FRAN KELLY: With the federal election fast approaching, the political battle has resumed over energy policy. The government's pounced on new modelling which shows Labor's climate policies could cost the economy up to $1.2 trillion in just over a decade. Wages would fall, jobs would be lost and electricity prices would almost double, with the manufacturing, mining and transport sectors to be the hardest hit. The opposition completely rejects these figures; they say they lack any credibility. The Energy Minister, Angus Taylor, joins us in our Parliament House studios. And after eight we will be speaking with the Shadow Energy Minister, Mark Butler. Minister, welcome to RN Breakfast.

ANGUS TAYLOR: Thanks for having me again, Fran.

FRAN KELLY: 336,000 fewer jobs, an 8 per cent fall in wages, a 94 per cent increase in wholesale electricity prices, have we been down this road before with warnings of a hundred dollar roast and whaler wipe-outs?

ANGUS TAYLOR: Well, we haven't been down this road before Fran, because we haven't had a 45 per cent emission reduction target, and just think about that for a second, that's taking almost half the emissions out of the economy within just over ten years from now. So this is a target on a scale that we haven't seen and what we've got here is very credible modelling by a modeller who advised the Hawke and Keating Governments, who advised the IPCC, who has laid out for the first time in a very detailed way, sector by sector, the impacts that that target will have. And as you say, $9000 hit to wages, 336,000 jobs, and that's if you use the Kyoto carryover credits, and Labor has been very unclear about whether they will use the Kyoto carryover credits. When you go to a position where you don't use them, the impact on the economy is extraordinary because you're breaking the back of our most prosperous and successful industries that give us that wealth to buy iPhones, cars, all those things that we take for granted in our economy today.

FRAN KELLY: Haven't we done modelling on Labor's policy before? Didn't Warrick McKibbin do it at the behest of Tony Abbott and found that there wasn't a major difference in the economic hit?

ANGUS TAYLOR: Well there's never been modelling done at this detailed level, Fran. That's what different, sector by sector. So you see hits to manufacturing, hits to aluminium, hits to transport, to agriculture, to cattle, cropping. The construction sector is a flow on from all of those other factors, so we haven't seen this very detailed modelling which is what Fisher has done, it's been peer reviewed by a Stanford academic. And it's important that we see that detail because the great challenge we've had in this debate is that there hasn't been enough discussion about the implications of policies adopted. We've laid out very clearly what our policies are to achieve our 26 per cent emission reduction target. We've laid them out a couple of weeks ago, right down to the last tonne. Labor hasn't and it's important we now have a sensible, rational debate about the impacts and the costs of their target, their 45 per cent emission reduction target, and we see in this modelling that those costs are extreme, and we can't afford them.

FRAN KELLY: If we're going to have a rational debate though, I mean let's look at some of these findings, they're being questioned already. For example, the report assumes the firming costs for renewable energy would be as high as 200 megawatts per hour. Contracts already being offered under Snowy 2.0 at just $70 an hour, and expected to keep falling. I mean these assumptions in this report, they're not all correct are they?

ANGUS TAYLOR: Well that's not correct, what you've got there, that's come from Mark Butler and he doesn't actually understand the modelling. The modelling uses ARENA's storage; ARENA has done an enormous amount of work - the Australia Renewable Energy Agency - an enormous amount of work on what the costs of storage are, what the costs of firming are...

FRAN KELLY: Yeah but it's not $200 a tonne.

ANGUS TAYLOR: Well they've done...

FRAN KELLY: What do you think the cost is for pumped hydro at the moment per tonne?

ANGUS TAYLOR: Well the modelling is based on ARENA's assumptions and that depends on how much you're doing and where it's done, so there's a whole lot of factors at work. But the point is, it's using ARENA modelling, and we have used ARENA to understand better this important issue of firming and storage. But let's be clear here, Fran, electricity is only one part of the story here, because we forget often that only 30 per cent of emissions come from electricity. Emissions also come from gas, and manufacturing, they come from agriculture, from cattle-

FRAN KELLY: Yeah.

ANGUS TAYLOR: And they come from mining, from manufacturing absent or independent from the electricity sector. And so electricity is only 30 per cent, we've got to focus on all of this, the 70 per cent as well as the 30 per cent.

FRAN KELLY: Well that's a criticism of your policy, isn't it? The Emissions Reduction Fund doesn't do that at all? That's what the NEG was supposed to do?

ANGUS TAYLOR: Well the emissions- absolutely not, you're absolutely- that's incorrect Fran. The Emissions Reduction Fund focuses on emissions reductions outside of the electricity sector, so land management which is a big opportunity for it.

FRAN KELLY: Yeah sure, but only really with the- in the agricultural sector really, effectively.

ANGUS TAYLOR: Well no, it extends beyond that as well. I mean it goes into a range of different sectors but it does use- it does extend beyond the electricity sector.

FRAN KELLY: Alright.

ANGUS TAYLOR: And this is the important point, that this is about much more- it does include electricity, that's an important part of it, but it's about a third.

