By Business editor Peter Ryan
An improvement in energy efficiency of just 1 per cent would add $26 billion to Australia's economy by 2030, according to a new report.
Research commissioned by the Climate Institute and US energy giant General Electric says Australia's poor investment in energy efficiency is costing tens of billions of dollars in potential economic growth.
But instead of following the lead of other developed nations, the study says Australia is failing to match efficiency improvements in other economies.
The research by Vivid Economics found that on average a 1 per cent improvement in energy efficiency would boost gross domestic product (GDP) per person by 0.1 percentage point and generate an additional $8 billion by 2020 and $26 billion by 2030.
Climate Institute chief executive John Connor says the improved energy efficiency is critical given the Prime Minister's proposal to lift annual productivity growth to 2 per cent.
"This is an important contribution to improving Australia's productivity as well as cutting our energy bills and carbon pollution," Mr Connor said.
"Our research puts a figure on just how much we are missing out on. The reality is that our current policies are inadequate to address the barriers preventing smarter energy use.
"To get to the next level, we need policies like a national energy saving initiative, ambitious performance standards for vehicles and equipment and bipartisan support for a robust long-term signal for low-carbon investment."
The research examines 28 countries including Japan, China, South Korea, the United States and Britain and is forecast over 30 years.
It points to key sectors such as manufacturing, resources, construction, freight and transport as areas which could cut their energy use by 11 per cent and save $3 billion per year.
Recent research by ClimateWorks Australia says companies can save energy by upgrading equipment, retrofitting buildings and recalibrating operational processes.
"We need to get beyond the idea that energy efficiency means changing light bulbs. In fact, just about every product and process can be streamlined to reduce energy waste, " Mr Connor said.
"Businesses are starting to recognise this, but there's a lot more they can do."
While the Climate Institute wants energy pricing to more accurately reflect the true cost of energy use, it also wants to maintain the carbon price mechanism which the Prime Minister is about to scrap in favour of an emissions trading scheme.
"Emissions trading puts not just a price but also a limit on carbon pollution," Mr Connor said.
"In moving from the fixed carbon price to a limit on carbon emissions, the interaction with other climate action becomes critical.
"Remember why we did all this in the first place: it is about reducing Australia's disproportionate contribution to climate change and making our high-carbon economy competitive in the low-carbon reality of the 21st century."
Mr Connor says any decision to bring an emissions trading scheme forward should include a "statement of increased ambition" and an continuing role for the independent Climate Change Authority.