1 October 2008
Amora Hotel
Richmond, Victoria
[check against delivery]
Chemicals and plastics are critically important industries for Australia, and the Plastics and Chemicals Industries Association is a critically important organisation for these industries.
In 2005-06, the sector earned $31 billion in sales and service income, generated $9 billion in industry value added, and employed 80,000 people.
And that’s just for manufacturing.
To get the whole story you would need to add the contribution of distributors, recyclers, importers and service providers – all of whom create jobs and wealth for Australia.
In 2004 05 we exported $3.5 billion worth of chemicals and plastics.
Imports were valued at $13.8 billion.
It would be nice to see those figures reversed, but the reality is that the rest of Australian industry depends on plastics and chemicals – wherever they come from.
In 2004-05, around two-thirds of this industry’s outputs were used as inputs by other sectors.
Without plastics and chemicals, we wouldn’t have an automotive industry, we wouldn’t have a healthcare industry, we wouldn’t have a construction industry, we wouldn’t have a packaging industry.
This is an essential industry, an enabling industry, and an industry the Australian Government wants to see prosper and grow.
You have asked me to say something about three things that will have a significant bearing on the sector’s future development – climate change, regulatory reform and innovation.
Let’s consider each in turn.
Climate change
In July, the Government released a Green Paper outlining its proposed Carbon Pollution Reduction Scheme.
We welcome your contribution to discussions about the Green Paper.
As the association’s Sustainability Leadership Framework for Industry (2007) points out: “the future pricing of carbon will play an important role” in reducing greenhouse emissions.
The development of this sustainability framework is just one example of how the PACIA and the industry are responding to environmental challenges.
This is important, because what happens in the chemicals and plastics industry will have a significant bearing on our efforts to reduce emissions nationally and globally.
The Government recognises that the introduction of an emissions trading scheme before an effective international agreement is in place may affect the competitiveness of emissions-intensive, trade-exposed industries in Australia.
That’s why we have proposed to offer free permits to these so-called EITE industries.
“Eligibility for EITE assistance would be based on the industry-wide emission intensity of an activity or process being above a threshold of about 1,500 tonnes [of] carbon dioxide equivalent ... per million dollars of revenue.”
There is no point pretending every industry will qualify for EITE assistance.
Based on 2001-02 data, only about a dozen non agricultural activities would be eligible.
With that in mind, we are also proposing to establish a Climate Change Action Fund.
It “will focus predominantly on those industries not receiving [a] free permit allocation, but which nevertheless need assistance to adjust to the carbon price.”
Among other things, the fund would support:
- investment in innovative low-emission processes;
- industrial energy-efficiency projects with long payback periods; and
- the dissemination of best practice among small to medium-sized enterprises.
The aim of these transitional measures is to ensure that Australian industry remains competitive and stays onshore.
There is no point sending our industries overseas to less environmentally friendly locations.
We will make a bigger contribution to the global effort by keeping industries here and exporting the new technologies they develop to reduce their emissions.
That’s why we are giving industry the certainty it needs to plan ahead.
Submissions on the Green Paper closed last month, and the Government intends to release:
- a policy White Paper;
- its medium-term emissions trajectory; and
- an exposure draft of the associated legislation by year’s end.
Our programs
Meanwhile, we are already working with industry to develop and apply climate change solutions through the $240 million Clean Business Australia initiative.
It has three elements.
Re-tooling for Climate Change and Climate Ready are operating already, and the Green Building Fund will follow soon.
Re-tooling for Climate Change offers manufacturers grants of between $10,000 and $500,000 to make their operations more water-wise and energy-efficient.
The program will meet up to one-third of the project cost for initiatives such as:
- small-scale cogeneration plants to capture waste energy and convert it into electricity;
- measures to capture stormwater and recycle waste water for use in the production process;
- better insulation and systems to recover waste heat for greater energy-efficiency; and
- carbon-cutting tools and processes.