FRAN KELLY: Minister, isn't there another side to this story though and that's the cost of not taking action? The RBA warned just last week that, of the first order economic effects to our economy from climate change - have those effects been factored into this modelling? The cost of doing nothing.

ANGUS TAYLOR: Sure and that is ultimately a global issue for which we have to do our fair share. That's the point Fran, we should do our fair share.

FRAN KELLY: No. No. We...

ANGUS TAYLOR: It's a survival issue. We can't solve this problem without coordinated action from other countries. And the point about 26 per cent, is it is our fair share.

FRAN KELLY: But the RBA point is we need to be ready for it. So we need to be taking actions and mitigation and that's going to have a cost.

ANGUS TAYLOR: We are taking actions and we've laid out clearly the cost. I mean we're pursuing our climate solutions package, our Climate Solutions Fund, $3.5 billion including $2 billion to the ERF. A strong focus on energy efficiency - we've announced $67 million into energy efficiency, we announced $1.4 billion into Snowy. We're not saying what we're doing here is free, it's not. We have to do our bit and that's as part of coordinated global action because you cannot solve this problem alone. Australia is too small a part of the emissions to solve the problem alone. We have to work with partner countries and that's how the problem gets solved.

FRAN KELLY: You're listening to RN Breakfast. Our guest is the Federal Energy Minister Angus Taylor. Minister, on other issues, the world is obviously still reeling from the outrage in Christchurch. Now our Prime Minister is pleading for an end to what he calls the mindless tribalism of us and them political debate which has created an environment for conflict and division. Why did it take a horrific terror attack so close to home for our Prime Minister to make this call? The us and them dynamic has been has been apparent for a long time, hasn't it?

ANGUS TAYLOR: Well, I mean the Prime Minister has been talking about a united Australia since he's been the Prime Minister and it's one of the things that's really resonated with me, with my constituents and with the people I talk about, that he talks about uniting Australia not dividing it. And Fran I think this is a big and very important part of the discussion right now and this is a terrible tragedy. I personally worked in Christchurch for a number of years and it's a city that's seen too much tragedy. But the key here for us and for New Zealand is to unite, not divide and that means that the tribalism that does emerge from time to time, unfortunately as a result of these sorts of evens, is not appropriate.

FRAN KELLY: Yeah but who's- is the Government taking responsibility for past comments? I mean it was only a few weeks ago that the Prime Minister on this program backed up the Home Affairs Minister and said it was simple math that sick refugees would take the place of Australian patients in hospitals - a problem completely disputed by the hospitals themselves. Isn't that an us and them statement?

ANGUS TAYLOR: Yeah look, Fran, I understand that when a tragic event like this happens people look for who to make accountable, I completely understand that. But what you've got to remember that accountability lies within the individual that conducted an absolutely horrific act. There is a sensible discussion...

FRAN KELLY: Yeah but not unaffected by atmospherics?

ANGUS TAYLOR: Well at the end of the day, we have a country where we do believe in individual accountability and this is a horrific act and that individual should be held to account. We should also have a sensible discussion about the platform that was used by that individual to get video, live streaming and shortly delayed streaming out to young people, including young people close to me. And I think that is a very sensible discussion about how we deal with that accountability as well. But let's be clear about accountability here, the accountability lies with the individual who conducted the act. Getting into tribal debate is not the way to solve this problem Fran.

FRAN KELLY: In the midst of this we learnt today that the Expenditure Review Committee of Cabinet has signed off on a formal cut now to Australia's migration intake - down 30,000 places to a new annual cap, I think it's the first time we've had a fixed cap, of 160,000. Now whether you mean to or not, doesn't this feed into the discourse that migrants are causing problems in our city? Is this the best time for this message?

ANGUS TAYLOR: Look this is a completely separate issue Fran. It's an important debate and the Prime Minister made this point in his speech yesterday - there is an important debate in this country about getting the balance right in immigration, not just in the total number but also in where people go. I mean I grew up in a wonderful regional town one of the great immigrant towns of this country, Cooma, not far from where I am now in Canberra and it was an extraordinary town to grow up in. So we have an opportunity I think to get more of our immigration moving to regional areas, that's something that we're very focussed on. So it's both the quantity and the mix.

FRAN KELLY: Should we be doing that rather than using the blunt instrument of cutting the annual intake? [Inaudible] signals that sense?

ANGUS TAYLOR: Well I think there's a sensible debate to- I'm not going to announce the policy here today Fran, but there's a sensible debate to be had about both. And it's got to be done in a rational way. It needs to be done in collaboration with the States because they're an important stake holder in this, how much infrastructure can we invest in in reasonable times to support population growth? Do we have the services? Can we manage the rate of immigration and the mix of where those immigrants are going? These are all sensible debates, they've got to be done in an- in an unemotive, rational way Fran and they should be kept very separate from the appropriate debate about the accountability for what happened in Christchurch and the way we deal with that.

FRAN KELLY: Okay. Angus Taylor thank you very much for joining us.

ANGUS TAYLOR: Thanks Fran.

FRAN KELLY: Angus Taylor is the Federal Energy Minister.