The challenges as I see them are: 1. Husbanding Australia’s water resources; 2. Reducing greenhouse gas emissions and waste; 3. Minimising energy intensity; 4. Maximising participation in the workforce; 5. Providing the right education and development opportunities for all; 6. Encouraging a healthy society; and 7. Last but by no mean least, sustaining the nation’s economic growth to pay for it all.
Of course, each of us will have our own list of what we see as Australia’s sustainability issues, and I would encourage you to think about what you see as the core issues. Hopefully, we can share them at the end of my talk. Unfortunately time today does not permit me to talk about all of these challenges, each of which could form the topic of a lengthy discussion in themselves. Instead, I will highlight three areas, being water, greenhouse gas emissions and waste, and health. By giving examples of what my company and others are doing, I will outline how business can provide leadership in Australia towards the attainment of the nation’s sustainability goals. As well, in each of these areas, I will outline how I think government can help by setting national targets and providing the right enabling environments. A common approach - using free market forces Before I describe in more detail the particulars of these sustainability challenges, I would like to set the stage by outlining what I think should be a common approach to all of these issues. I believe in free market forces. Historical evidence shows us that free market forces will lead to real prices for precious assets like water, clean air, unpolluted land and a healthy population. I believe that it is only by market pricing of these assets, and properly charging users for practices that threaten them, that the best choices will be made to achieve the sustainability goals. Free market forces, whilst admittedly less than perfect, are a sure way of achieving the ‘best bang for our buck’. This will not be easy to put into practice but if we are to meet Australia’s sustainability challenges, we will all need to adopt new ways of living and doing business. Husbanding Australia’s water resources Macro picture I turn now to the first challenge – husbanding Australia’s water resources. Managing Australia’s water resources to ensure that future Australians continue to have access to water of sufficient quality and quantity to meet their needs is a key challenge. Australia is the driest inhabited continent on the planet and access to quality water is a critical foundation of our society, environment and economy.  [1] Australia has a highly variable rainfall, and enabling all Australians to have access to water year round has meant that water needs to be collected and stored. However, the building of dams has had adverse impacts on river ecologies. [2] Market forces And if we turn to look at what we are doing with the water that we harvest from the rivers, we see that we do not even achieve good economic return for most of it. CEDA’s “Water and the Australian Economy” report states that around 75% of all water harvested is used in irrigation, but 67 per cent of that, used for pasture and rice crops, returns only $300 of economic output per million litres, which roughly equates to the volume of an Olympic sized swimming pool.[3] This can be contrasted with the much higher returns from crops like fruit and vegetables, which use much less water in total but return between $1500 and $1800 per million litres. We must put our precious water resources to more efficient use. This is why I support the creation of an efficient national water market, with a system of tradable water entitlements. Such entitlements ought to be vested with individual water users. And we must ensure that ‘the environment’ is recognized as a legitimate user of water – that is, that we explicitly reserve sufficient quantities of water to safeguard the flora and fauna that live in or around our rivers and waterways. Equally, we must ensure that rivers receive sufficient quantities of water to enable them to flow. Tradable water entitlements will ensure that water will be moved to where it is most needed and most valuable, and be able to resolve ‘resource use’ conflicts.[4] Those users who desire more water than they are allocated will be able to buy water on the open market, at a transparent price. I applaud the National Initiative committed to by the Council of Australian Governments in August last year, which includes the initiation of an efficient market for water, with water being priced to produce appropriate and sustainable outcomes.[5] What business can do – and what Shell and others are doing I also note that the National Initiative will try to encourage those of us that live in the cities to conserve and recycle water. I think that this is the area that most of us here today can play a part in. For example, Shell is a significant user of metropolitan water supplies at both our Sydney and Geelong refineries, so we have been actively looking at ways of reducing, recycling and reusing water. At Clyde in Sydney, any water lost through evaporation from our closed recirculating cooling water loop system is replaced by biotreated effluent water, instead of fresh water as at many other refineries. This reduces the demand placed by the Clyde Refinery on Sydney Water’s potable water supply by up to 1.7 million litres per day, or the equivalent amount of water used by about 5000 individual consumers. Our Geelong Refinery is one of the top 3 users of Geelong’s daily potable water supply, and we are currently working with the local authority, Barwon Water, to investigate a combined domestic and industrial wastewater reclamation plant to provide recycled water to the Refinery. If built, this plant could reduce the refinery’s domestic water use by approximately 6 million litres of water a day (which is the equivalent of the water used in a day by almost 18,000 individuals), reduce the flow of effluent water through Barwon Water’s main sewerage outfall, and significantly reduce water discharged from the refinery into Corio Bay. Once built, the plant will be able to provide recycled water to many of our industrial neighbours in the Geelong community, thereby further reducing the drain on Geelong’s freshwater resources. Through my involvement in the government’s Business Roundtable on Sustainable Development, I am also aware of some great water efficient practices by other Australian businesses. Toyota Australia has managed to save in excess of 150 million litres per annum over the last 4 years, primarily in their paint shop, by a combination of ceasing unnecessary processes, reusing water and using more efficient technologies. Rio Tinto has introduced a unique salt credit-trading scheme