While most of us do not agree with our PM she is on the money with this.
Julia Gillard
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Investment will be shelved and electricity prices spiral unless industry has certainty.I have spoken a lot about reform lately - because I believe that's the job of governments. As it is a word that gets a good workout in politics, it is worth stopping occasionally to think about what it means.
Reform means literally that - a reshaping. A reforming government starts with the proposition that it is possible to reshape the landscape, to look afresh at the way things are done and find a better way.
It is possible to do something for so long that you forget there are other ways to do it. Electricity generation in Australia is a bit like that. Historically, Australia has relied almost entirely on our extensive coal reserves to fulfil our electricity needs.
That has served us for a long time, and it has served us well. Many Australians work in the coal industry, and it is an industry that is not about to vanish. But, just because the dominance of coal has been the status quo, it does not mean it should remain the status quo.
In fact, the exact opposite is the case: as the climate changes, it is up to this generation of people and the generations coming up fast behind it to take the action necessary to tackle climate change and its potentially devastating impacts on the Australian economy.
Australians want action on climate change, and that means cutting carbon pollution. And that, inevitably, will involve a gradual shift away from carbon-intensive power generation.
The question is how we do this in the most effective way to ensure costs are minimised. Our electricity sector contributes more than one-third of our national carbon pollution. In terms of the electricity Australians use, about 82 per cent of power in the national electricity market is generated from coal. Only 10 per cent comes from natural gas and 8 per cent from renewable sources.
Conventional brown-coal power stations are between three and four times more carbon intensive than the most-efficient natural-gas power stations. Black coal sits in between these two - which is why we have one of the most carbon-intensive electricity sectors in the world.
If we can change the way the electricity sector operates, we can bring down our levels of carbon pollution, and continue the crucial task of tackling climate change. Putting a price on carbon would do this.
By introducing a price, fuels that produce less carbon pollution become more price competitive. Energy sources such as natural gas, wind and solar become more able to compete with coal. And as the price of producing more carbon pollution goes up, coal-fired power stations will have an incentive to invest in new technologies such as carbon capture and storage.
Right now, Australia's energy sector is suffering from a lack of certainty created by the fact that the Parliament has repeatedly blocked the government's attempts to introduce a carbon price.
Because it is generally accepted that there will be a carbon price at some point but there is no time frame in place, the energy sector is caught between investing in old technologies it knows are going out of date, and investing in new technologies it does not yet have an incentive to invest in. That dilemma, and the lack of infrastructure investment that accompanies it, is playing a role in pushing up electricity prices.
As Rod Sims, chairman of New South Wales's electricity price regulator, said last week, one of the key drivers of current electricity price rises is ''continuing carbon price uncertainty''.
A carbon price will give industry the certainty it needs to plan ahead. It will allow it to start making investment decisions now so that we can make the transition to a low-carbon economy smoothly, efficiently and in the cheapest possible way.
Continued lack of certainty will see vital investment decisions delayed and money ploughed into costly and wasteful stop-gap options.
As former prime minister John Howard and his then environment minister Malcolm Turnbull know, a carbon price is the only prudent answer because it unlocks one of the most powerful forces on earth - the genius of the free market.
By resetting price signals, we will open the door to a new era of investment and innovation, creating thousands of jobs for Australians in the industries of tomorrow.
The alternative is very stark. If we continue to do nothing, we will pay a heavy cost - electricity prices will spiral, big investment decisions will remain on hold, our power supplies will begin to run short, and clean energy jobs will be lost offshore.
This is a domestic economic reform that is needed to reshape the way the Australian economy works.
Like the controversial cuts to tariffs and the decision to float the dollar 25 years ago, a carbon price will shift the way things are done.
Julia Gillard is Prime Minister.
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