As the renewable energy industry eagerly awaits the Government’s carbon pricing legislation, it is worthwhile looking again at the Minister’s comments and seeing whether that approach will deliver the much promised clean energy future.

Mr Ferguson told EcoGeneration:

“I am very firmly of the view that a price on carbon is going to create a huge growth opportunity for gas. It is the really [sic] only form of alternative clean energy in Australia at the moment.”

That would have been a huge surprise to the wind industry, which is already providing more than 5,000 gigawatt hours of electricity generation each year, enough to power 700,000 homes. It also betrays an ambivalence towards residential and large-scale solar and the emerging energy sources like wave, tidal, geothermal and advanced biofuels.

The comments contrasted sharply with those of the Prime Minister,whostated on 16 March 2011:

“We cannot afford to be stranded with an outdated high-emissions economy…I don’t want us to wake up in ten years time lumbered with a high carbon economy when the rest of the world has moved on and then scramble to catch up. Our nation is well equipped to make the transition. We have an abundance of natural resources like wind, natural gas, solar and geothermal.”

The apparent ambivalence towards renewable energy was compounded by a lacklustre Federal Budget, which saw funding cuts and delays across clean energy programs. The Solar Schools Program (not in Martin Ferguson’s portfolio) was wound up, saving $156 million, the Solar Flagships was delayed further with funding cut by $220 million and then pasted into the forward estimates. The ten year $1 billion Connecting Renewables Program still has no starting date.

It wasn’t the Budget the clean industry expected as the Government tried to sell the benefits of carbon pricing and a low emissions economy and it again highlighted the mixed messages from the Gillard Government.

This ambivalence raises questions about what a carbon price regime will really mean for the clean energy sector. There’s no question the Government and the Multi Party Climate Change Committee will have to deliver a much more positive vision of a low carbon economy, as well as substantial new funding and innovative investment incentives to gain the active support of the clean energy sector for its carbon pricing regime. It makes sense for this new regime to be driven by a Minister for Clean Energy.

Carbon pricing may create a huge growth opportunity for gas, but it will also be a huge growth opportunity for renewable energy if it is accompanied by a strong regulatory framework.

At the time of writing, the detailed architecture of the carbon pricing regime was unknown, but it is unlikely a carbon price will begin at a sufficient level to drive investment in wind power, let alone the emerging energy sources, unless accompanied by complementary measures. That means a strong Large-Scale Renewable Energy Target, support for small-scale renewables and additional incentives for large-scale solar and emerging technologies.

The Minister for Climate Change and Energy Efficiency, Greg Combet, has confirmed a Large-Scale Renewable Energy Target and a small scale scheme will continue and will complement a carbon price. That measure alone could deliver more than $36 billion in investment by 2020, according to Bloomberg New Energy Finance, but it is unlikely to provide sufficient incentive to drive down the cost of the emerging technologies.

Australia’s clean energy industry and its supporters in the environment movement are united in their view that revenue from a carbon price must go into some form of clean energy investment bank.

The economic case for public investment in clean energy innovation was made by Professor Ross Garnaut in his Update Paper Seven, Low Emissions Technology and the Innovation Challenge. In that paper, Professor Garnaut suggested that “revenue from the carbon price should be used to add to existing commitments, and lift Australia to [a] proposed $2–3billion annual commitment.”

The Clean Energy Council has taken this proposal further, specifically recommending the establishment of an independent carbon bank that could borrow against future carbon price revenue to invest in clean energy innovation. Similarly, the Australian Solar Energy Society has recommended 25 per cent of carbon price revenue go into an independent Green Investment Bank and the Australian Conservation Foundation has called for the establishment of a Clean Energy Finance Corporation, providing a suite of incentives including loan guarantees, capital grants and tax concessions.

A carve out of funding for innovation is not a radical idea, although it has struggled to take hold in Australia to date. The conservative United Kingdom Government has dedicated £3 billion for a Green Investment Bank, which it believes will leverage £15 billion in private sector investment in clean energy.The United States Government has provided more than $26 billion in loan guarantees to 25 clean energy projects – including the world’s largest solar power station – and the Chinese Government is now spending more money on clean energy than fossil fuel.

The renewable energy industry is looking to the Australian Government to carve out a substantial proportion of carbon price revenue for clean energy innovation in its draft legislation, but if the Government fails that test it will then become a key challenge for the cross benches. The renewable energy industry overwhelmingly supports a price on carbon, but it will not do so unconditionally.

Martin Ferguson suggested to EcoGeneration that “one way or another, pricing carbon – we’ve got to have the fight and resolve it. Industry needs an outcome one way or another.” As with any other industry, the clean energy industry needs an outcome to deliver investment certainty, but Australia won’t reach its natural resource potential – its natural advantage – without a comprehensive suite of measures including a carbon price, renewable energy target and an independent clean energy investment bank.