to regulate salinity discharges from coalmines in the Hunter Valley. The scheme, which was a tripartite development between government, the community and the mining industry, facilitates the controlled discharge of saline water from mine sites to reduce adverse impacts on river water quality and agriculture. [6] What government can do Turning now to the role of government, I believe that their primary responsibility is in setting national targets and providing enabling environments in which individuals and industry can adopt measures and behaviours aimed at achieving the stated national targets. As I said at the beginning, I strongly believe that their policies ought to promote the working of free market forces. In the case of husbanding water resources, they may need to assist in the process of setting market prices and determining water allocations. Governments have a responsibility to ensure that all interested stakeholders in the community have a say in the process, and that everyone has equal opportunities to take part in the developing market. They should set up a Federal market – it makes no sense whatsoever to have a state-by-state market for water. The National Water Initiative agreed by the Council of Australia Governments is a good example of what I think we need to see happening right across our areas of sustainability challenge. Not only have steps now been taken towards a national water market, but the state governments were able to work with each other and the federal government for the benefit of all Australians. This is a very good start – and now it will be up to us as businesses and individuals to change our behaviours to ensure that Australia meets the water conservation goals outlined by government. Minimising greenhouse gas emissions and waste Staying with the environmental theme, the next challenge that I would like to address is the minimisation of greenhouse gas emissions and waste. Australia now has the highest level of greenhouse gas emissions per capita of any industrialised country.[7] The National Greenhouse Gas Inventory report states that Australia produced 550 million tonnes CO2 equivalent in 2002.[8] The greatest proportion of these emissions came from the energy sector, which includes stationery energy (i.e. power stations), transport and fugitive emissions. In fact, fully 88.5% of carbon dioxide emissions came from this sector. [9] And the trend is not good. Net greenhouse gas emissions were higher in 2002 than they were in 1990 – admittedly by only 1.3%, but certainly not a reduction.[10] In terms of waste, Australia is among the top 10 solid waste generators per capita of the OECD countries,[11] and has the second highest per capita level of municipal solid waste generation in the OECD, with most of that waste going to landfill[12]. Free market forces Again, I am in favour of imposing free market measures such as a carbon trading system and fully costed landfill fees, as I believe that these will lead to optimal outcomes. However, I do not believe that prescriptive regulation is the best way forward – that is, saying that everybody has to reduce their emissions by a certain percentage or to a certain target, regardless of cost. I believe that the intelligent use of market forces will lead to the optimal outcome, where we will see the greatest reductions per unit dollar expended. What is Shell doing? Already within Shell we require that all new projects must be economic in the presence of a carbon charge. For the moment, in the absence of a charge mandated by legislation, we require that options to reduce greenhouse gas emissions must be built in up to that carbon charge level in the design stage. We have recently used this approach in designing the production facilities for making low-sulphur-diesel and high-octane petrol at our refineries. Speaking of fuel, we believe that it is in producing lower tailpipe emission fuels, or ‘clean fuels’, where we can help make the most difference. This is why we are fully supportive of the Federal Government’s ongoing clean fuels initiatives. We know that production of these new clean fuels will, somewhat paradoxically, increase the level of emissions at our refineries, because of the increased processing of the crude that must occur. However, when looked at on what we call a ‘wells to wheels’ basis, we find that the overall emissions from a litre of fuel falls, improving air quality for all Australians. Similarly, we actively promote the use of lower emission fuels such as Liquefied Natural Gas – not only here in Australia but also overseas, for example in China, where the replacement of coal by LNG as a generation fuel will save many hundreds of tonnes[13] of greenhouse gas emissions. However, we know that LNG production facilities can be very significant sources of greenhouse gas emissions themselves. Shell is actively engaged in trying to find ways to significantly reduce emissions from LNG plants. We are also very excited, along with our partners in the Gorgon gas field joint venture, to be involved in the pioneering use in Australia of geological carbon sequestration on Barrow Island. Over the life of the project, this will enable us to bury approximately 130 million tonnes of carbon dioxide deep below the earth, gas that would otherwise be released into the atmosphere. We will continue to openly report our greenhouse gas emissions – locally through the Australian Government’s Greenhouse Challenge Programme in which we are a foundation participant, and globally through our Shell Report. More broadly, we are exploring what a low carbon future might look like, and how we might get there. We are actively involved in hydrogen car trials, for example in the US,[14] and in solar and wind energy initiatives. What government can do Turning to the role of government, they must set national greenhouse gas emission targets and provide the right environment to allow us as businesses and individuals to achieve those targets. The Federal Government has set some greenhouse gas targets, via the National Headline Sustainability Indicators. [15] Providing the right enabling environment is likely to require the introduction of market based pricing, such as a carbon charge, which will ensure that producers and consumers are cognisant of the cost of their actions on the environment. Encouraging a healthy society Introduction Turning now to encouraging a healthy society. Australia performs very well on what is probably the best indicator of a healthy society, average life expectancy, with one of the highest rates in the OECD. Thankfully, this is expected to continue. However, we could improve our life expectancy even more. The top 3 underlying causes of death in Australia continue to be cancer, heart disease and strokes. By