Australia

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 555 MtCO2e by 2020 and 565 MtCO2e by 2030. This is equivalent to an increase in emissions from 2005 levels (excl. LULUCF) of 6% and 8% by 2020 and 2030, respectively (when compared to 1990 levels (excl. LULUCF) this results in an increase of 32% and 35% respectively).

However, the federal government continues to repeatedly state that Australia is on track to meet its 2030 target “in a canter” (Adam Morton, 2018b). Australia’s emissions have been increasing since 2014 (excluding LULUCF), when the federal government repealed the carbon pricing system. The latest quarterly update shows a slight decrease of total emissions including LULUCF since 2014, as a result of a recalculation of energy consumption data, emissions excluding LULUCF have still increased – by around 1% on average per year since 2014 (Department of the Environment and Energy 2019b). The federal and state government have both approved the start of what could prove to be the biggest coal mine in the world, the Adani mine in Queensland (ABC News, 2019a, 2019d).

Australia’s Emissions Reduction Fund (ERF) is a reverse auction mechanism that is supposed to reduce emissions in a cost-effective manner. However, this 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 OECD has warned the Australian Government that it will not achieve its target without intensified mitigation efforts. It describes current climate policy as a “piecemeal approach” (OECD, 2019).

The Clean Energy Regulator, which serves as economic regulator of the ERF, indicates the fund only avoided a mere 4 MtCO2e of emissions over the four auction rounds in 2017 and 2018, which is a 97% drop compared to the reported first two years of the ERF, despite the 123 contracts worth 372 million AUD (ABC News., 2019). Part of the problem is the failing contracts.

By the ninth auction in July 2019, 22 projects were completed and 433 contracts were in hand (CER, 2019). So far, the ERF has delivered a total of 44.8 MtCO2e in abatement, and has 147.3 MtCO2e abatements contracted to be delivered (CER, 2019). These figures exclude terminated or lapsed contracts worth 14.8 MtCO2e in emission abatements (CER, 2019) as businesses did not deliver the agreed abatements. The future of the fund remained in question until the pre-election announcement (in February 2019) by the government to add a further 2 billion AUD in funding over a ten year period for the continuation of the ERF (re-named the “Climate Solutions Fund”) (Australian Government, 2019).

By April 2019, the budget revealed the 2 billion AUD would be spread over 15 years rather than ten, effectively cutting the funds from 200 million AUD to 133 million AUD per year. The government thus wants to continue relying on an instrument that has been the subject of fiscal concern due to its cost to the taxpayer, and against the advice of the government-appointed advisory body Climate Change Authority to not rely on the ERF and instead introduce new policies aiming at decarbonisation and structural change (Climate Change Authority, 2017).

Business interest in the scheme has seen a steady decline, with less than seven million contracted abatement units cleared in June 2018 auctions (The Guardian, 2018a). This number shrank to just over three million in the December 2018 auction, and then only 59 thousand abatement units in July 2019 (CER, 2019). The auction of July 2019 added only three new projects, and five contracts that had failed since the previous auction. These failed contract projects will not abate their emissions. The fund is also 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. There is a high risk of reversal of stored carbon in land sector projects being emitted again (Climate Change Authority, 2017), particular in light of the widespread bushfires of November 2019. There are also serious doubts about the additionality of many of the ERF projects (Baxter, 2017).

The government appears to have now recognised that the ERF is failing to achieve reductions, hastily asking a panel to review the instrument involving fossil fuel industry stakeholders and no transparent review process (Mazengarb, 2019; A. Morton & Murphy, 2019).

The Climate Solutions Package has been criticised in the media as a rebranding of old policies (Australian Government, 2019; Murphy, 2019). Apart from the reliance on carry over, the rebranded ERF (now Climate Solutions Fund), includes unspecified Energy Efficiency Measures, government investment into a “Battery of a Nation” project (new links between Tasmania and mainland), and the vague announcement of a future Electric Vehicle Strategy.

The Government claims these policies, along with energy performance (air-conditioning and refrigeration), and previous policies and projects such as Snowy 2.0, and unspecified “technology improvements”, will allow Australia to meet the 2030 target (Australian Government, 2019). The package does not clarify how it will meet the Paris commitments in detail. 100 MtCO2e of abatement is derived from unspecified “technology improvements and other sources of abatement” and another 10 MtCO2e from the electric vehicle strategy which has not yet been developed.

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 emissions level. This mechanism applies to around 140 businesses that have facilities with direct emissions of more than 100 ktCO2e.

