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    Australia

    Page last updated: 6th July 2017

    Rating


    Assessment

    There has been no improvement in Australia’s climate policy settings over the last year, and the 2017 CAT assessment confirms all previous assessments that its emissions are set to far exceed its Paris Agreement NDC target for 2030.

    The NDC target itself we rate “inadequate,” with a level of ambition that—if followed by all other countries—would lead to global warming of 3°C to 4°C by 2100. In addition, if all other countries were to follow Australia’s current policy settings, warming would far exceed 4°C.  While the Federal Government continues to maintain that “Australia's effective climate change policies are working,”(Frydenberg, 2016) the Climate Action Tracker is not aware of any factual basis, published by any analyst or government agency, to support this.

    Whilst the Federal Government continues to promote coal as a solution to energy security issues, downplay renewable energy and obfuscate on its climate policies, the reality on the ground at the state level, public opinion (Essential, 2017), and across the business sector in Australia, is very different.  South Australia is progressing towards its 50% renewable by 2025 target and has a net zero emissions by 2050 goal, as do Victoria and New South Wales, and Queensland has a 50% renewable target for 2030. 

    The massive penetration of small-scale solar on households in Australia, as well as the increasing uptake of battery storage, combined with increasing efficiency of appliances is set to stabilise electricity demand from the national grid for the next 20 years, irrespective of further climate policies (AEMO, 2016). These facts—and numerous scientific studies—show that a change in policy settings in Australia could rapidly turn around present emission trends and set the country on a path towards zero emissions by 2050, with substantial economic and energy-security benefits, and such policies would attract widespread public support.

    The Finkel Review of 2017 was an opportunity to propose a science-based approach to the short and long-term development of Australia’s electricity sector consistent with the low-carbon transformation required to meet the goals and obligations of the Paris Agreement. Theminimum electricity sector emissions reduction pathway suggested in the Finkel Report (26–28% reduction from 2030 levels from 2005) is not consistent with other scientific assessments, as its reductions only track the (already inadequate) 2030 reductions proposed for the entire Australian economy (Hare et al., 2017).

    Considering economy-wide emissions, under current policy settings, Australia’s emissions excluding LULUCF are set to increase substantially to 8–16% above 2005 levels by 2030, equivalent to an increase of 35–46% above 1990 levels, confirming earlier assessments by the CAT - and many other analysts -  that Australia’s current policies will fall well short of meeting its proposed Paris Agreement target of an emissions reduction of (including LULUCF) 26–28% below 2005 levels by 2030. Without accelerating climate action and additional policies, Australia will miss its 2030 target by a large margin. The Emissions Reduction Fund (ERF)—the so-called “centrepiece” of the Australian Government’s policy suite to reduce emissions—does not set Australia on a path to meeting its targets.

    Australia ratified the Paris Agreement on 6 November 2016. Its Nationally Determined Contribution (NDC), includes a target of reducing GHG emissions, including land use, land use change and forestry (LULUCF), by 26–28% below 2005 levels by 2030. This target is equivalent to a range of around 9% below to 3% above 1990 levels of GHG emissions excluding LULUCF in 2030. We rate this target “inadequate”. 


    Paris Agreement targets

    Australia ratified the Paris Agreement on 6 November 2016. In its NDC, Australia announced a 26–28% reduction of greenhouse gas emissions by 2030 below 2005 levels, including LULUCF. This translates into a range of 445–458 MtCO2e allowed emissions levels in 2030 incl. LULUCF (equivalent to a reduction of 13–15% below 1990 emissions levels incl. LULUCF). Analysis of the effect of the NDC on likely fossil fuel and industrial[1] GHG emissions is made difficult by the fact that the NDC target includes LULUCF emissions, which are substantial and fluctuate significantly (Figure 2 under “Data Sources and assumptions” in our Australia report). We have estimated levels of emissions excl. LULUCF resulting from the NDC by subtracting projected emissions for the LULUCF sector in 2030 from the targeted level incl. LULUCF. We estimate that the NDC translates into emissions levels of 395–437 MtCO2e excl. LULUCF, equivalent to around 1% below to 9% above 1990 emissions levels excl. LULUCF.

    An important aspect of the Australian NDC is that the 2030 target remains provisional on the “rules and other underpinning arrangements of the agreement” and that Australia reserves the right to adjust it. This adds high uncertainty to Australia’s contribution to the 2015 Paris Agreement. The conclusions of the present CAT assessment are subject to the same uncertainty and will need to be revised if Australia makes any adjustments to its target and proposed LULUCF accounting approaches.