and large, we know what we can do to reduce the risk of suffering from these diseases – exercise more, don’t smoke, have a healthy diet, reduce cholesterol, stay out of the sun, manage stress levels, and take regular holidays. However, research shows that only around half of us do enough exercise to maintain a healthy life, that a quarter of us still smoke, and just under a fifth of the population has taken illicit drugs. [16] I think even in the area of health, we can apply the free market forces and real prices theory. For example, we know that cigarette smoking is a high risk factor in developing many forms of cancer, particularly lung and throat cancer. Perhaps, for example, we need to rethink the pricing of cigarettes to truly take into account these high risks, and the consequent demand on our health system. We should, where possible, use free market forces to encourage people to take early preventative measures. As well as easing pressure on the hospital system, there is no denying that it will bring personal benefits to individuals in terms of improved quality of life, and to the community in general by improving workplace participation and productivity.[17] I think the government can again play a leading role here – in putting in place an environment which enables and encourages people to take responsibility for their own health care. This is likely to take the form of a mix of market based measures and providing widely available education about what people can do to help themselves lead long and healthy lives. What business can do And we in business can help our employees and others in that education process. Many companies, including Shell, have a comprehensive programme of workplace health promotion, not only to protect the health of our employees, but also their families and those in communities near our facilities. Our programme provides the tools for us to recognise and evaluate health hazards and then put plans in place to manage them.[18] As well as this ongoing programme, we also have various internal health promotions, such as offering our employees a free flu vaccine. I am particularly excited about a new initiative that we are involved in with the University of Queensland to assess depression in Australian workers. Depression is now a major health problem for Australians, and one that relatively little is known about. Almost a quarter of a million employees across Australia, including Shell employees, will be voluntarily surveyed, and the results analysed to identify those who may be depressed. The general health of those employees will then be followed over an 18 month period to assess whether, and what type of, interventions make a difference to their well being and their productivity. Shell is participating not only because we believe this may provide valuable information to our own people regarding their general health status and mental well being, but also to try to add to the currently limited body of knowledge about what types of intervention can actually help in cases of depression. While these programmes I have mentioned are targeted at our and other companies’ employees, there is no denying that they can have broader benefits. There are many examples of employees taking safe and healthy practices from the workplace into their homes and communities. For example, drivers who are educated about the dangers of driving when tired are less likely to have accidents, which makes our roads safer for everyone. Sharing best practice I hope that I have been able to give you ideas of how business can help Australia meet its sustainability challenges. I know that there is much exciting work on sustainability going on in many Australian companies, and I would encourage us all to share both our successes and failures– we must share best practice so that everyone can learn from it and implement it in their own lives and businesses. I don’t think that we as a business community share our experiences in these areas enough. I think that the easiest way to do so is via business networks, industry associations and through bodies like CEDA. Business can and should lead the way in reaching Australia’s sustainability targets – not only to ensure that Australia reaches a position of global leadership on these issues, but simply because many remedies to our challenges are just good business. Economic performance So – those are some of the challenges before us, and how I think we in business can help in solving them, and what part government needs to play in the process. I hope I have not painted too gloomy a picture – I certainly did not intend to. Compared with a lot of other countries, Australia performs well on most measures of sustainability. And, as opposed to a lot of other countries facing the same or more difficult challenges, Australia continues to enjoy robust economic growth, which must underpin everything else we do. In the 14 years since 1990, we have seen a surge in productivity and above average growth in GDP per capita at 2.5 per cent. [19] Many of these productivity gains can be attributed to the economic policy reforms of the 1980s and 1990s. To continue to enjoy this level of performance, we will need to continue with reforms to free up economic activity, enhance labour market flexibility, strengthen competition, promote efficient resource allocation and continue to develop a more innovative and dynamic society. [20] As well as actively participate in these market reforms, one of the most important things that we as businesses can do is to continue to operate profitability for the long term. Without our own economic sustainability, we cannot continue to produce the products and services that our customers need to live their lives and run their businesses, we cannot employ people, and we cannot pay the taxes that allow governments to do their work in helping overcome Australia’s challenges. The good news is that if we successfully address our sustainability challenges, I believe that further economic growth will be encouraged, which will free up more money for programs to make further improvements, which will again increase productivity. It becomes a virtuous circle. Conversely, if we get it wrong, or get the various elements out of balance, it becomes a vicious circle from which it would be difficult to extricate ourselves. Conclusion That concludes my talk for this afternoon. I would be happy to answer any questions you might have on anything I have raised today, and I would be especially happy to hear from you about what you are doing in your business that addresses Australia’s sustainability challenges. Thank you. Tim Warren End notes: [1] “Water and the Australia Economy”, The Committee for Economic Development of Australia (CEDA), March 2004, pg 5. |