High-emitting industrial facilities covered by the safeguard mechanism are projected to drive national emissions growth through to 2030, as they were permitted to increase emissions baselines, leading to a projected increase of emissions from these facilities by 16% since the commencement of the scheme, potentially cancelling out publicly funded emissions reductions under the ERF (Adam Morton, 2018a). The government consulted with industry stakeholders on how to make the safeguard mechanism “fairer and simpler”, without addressing these issues. In March 2019, baselines were increased, allowing emissions to increase (Department of the Environment and Energy, 2019b).

The Prime Minister’s speech to the UN General Assembly in September 2019 confirmed Australia will no longer contribute to the Green Climate Fund (Prime Minister of Australia, 2019). Australia undermined the consensus at the Pacific Islands Forum in Tuvalu in August 2019. Pacific Island countries wanted stronger action on cutting emissions and phasing out coal, facing strong opposition by the Australian Prime Minister, leading to Australia not supporting all the declarations from smaller nations in the final communique (ABC News, 2019c).

In a recent survey, published in November 2019, climate change ranked second as the most important problem facing Australia, a concern that had increased since 2018 (Markus, 2019). In a poll published just before the elections in May 2019, more than 80% of Australians want the government to enhance their climate action, and more than 90% want to see more renewable energy (Hanrahan, 2019). Three quarters want to see the Government do more to increase the number of electric cars. Another report found 81% of Australians are concerned about climate change impacts, in particular, droughts and floods (The Australia Institute, 2019).

In a 2018 survey, capturing the views of Australian business and industry, 92% of respondents said Australia’s current climate and energy policy was insufficient to meet the required targets (Carbon Market Institute, 2018). A further sign of escalating and widespread public disquiet and concern at their government’s lack of action on climate change was the unprecedented, nation-wide strike by school children in late November 2018, March 2019, who were joined by others in September 2019 (ABC News, 2018, 2019b). Recent reports in 2019 have highlighted the extreme vulnerability of the great barrier reef to the impacts of climate change (Climate Analytics, 2019a; GBRMPA, 2019).

The re-elected federal government refuses to discuss any emissions reduction policy for the electricity sector. It claims it wants to focus on reducing prices and supporting investment in coal and gas to ensure reliability against all evidence pointing to the likelihood that this strategy will lead to higher costs than relying on more investment in renewable energy (Toscano & Harris, 2019).

The government has encouraged utilities to extend the coal-fired power generation lifespan beyond shutdown dates scheduled (Taylor, 2019), and continues to support fossil fuel electricity generation, offering incentives through a power subsidy scheme and considering future support for a new coal fired power plant (Coorey, 2019; DEE, 2019). This stands in stark contrast to the need to phase out coal by 2030 (Climate Analytics, 2019b). The Australian government refutes key messages from the IPCC (Hannam & Latimer, 2018) despite the fact that OECD countries, including Australia, need to phase out coal by 2030 (Climate Analytics, 2016, 2019d; Powering past coal Alliance, 2017).

Australia’s Renewable Energy Target, introduced in 2010, aims to increase 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. There is no renewable target set beyond 2020. Renewable energy investments are decreasing since the 2020 target has been met (McConnell, 2019).

Australia is home to the world’s largest battery storage plant (100 MW/129 MWh) and installed an estimated 20,800 battery storage systems in 2017, tripling the number of systems added in 2016 (Latimer, 2018). Most of these were sold in combination with rooftop solar photovoltaic panels, driven by rising retail rates and the desire to maximise solar power self-consumption (Roberts, 2017). Distributed solar-plus-storage has become cheaper than retail electricity from the grid in several regions.

The graph below demonstrates the increase in renewables share of electricity generation in Australia. Despite the fact the share of renewable electricity has increased in recent years, and is projected to keep increasing, it reached only 17% in 2018 (see graph below) and the Australian Government projects renewables to only increase to 35% by 2030 (Department of the Environment and Energy, 2018). The remainder, 83% electricity share in 2018 and 65% in 2030 is still dominated by coal with fossil fuels representing the majority share of the primary energy demand.

Ironically, the proposed government investment to fast track the “Battery of the Nation” project (new links totaling 1,200MW of capacity between the island state of Tasmania with considerable hydro and wind resources and the mainland of Australia) has been assessed to only make financial sense with an acceleration of coal retirement and an acceleration of renewable energy investments, according to a feasibility study (TasNetworks, 2019).

Despite government support for coal, there is little appetite for new coal generation - neither from utilities and industry, nor from the general public. Nine coal-fired power stations have been retired in the last five years, including Hazelwood, a 1,600 MW lignite coal-fired plant in the state of Victoria. This illustrates the economic challenges coal plants face in Australia against the continuously decreasing costs of renewables and storage. There is increasing concern about the lack of reliability of aging coal-fired power plants, with renewable energy and increasing use of modern storage technologies proving to contribute more and more to reliability (Gas Coal Watch, 2018; IEEFA, 2018; RenewEconomy, 2018).