Applications for the first funding round close on the 20th of this month.
Climate Ready provides dollar-for-dollar grants of between $50,000 and $5 million to support the development and commercialisation of products that save energy and water, reduce pollution, and use waste in innovative ways.
Both programs are designed to deliver great environmental outcomes, to support Australian innovators, to put Australian industry on a more sustainable footing, and to help secure jobs for the future.
Both are about drawing on the creativity of Australian business to develop climate change solutions we can use ourselves and sell to the world.
Regulatory reform
Another way to unlock creativity is through regulatory reform.
The Government recognises that excessive and inconsistent business regulation hurts productivity, inhibits innovation, and discourages risk-taking.
The more we reduce red tape, the more businesses can concentrate on problem-solving, job creation, and growth.
This association has been a valuable partner in the regulatory reform process, both on its own account and as part of the Chemicals and Plastics Leadership Group.
The regulation of chemicals and plastics is an issue of long-standing concern.
The sector is covered by a panoply of Commonwealth, and State and Territory regulations.
There are variations between jurisdictions and inconsistencies within jurisdictions.
Regulations have been written with different policy objectives and risks in mind – whether to public health, workplace and transport safety, the environment, trade, or national security.
The Commonwealth is working with the States and Territories through the Council of Australian Governments to clean up the mess.
The Productivity Commission has completed a study of Chemicals and Plastics Regulation which will help shape future institutional and regulatory arrangements.
COAG’s Business Competition and Regulation Working Group has recommended that implementation plans based on the Productivity Commission’s findings be considered at the December meeting of COAG.
The working group is particularly concerned that we get the coordination and governance right, and this will be a focus of the December meeting.
Innovation
If we are to succeed in reforming plastics and chemicals regulation, we must be ready to embrace new ideas – ready to try new things.
In this as in every other area of our national life, innovation is the key.
One of my first actions as Minister was to launch a comprehensive review of Australia’s innovation system.
The review panel reported at the end of August.
It was not asked to develop strategies for particular sectors.
Instead, it was asked to suggest how we can boost Australia’s innovation capacity and performance across the board.
The panel came back with seventy-two recommendations for business, for universities and public research agencies, and for government.
I don’t propose to go through the recommendations in detail, but the report’s big ideas include:
- restoring the level of Commonwealth spending on science and innovation to the levels of the early nineties;
- scrapping the R&D tax concession and replacing it with two R&D tax credits;
- funding the full cost of research at our universities; and
- adopting national innovation priorities to focus our efforts and resources.
Two of the review panel’s overarching messages are that we need to invest in skills and human capital, and to increase our international engagement.
The Government is weighing the review panel’s recommendations and will draw on them as it develops its own innovation White Paper in the months ahead.
Linking business and research
One of our great concerns is to bridge the gulf between private enterprise and public research.
Firms in the chemicals and plastics sector have been quite effective in partnering with CSIRO and Cooperative Research Centres like the CRC for Polymers – but this is not the norm.
The latest figures from the ABS show that only around a third of Australian businesses are innovation-active, and only a tiny proportion of innovation-active businesses collaborate with the formal research sector:
- 1.6 per cent with universities;
- 4.3 per cent with private non-profit research institutions; and
- 7.2 per cent with public sector research agencies like CSIRO.
Lifting these numbers will require cultural change on both sides.
The future
The Plastics and Chemicals Industry Association knows perfectly well that innovation is critical to making Australian industry more productive, competitive and prosperous.
As the association says in its Sustainability Leadership Framework:
“The development of new and more desirable products and services that are linked to market needs and more efficient production processes has ensured that many companies continue to grow and remain viable in increasingly competitive markets.”
This is old news to forward-thinking industries and industry associations like this one, but not everyone gets it.
Whatever the challenge – be it climate change, regulatory reform, or building a business – innovation is the answer.
That’s the message I’m trying to spread, and I hope I can count on your help.