     

    2020 pledge and Kyoto target

    Kyoto Protocol First Commitment Period Target (2008–2012)

    Australia’s Kyoto Protocol target for the first commitment period (CP1) (2008–2012) was to limit the increase in its GHG emissions excl. LULUCF to 8% above to 1990 levels (QELRO of 108% of base year emissions).

    Under the Kyoto Protocol accounting rules (notably Kyoto Protocol Article 3.7), Australia was allowed to add deforestation emissions to its base year for calculating its commitment period emissions allowances. This led to an increase in Australia’s allowances of around 30% per year of the commitment period. Other LULUCF accounting rules applicable to Australia in the first commitment period (Article 3.3) provided debits, which were subtracted from the allowed GHG emissions excl. LULUCF during the commitment period.

    Overall, Article 3.7 and the other LULUCF provisions of the Kyoto Protocol resulted in emission allowances exceeding actual emissions by around 100 MtCO2e, despite minimal policy action for that period. Australia ended CP1 with a surplus emissions allowance of around 100MtCO2e to be transferred to the second commitment period, principally as a consequence of Article 3.7  (which is often called the Australia clause[2]), and without having to take any action to reduce emissions.

    Kyoto Protocol Second Commitment Period Target (2013-2020)

    Australia has a target under the Kyoto Protocol’s second commitment period (2013–2020) to limit average yearly emissions to 99.5% of 1990 base levels (a 0.5% reduction). However, after taking into account:

    1. Article 3.7—a special provision of the Kyoto Protocol that applies to Australia, allowing it to include deforestation emissions in 1990 its base year,[3] 
    2. the CAT assessment of likely aggregate credits due to Kyoto LULUCF accounting rules, and
    3. surplus units resulting from the first commitment period,

     Australia’s allowed GHG emissions (excluding LULUCF) could be increased in 2020 to 23–48% above 1990 levels of GHG emissions excluding LULUCF (further details on this analysis in our Australia report). Similarly to the first commitment period target for the Kyoto protocol Australia is hence likely to meet its target, which would have less to do with policy action and more to do with specific accounting provisions, which enable emissions in the second commitment period to exceed real emissions.

    Copenhagen 2020 Pledge

    Under the Copenhagen Accord Australia proposed three targets for 2020 with different conditions, -5%, 15%, and 25% below 2000 levels. The 5% below 2000 levels goal currently stands as Australia’s unconditional pledge. In its Copenhagen Accord Australia pledges “to reduce its greenhouse gas emissions by 25% on 2000 levels by 2020 if the world agrees to an ambitious global deal capable of stabilising levels of greenhouse gases in the atmosphere at 450 ppm CO2–eq or lower”—with the Paris Agreement long term temperature goal this condition has been met.

    The Australian government has stated: “in defining its targets for 2020, Australia considered that these targets refer to its net emissions from the sector and source categories included in Annex A to the Kyoto Protocol as well as from afforestation, reforestation and deforestation activities, for the base year (2000) and 2020” (UNFCCC, 2014 and DCCEE, 2012)[4]. The CAT estimates Australia’s unconditional Copenhagen pledge to reduce emissions by 5% below 2000 emissions by 2020 is equivalent to an approximately 9% increase above 2000 levels excl. LULUCF (or to a 27% increase above 1990 levels of GHG emissions excluding LULUCF[5]after taking into account Australia’s inclusion of afforestation, reforestation and deforestation (ARD) emissions in year 2000 base level emissions and in the 2020 target year.

    Since the Copenhagen pledge is not legally binding, there are no pre-existing rules as to which rules apply to this pledge. Some countries, such New Zealand, indicate that they would use the Kyoto Protocol rules to increase their allowed GHG emissions as illustrated above. If we apply this approach to the Copenhagen pledge, Australia could increase its GHG emissions (excl. LULUCF) by up to 22% above 2000 levels (equivalent to 45% increase above 1990 levels) and still officially meet its 5% reduction target.

    Footnotes

    [1]With „industrial GHG emissions” we mean here GHG emissions from the energy, industrial processes, solvent and other product use, agriculture and waste sectors, excluding land sector and forestry.

