The CEO of GE Australia tells Climate Spectator editor Giles Parkinson that:

 – The push for a carbon price in Australia is not about leading change, it's about catching up;

– GE has been basically operating under the Kyoto protocol since 2005;

– GE and the businesses in the coalition want to ensure there is an open, well-rounded and focused debate;

– This is a terrific business opportunity for those who wish to adapt and figure out how to turn that opportunity into shareholder value.

Giles Parkinson: Steve, thanks for joining us today. You and a bunch of other companies have announced a coalition of businesses to declare your support for a carbon price in Australia. Why was it necessary to do so?

Steve Sargent: Look, this is a very important issue – not only for business; it’s an important issue for the nation, it’s an important issue for communities, it’s an important issue for individuals. Certainly all the businesses who have signed up to this coalition believe that it’s one that should be broadly debated. It’s our view that a price on carbon is not necessarily a matter of if, but more a matter of when. And certainly the companies that are represented in our coalition here are all taking action on it today.

This is not something that we’re waiting to have imposed upon us. It’s something that some of us have taken action on many years ago. GE has been basically operating under the Kyoto protocol since 2005 in terms of how we make investments and how we operate and how we manage our own carbon footprint. I think, also, what companies are looking for is more investment certainty. Now, this is a pretty significant swing factor out there and all of us are looking for more certainty around this issue to enable us to continue to identify where to drive investment for our companies.

GP: But the reason for actually creating this coalition; are you doing so because there is some concern about the course of public debate and the fact that maybe it was dominated by people who are resisting a carbon price?

SS: Certainly, the media has covered the against argument for a price on carbon more extensively than it has covered the affirmative argument for a price on carbon. Interestingly enough, both parties, the Labor Party and the Opposition, both actually believe something should be done about climate change. There are many approaches to this. One is to have a sort of tax-type approach, like where you put a price on carbon that may transition to more market efficiency type measures. Then there are other things you can do around it: Clean energy standards; making sure all motor cars can drive a certain number of kilometres per litre; making sure that power generation companies have X amount of emissions or use Y amount of certain fossil fuels; things like that. And there are several different ways to get there. Now, we’re not really having that debate, right?

There’s been an approach that’s been put up: Let’s put a price on carbon, let’s then transition that into a more market-based mechanism over time. If both parties agreed that something should be done, there’s not a lot of debate around well, what other things could we be thinking about here, as opposed to, look, it’s a tax and a tax is bad?

GP: Isn’t it just a case of one group of companies with a certain vested interest versus another group of companies with a different vested interest?

SS: I really don’t think so. If you look at the members of this coalition, you have large energy companies like BP, you have large utilities like AGL, you have large companies like GE. Yes, we think this is a significant business opportunity for GE, but you could argue we are just as impacted by a price on carbon. We have to change and we have changed the way we operate to use less energy, to reduce our carbon, our greenhouse gas intensity over the years. We continue to change the way we do things and incidentally, we have found it to be a significant productivity opportunity at the same time. So, this hasn’t cost us money to do this. We’ve found that we’ve saved in the vicinity of $100 million a year in cost out opportunities, as you lose less energy. So, I think if you just look at the cross section of companies who have signed up, it would argue against the fact that it’s just the pros against the cons.

GP: To what extent of what we’re seeing here is a repeat of what’s happening overseas? There have been splits in business ranks in the US and we’ve seen it in Europe as well, particularly about the the pace of the emission reductions task .

SS: I don’t think there’s anything unusual about the process and how the debate has evolved here. I would agree it looks pretty similar. The interesting thing, though, is that Australia is certainly lagging. You know, there’s a concern out there that Australia is trying to lead the way on taking action for climate change. You just read almost any literature on the subject at all and Australia is lagging. Australia’s per capita greenhouse gas emissions are the highest of any OECD country in the world. We are sixth highest in the world behind Bahrain, Bolivia, Brunei, Kuwait and Qatar.

What I’m concerned about, as an Australian, is that it’s not about getting out and leading the way – it’s that as this does continue to change on the global arena and other countries are taking more action, other countries have been able to break the nexus between strong economic growth and continued increase in greenhouse gas intensity. I point to Germany as a terrific example. Germany is one of the best export-performing economies in the world today. They sell to China. They sell to India. They sell to everybody. And I think their economy is based around 60 or 70 per cent exports. You look at their carbon productivity and how they’ve been able to get financial GDP growth, strong GDP growth, but their carbon intensity is flat to down. They’ve been able to do it.

