considers the growing world market for environment management technologies and services to be a key source of opportunity for Australia.

The report therefore sets out to:

• Provide an overview of the Australian environment industry
• Document current national environmental knowledge and identify strategies to leverage this knowledge into commercial opportunities
• Review the impediments and incentives that influence growth and development of the environment industry - including the role for the Commonwealth Government, and
• Provide some insight into established and emerging market sectors within the environment industry.

OVERVIEW OF THE AUSTRALIAN ENVIRONMENT INDUSTRY

The emerging environment industry - products and activities which measure or prevent or minimise or repair environmental damage to air, water, soil or ecosystems, or which deal with waste or noise - is already making an important contribution to economic activity. It is estimated to account for 1.6% of Australia's GDP and provide around 127,000 jobs.

National environmental expenditure both public and private, is estimated at $8.6 billion per annum.

Current exports are approximately $300 million, with significant growth potential. It is anticipated that the increasing adoption of environmental initiatives by mainstream industry will drive significant demand led growth. Growth forecasts on the environment industry are variable, but range up to $50 billion by the year 2011.

AUSTRALIA'S KNOWLEDGE RESOURCE

The Report finds that the Australian environment industry is well supported by a vast network of knowledge. There are a number of fields in which Australia is at the leading edge of international knowledge - land and water management, salinity control and treatment, renewable energy and the broad range of issues linked to climate change - emissions abatement, emissions monitoring and greenhouse accounting.

Most of this knowledge resides within public sector research vehicles - the CSIRO, various Cooperative Research Centres and Australia's universities are at the forefront of environmental research.

Australia's private sector is much less engaged in environmental research, accounting for only 15% of the national research and development effort in the environmental field. This picture is different from other countries, but quite consistent with the general research and development malaise in Australia, which Labor sought to focus on last year with its Knowledge Nation agenda.

IMPEDIMENTS AND INCENTIVES TO GROWTH AND DEVELOPMENT

The leading edge knowledge we have provides significant opportunities for commercialisation both nationally and internationally. The report says we need to turn this research and this knowledge to the development of solutions to environmental problems. Some of the current barriers it identifies to this happening are -

• Lack of value attributed to environmental externalities
• The Australian economy's dependency upon resource intensive industries, and
• Due to isolation, the Australian society is less aware of environmental initiatives undertaken by overseas governments and businesses.

In other words, we are simply not aware of how far European and other countries are moving in the direction of sustainable industry.

The Report says there is a comprehensive role for the Commonwealth Government in facilitating the development of Australia's environmental industry in order to enable improved environmental outcomes and deliver a range of economic benefits, including employment growth.

Some of the things it says the Commonwealth Government needs to do are -

• Formulate a national strategy to manage issues of climate change, including consideration of the Kyoto Protocol.
• Develop an agenda to co-ordinate the management of Australia's biodiversity, and
• Deliver improved efficiency in relation to the use of water resources, the remediation of degraded land, and the management of fresh water salinity.

The Report says that Government should be supporting business in adopting eco-efficiency measures through means such as -

• Financial incentives to reduce material intensity of products
• Subsidisation of industry utilisation of renewable energy
• Penalty regimes associated with the discharge of toxic substances,
• Better communication with the public on the importance of environmental policy and Australia's positioning on environmental issues in an international context
• Remove perverse financial subsidies
• Realign property rights to enable market forces to value natural capital and its depletion, and
• Support emissions trading schemes and tradeable certificate programs.

This question of valuing natural capital has been the subject of a lot of work by US writer, businessman and ecologist Paul Hawken.

He says we are entering an historic period in which, for the first time, the limits to increased prosperity are not the lack of man-made capital but the lack of natural capital. The limits to increased fish harvest are not the lack of boats, but the amount of fish; the limits to irrigation are not pumps or electricity, but water; the limits to timber production are not sawmills, but the availability of forests.

As you are probably aware, the Federal Labor Party is presently engaged in a process of Policy Review, and these proposals, and the others contained in the Report, are useful proposals for us to consider as part of that Review. The point that needs to be made here is that Governments do have a range of means at their disposal to directly and indirectly promote the environment industry, and the time has come for those powers to be exercised.

EMERGING MARKET SEGMENTS

The Report identifies four segments of the environment industry for which significant growth opportunities exist, as follows:-

CLIMATE CHANGE - areas such as data acquisition and interpretation, carbon sequestration technologies, and renewable energy, such as wind farm development.

BIODIVERSITY MANAGEMENT - Carbon sink forestry management, site assessment etc.

LAND, WATER AND SALINITY - eg Dryland salinity remediation technologies, and water extraction and irrigation management.

ECO-EFFICIENCY - Waste management, recycling, monitoring pollutants.

The Report's discussion of climate change draws attention to the fact that Australia faces the likelihood of increased water shortages, and more frequent and more severe extreme weather events - floods, high winds and droughts. These changes would have a significant impact on Australia's primary industry productivity, the cost of insurance premiums and the availability of cover, and an influence upon issues of public safety and health.

It also points out that as the rest of the world adapts its industry and policies to a carbon constrained world, Australia may be at risk of becoming isolated and left behind as various greenhouse gas reduction technologies, flexibility mechanisms and industrial processes and initiatives expand in Europe and Japan.

It further points out that Australia needs to actively participate in international negotiations and activities to try to prevent or minimise the forecast weather changes.

In fact it is only Labor which understands the need to meet this challenge and secure our future prosperity. Only Labor will ratify the Kyoto Protocol and take the steps needed both to make our own business and industry sustainable, and to ensure other countries do the same, and reap the economic and environmental rewards which come from getting in early.

We have an environment industry which is growing and which is poised to take advantage of initiatives such as our Government ratifying the Kyoto Protocol on Climate Change.

There's money to be made from getting fair dinkum about environment protection.

REPORT CONCLUSION

Australia is well positioned to develop a strong environment industry that is able to respond to both domestic and export opportunities. Industry development and growth is fundamentally dependant on the industry's ability to leverage existing knowledge and expertise, in which Australia has significant capability, in order to drive quantifiable environmental improvement and derive considerable economic benefit.

The development of the environment industry would be accelerated and enhanced by the Commonwealth Government actively providing comprehensive and appropriate policy, fiscal and regulatory settings.

I take pleasure in formally launching this report.