    [2] http://envirowiki.org/The_Australia_Clause

    [3]The review of the initial report of Australia for it second commitment period under Kyoto would permit more accurate quantification in the event of any adjustments to its reported deforestation or other emissions in the base year, as occurred in the case of the IRR for the first Kyoto commitment period (http://unfccc.int/resource/docs/2009/irr/aus.pdf)

    [4]In comparison with the Kyoto Protocol target, the Copenhagen pledge not only puts forward a different target and base year (2000 vs 1990) but also a different way to calculate base year emissions, as it includes emissions from afforestation, deforestation and reforestation instead of only deforestation as it is done under the Kyoto Protocol.

    [5]CRF 2014 data.

    [6]For this calculation, we did not use Party-provided ARD projections, instead obtaining the 2020 ARD value by linear trend over the period 1990-2010 for afforestation and reforestation and a linear trend over the period 1990-2012 for deforestation (see Assumptions).


    We rate Australia’s NDC target for 2030 “inadequate.” The “inadequate” rating indicates that Australia’s commitment exceeds the acceptable emissions level for Australia in all effort-sharing proposals evaluated by the CAT. This means it is not consistent with limiting warming to below 2°C, let alone with the Paris Agreement’s stronger 1.5°C limit: if most other countries followed the Australiaapproach, global warming would exceed 3–4°C. For Australia, proposals based on capability lead to higher emissions allowances whereas approaches that focus on equal cumulative/equal per capita emission would require more stringent reductions. The 2020 Kyoto targets are also rated “inadequate.”


    Australia’s current policies fall far short of the emissions reductions required to meet the 2030 target put forward in its NDC. Under current policies in place, Australia’s total GHG emissions excl. LULUCF are projected to rise to about 523–536 MtCO2e by 2020 and 540–583 MtCO2e by 2030. This is equivalent to an increase in emissions from 2005 levels (excl. LULUCF) of 4–7% and 8–16% by 2020 and 2030 respectively (when compared to 1990 levels (excl. LULUCF) this results in an increase of 31–34% and 35–46% respectively). To meet its 2030 emissions targets, Australian emissions should decrease by an average annual rate of between 1.9–2.7 per cent until 2030; instead, with current policies, they are set to increase by an average annual rate of between 0.3–0.7% per year.

    Australia’s primary energy consumption is dominated by fossil fuels; in 2014-15 38% come from oil, followed by 32% coal, 24% gas, followed by a mere 6% of renewable energy (Australian Government, 2016a).

    Federal and state energy ministers commissioned a review of the national electricity market, the so-called Finkel review, in 2016. The review highlights “the need for a clear and early decision to implement an Orderly Transition” and recommends that the Australian State and Territory governments agree to an emissions reduction trajectory for the National Electricity Market and the adoption of a Clean Energy Target (Finkel, 2017). The minimum electricity sector emissions reduction pathway suggested in the Finkel Report (26–28% reduction from 2030 levels from 2005) however, is not consistent with other scientific assessments, as its reductions only track the (already inadequate) 2030 reductions proposed for the entire Australian economy (Hare et al., 2017).

    Australia’s Renewable Energy Target, introduced in 2010, aims at increasing the share of electricity generation from renewable sources. It consists of two targets: the Small-scale Renewable Energy Scheme, which supports small-scale installations like household solar panels and solar hot water systems, and the Large-scale Renewable Energy Target (LRET). The LRET originally aimed to achieve 41 TWh of additional renewable electricity generation by 2020, but, in 2015, the government reduced this target to 33 TWh. In the same year, coal consumption rose by 3%, due to increased black and brown coal use in electricity generation (Australian Government, 2016).

    Coal has featured prominently in in Government statements on energy security and the future of Australia’s power system. However, on the ground, there is little appetite for new coal generation from utilities and industry, nor from the general public.  Nine coal power stations have been retired in the last five years, including Hazelwood, a 1,600 MW lignite coal-fired plant. This illustrates the economic challenges coal plants face in Australia against continuously decreasing costs of renewables and storage, rather than “climate-induced political fiddling” as suggested by former Prime minister Tony Abbott (2017).  Due to the politically unstable environment on climate policy, investment uncertainty remains high over what kind of power plants to build as ageing coal plants are shut down. Wholesale power prices have doubled since the carbon price scheme and related legislation was axed, fuelling calls for an emissions intensity-based carbon pricing scheme for the electricity sector (Morton, 2017). Even this measure was ruled out by the Turnbull government, although analysis suggests it could save households and businesses up to AUS$15 billion in electricity bills over a decade (Morton, 2016).

    The AUS$500 million funding cuts to the Australian Renewable Energy Agency (ARENA) may further impact the development of clean energy in Australia, hampering the rate of development and innovation needed, as well as adding to increased investor uncertainty (Clean Energy Council, 2016).