So, what I’m more concerned about is that if we don’t start to take action, and I think most of our members here believe that if we don’t start to take action now, we’re going to be left behind. When we do have to take action, it will be a shock as opposed to a well managed transition. I think that’s one part of the argument.

The other part of the argument is, frankly, this is a terrific business opportunity for all those who wish to adapt their businesses to try and figure out how to turn that opportunity into shareholder value.

GP: I presume that GE is technology agnostic because you supply equipment for nuclear, coal, gas and renewables; just talking about the energy sector, which is just one part of your business, but what should it matter to you what sort of energy is being built, because some sort of energy is going to be needed anyway?

SS: We are certainly agnostic. Whatever customers want to do, we will help them with whatever they need. Having said that, we’re still working on improving the efficiency of our gas turbines. So, are our gas turbines more efficient today than they were five, 10 years ago? Yes, they are. We’ve seen significant improvement. Look at our jet engines. You know, Qantas is acquiring our engines to put on their 787s. That engine has a 20 per cent better fuel burn than the old technology. Now, that is a huge operating saving for that customer. They use less fossil fuels and their nitrous oxide emissions are down somewhere around 40 per cent lower than the previous technology.

So, as we go across all of our business – which frankly, Giles, is why we went into this back in 2004-2005 – we were hearing from our customers across a broad array of our industries and from our financial service customers, our energy customers, our aviation customers, our healthcare customers, we were hearing that there would be an increase in either regulatory pressure to do something about reducing the use of fossil fuels, or it was purely that the cost of oil was going up. So, we got some of our scientists, about a dozen of our scientists, to argue pro climate change with another dozen to argue against climate change, and what we should do about it. And we came out, as a company, to think: You know what, we’re going to get on the front foot on this, we’re going to position our company and try and take advantage of this business opportunity and develop technologies for our customers that reduce emissions, use less fossil fuels, have a lower greenhouse gas intensity and have improved operating performance. We have this mindset that green costs more. That’s not necessarily the case and certainly not our experience.

GP: So, what exactly is this coalition calling for?

SS: We’re just saying let’s have a good open, candid, high quality debate about this. This is a very important issue. We’ve all got businesses, we all need certainty of investment, and we’d like to get to that point sooner rather than later to get more clarity around that policy. I think it’s also to make sure we have the best parties at the table making sure that we’re debating this very important issue and making sure, frankly, that the media and everybody else is hearing a well rounded, well focused debate.

GP: Do you think that the right parties are at the business round table for instance?

SS: I think it represents a good cross section of the business community.

GP: A lot of the businesses seem to be expecting, at the moment, that the policy that is produced could end up something similar to the CPRS. Is that something you or your coalition would be happy with, or are there some things that you want avoided?

SS: Look, we haven’t gotten that far into detail. ...This is a very, very complex issue and we are going to need to change behaviour within our businesses. We’re going to need to change behaviour as consumers and individuals in the way we do things over time. And we need to put some of those mechanisms, some of those levers in place so that we change our behaviour over time and end up with a more efficient, low-carbon or lower-carbon economy.

GP: Yours is a global business, obviously. To what extent does what happens in Australia on this carbon price and debate affect the way this this policy or this issue will be addressed around the world?

SS: I think that’s an interesting question. We had our chairman here a couple of weeks ago. He’s very interested and he has asked me to keep him apprised of where we sit on this. I know he met with the Prime Minister when she was in the US a few weeks ago. We met with her, the chairman Jeff Immelt and myself met with her during his visit down here and certainly I know she’s communicated that folks in the US are watching what’s happening. And certainly in the business community – certainly in GE’s case – this is certainly one of the topics of discussion.

GP: Does it have a potential of being a line in the sand, as it were, because there are a lot of international companies being very vocal about a very small part of their business?

SS: I don’t really have a view on that. But I think, from a national perspective, for me this is not about leading change, this is about catching up. Go read chapter 7 of the Garnaut Report around putting Australia’s emissions into context. We’re not leading this by any stretch of the imagination. We are significant laggers and I think there’s more of a risk of not taking action. And then, when the rest of the globe does take action – and we know that countries like China and a large part of the US and obviously European countries have, and are already are taking action – my concern is that once that does happen, the transition becomes more of a shock as opposed to a gradual transition.