    On the subnational level, climate action is more visible. South Australia has a 50% renewable energy target by 2025, which is now close to being achieved, and aims to achieve net zero emissions by 2050 (Government of South Australia, 2016). Last year a blackout in South Australia, caused by extreme weather conditions, resulted in the loss of three significant transmission lines. This event was used by the Federal Government to mount a national campaign against renewable energy, specifically wind power, in favour of coal, despite the fact that wind farms were found not to have been at fault in the state-wide power failure (Department of State Development, 2016). The debate reached global attention when Tesla CEO Elon Musk placed a bet to solve South Australia’s grid stability problem (BloombergGadfly, 2017) by offering to install a 100 MWh energy-storage plant within 100 days at a battery-pack price of US$250/kWh, aiming to demonstrate the viability of renewable energy and its benefits. A recent study finds that Australia could build an affordable and secure electricity network with 100 percent renewable energy, using existing technologies (Blakers, Lu, & Stocks, 2017). A report by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and Energy Networks Australia (ENA) finds that a decarbonised energy grid by 2050, with half of generation produced and stored locally, will save billions in upfront capital costs and consumer bills, and deliver a secure electricity system (Australia Energy Networks & CSIRO, 2016).

    Australia’s Emissions Reduction Fund (ERF) is a reverse auction mechanism that aims to “reduce emissions at lowest cost over the period to 2020” (Australian Government, 2014, p. 68). However, the ERF—the so-called “centrepiece” of the Australian Government’s policy suite to reduce emissions—does not set Australia on a path towards meeting its NDC target. The ERF’s fifth auction took place in April 2017, with AUS$133 million committed to purchase 11.25 million tonnes of abatement (an average price per tonne of abatement of AUS$11.82 (Australian Government, 2017). Compared to previous auctions, participation was low, reflecting the negative market sentiment in the ERF. The administrative complexity of the fund, as well as the low average auction price, pose barriers of participation, in particular for high emitting companies (Reputex, 2017). In addition, the fund is plagued by a mismatch of its abatement profile (concentrated in the land sector) with Australia’s emissions profile which is driven by industrial and power sectors, and concerns about additionality, as it is difficult to know whether the emissions reductions would have occurred anyway. The ERF is also the subject of fiscal concern due to its cost to the taxpayer.

    Alongside the reverse auction, the ERF includes a safeguard mechanism, which began operations in July 2016, with a goal of limiting significant emissions increases from large industrial sources to a baseline emission level. This mechanism applies to around 140 businesses that have facilities with direct emissions of more than 100 ktCO2e. For these facilities, the government set a baseline level using the highest level of reported emissions for a facility over the historical period 2009/2010 to 2013/2014. (Australian Government, 2016b). An analysis has shown that as a result of this generous baseline, the mechanism is not expected to reduce emissions (RepuTex, 2015). At the same time, the same analysts predict that declining emissions baselines will eventually have to be implemented, stating the safeguard mechanism to be the only remaining policy able to deliver large emissions reductions (RepuTex, 2017).

    The National Energy Productivity Plan 2015–2030 aims to improve energy productivity by 40% by 2030 through “encouraging more productive consumer choices and promoting more productive energy services” (Australian Government, 2015b). It defines energy productivity as how much value is generated from investment in energy (economic output/energy used) and sets out a workplan that contains broad policy measures as the first steps in the 15 year life of the Plan. More productive consumer choices will be encouraged through efficient incentives, empowering consumers and helping business compete. More productive energy services will be promoted through innovation support, competitive modern markets and consumer protections.


    Pledge

    Targets for 2030 were calculated using CRF 2016 data that is converted from AR4 into SAR by our scientific collaborator, the Potsdam Institute for Climate Impact Research (PIK). For a detailed description on the assumptions used regarding base year emissions, emissions data sources, LULUCF accounting rules supporting this analysis please consult our Australia report.

    Current policy projections

    The current policy projections are based on the lower and higher emissions sensitivity scenarios from Australia’s December emissions projections 2016. The CAT always provides current policy projections excluding LULUCF. To this end, we subtracted in both scenarios the projections provided for LULUCF.

    The values provided in the 2nd biennial report are reported in AR4. For the purposes of this analysis growth rates were applied onto the historical CRF2016 that is converted from AR4 into SAR by our scientific collaborator, the Potsdam Institute for Climate Impact Research (PIK).


    Australian Government. (2016a). Australian Energy Update 2016.

    Australian Government. (2016b). The safeguard mechanism. Retrieved from http://www.cleanenergyregulator.gov.au/NGER/The-safeguard-mechanism

    Abbott, T. (2017). Hazelwood Should Stay Open. Retrieved April 27, 2017, from http://tonyabbott.com.au/2017/03/hazelwood-stay-open/

    About the Emissions Reduction Fund | Department of the Environment. (n.d.). Retrieved June 9, 2015, from http://www.environment.gov.au/climate-change/emissions-reduction-fund/about

    ACIL ALLEN Consullting. (2013). Modelling of the Australian Electricity Generation Sector (Vol. 1).

    AEMO. (2016). National Electricity Forecasting Report Overview.

    Auction results: April 2015. (n.d.). Retrieved June 9, 2015, from http://www.cleanenergyregulator.gov.au/ERF/Published-information/auction-results/auction-results-april-2015

    Australia Energy Networks, & CSIRO. (2016). Electricity Network Transformation Roadmap: Key Concepts Report, (December).

    Australian Government. (2014). Emissions Reduction Fund White Paper.

    Australian Government. (2015a). Emissions Reduction Fund?: Safeguard mechanism Consultation paper.

    Australian Government. (2015b). National Energy Productivity Plan 2015–2030, (December), 22. Retrieved from http://www.scer.gov.au/workstreams/energy-market-reform/national-energy-productivity-plan/

    Australian Government. (2017). Auction April 2017. Retrieved April 20, 2017, from http://www.cleanenergyregulator.gov.au/ERF/Auctions-results/april-2017

    Blakers, A., Lu, B., & Stocks, M. (2017). 100 % renewable electricity in Australia, (February).

    BloombergGadfly. (2017). Tesla’s Australian Gamble. Retrieved April 21, 2017, from https://www.bloomberg.com/gadfly/articles/2017-03-13/elon-musk-s-australian-battery-gambit-is-a-viable-bet

    Clean Energy Council. (2016). Cuts to renewable energy funding to slow innovation and energy transition. Retrieved April 27, 2017, from https://www.cleanenergycouncil.org.au/news/2016/September/arena-funding-cuts.html

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    Department of State Development. (2016). Energy in South Australia - What happened on 28 September, 2016, (September).

    Department of the Environment. (2015). Australia’s emissions projections 2014-15. Canberra, Australia: Department of the Environment, Australian Government.

    Essential. (2017). Renewable energy. Retrieved July 6, 2017, from http://www.essentialvision.com.au/renewable-energy-2

    Finkel, A. (2017). Independent Review into the Future Security of the National Electricity Market: Blueprint for the Future. Retrieved from http://www.environment.gov.au/energy/publications/electricity-market-final-report

    Frydenberg, J. (2016). Climate Change Review 2017. Retrieved from http://www.environment.gov.au/minister/frydenberg/media-releases/mr20161205.html

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    Hare, B., Hutfilter, U. F., Sferra, F., Parra, P., Cantzler, J., & Beer, M. (2017). The Finkel Review and scientific consistency with the Paris Agreement, 1–8.

    Morton, A. (2016). Government killed emissions scheme despite knowing it could shave $15 billion off electricity bills. Retrieved April 21, 2017, from http://www.smh.com.au/federal-politics/political-news/government-killed-emissions-scheme-despite-knowing-it-could-shave-15-billion-off-electricity-bills-20161208-gt6v48.html

    Morton, A. (2017). Energy crisis: Wholesale power prices have doubled since the carbon tax was axed. Retrieved April 21, 2017, from http://www.smh.com.au/federal-politics/political-news/energy-crisis-wholesale-power-prices-have-doubled-since-the-carbon-tax-was-axed-20170308-gutf8t.html

    RepuTex. (n.d.). MARKET OUTLOOK: Industry to capitalise on “likely” ERF delay. Retrieved June 10, 2015, from http://www.reputex.com/publications/market-forecasts/market-outlook-industry-to-capitalise-on-likely-erf-delay/

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    RepuTex. (2017). Climate policy review - Industry emissions key roadblock to 2030 target. Retrieved from http://www.reputex.com/research-insights/on-point-climate-policy-review-industry-emissions-key-roadblock-to-2030-target/

    “Safeguard mechanisms” likely to fall short: Reputex | Business Spectator. (n.d.). Retrieved June 9, 2015, from http://www.businessspectator.com.au/news/2015/3/27/policy-politics/safeguard-mechanisms-likely-fall-short-reputex

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