Due to the politically unstable environment on climate policy, expected to continue with the re-elected government, investment uncertainty remains high over what kind of power plants to build as ageing coal plants are shut down or are increasingly unreliable.

The government continues to subsidise the fossil fuel industry by about 12 billion AUD per year (Market Forces, 2019). The industry benefits from tax rebates, the most prominent being the fuel tax credit scheme (Australian Taxation Office, 2017). Another subsidy is the statutory effective life caps. This subsidy can be applied to oil and gas assets to accelerate the depreciation, and the taxable amount on the asset (Makhijani & Doukas, 2015). The production of oil and gas have continued along an increasing trend, shown in the graph below. These subsidies support fossil fuel industry and their exports, despite the need for global phase out.

Within the energy sector, direct combustion emissions are increasing and projected to increase further with the ramping up of LNG export facilities, mainly in Western Australia and Queensland. Australia is projected to become the world’s largest LNG exporter by 2020. This increase in gas production is also leading to an large increase in fugitive emissions.

While oil production has declined in Australia since 2010, natural gas production has vastly increased since 2012 (IEA, 2019a). This graph does not depict the substantial growth in natural gas production beyond 2015. From 2015 to 2018 natural gas production increased by 75% (IEA, 2019a). Australia is expanding its LNG capacity and aims to have 10 plants in operation to export over 80Mt of LNG annually (Department of the Environment and Energy, 2018).

What is not measured in national level greenhouse gas accounts is the emissions from LNG and coal at the export destination. Under government projections for coal and gas production, Australia’s extraction based emission from fossil fuel production would nearly double (95% increase) by 2030 compared to 2005 levels (UNEP, 2019).

One bright spot is the growth of renewable energy in the power sector which was quite rapidly driven initially by the large-scale renewable energy target for 2020, which the Federal government will not renew. However, the poor climate change response from the national government has resulted in some considerable state level action.

Six out of the eight states and mainland territories have renewable energy targets.¹ South Australia has recently set an ambitious target of net 100% renewables by 2030 (RenewEconomy, 2019). The state plans to export surplus renewable electricity to neighbouring grids and overseas (RenewEconomy, 2019). South Australia is a global leader in terms of the share of variable renewable energy (wind and solar PV) at 51% in 2018 (Department of the Environment and Energy, 2019a). It also leads in storage technology with the world’s biggest lithium-ion batteries and one of the world’s biggest solar thermal plants. The state has plans for the world’s biggest “virtual power plant”, i.e. the installation of solar panels and batteries on more than 50,000 homes, and for investments into green hydrogen from renewable energy for storage and export (The Guardian, 2018c). Queensland, Victoria, and the Northern Territories have committed to 50% renewables by 2030 (Department of Energy and Water Supply., n.d.; Langworthy et al., 2017; Victoria State Government, 2019). Western Australia and New South Wales do not have a renewable energy target.

All states (and in addition, the Northern Territory and ACT) now have zero emissions targets for 2050 (Climate Council, 2018a; Government of Western Australia, 2019; Northern Territory Government, 2019). The ACT and Victorian Government (2017) have legislated their targets. The ACT set an ambitious target earlier than 2050, to achieve zero net emissions by 30 June 2045 (ACT, 2019).

About 32% of dwellings in South Australia, 33% in Queensland and 27% of Western Australia had solar PV by 2018, with substantial shares in several other states and territories, a trend that is showing no sign of slowing down (Climate Council, 2018a). This is not a boom driven by a pending reduction in subsidies, rather by high electricity prices, highly affordable solar power systems, and people’s desire to act on climate change.

The outlook is clouded though as many analysts believe further incentives and/or structural changes in the electricity market, including the establishment of adequate grid into connectors is essential for the recent growth to continue at the same rate. For example, a recent study finds that Australia could build an affordable and secure electricity network with 100 percent renewable energy, using existing technologies, but with the need for stronger interconnections between regions (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, would save billions in upfront capital costs and consumer bills, and deliver a secure electricity system (Australia Energy Networks & CSIRO, 2016). The Energy Transition Hub has published a new scenario analysis showing the potential for ‘200% renewable energy’ to support domestic demands and RE exports (Burdon et al., 2019) presenting recommendations that have been ignored by government.

The government has started an inquiry into the prerequisites for nuclear energy in Australia, which was open to public written submissions in September 2019 (Parliament of Australia, 2019).

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, 2015). However, research suggests that much more ambitious improvements are possible, with a doubling of energy productivity possible by 2030 with net benefits for GDP (Energetics, 2015). Almost four years after its publication its impact has yet to materialise.

Along with setting and encouraging efficiency standards, governments can support energy efficiency improvements across sectors by setting ambitious goals, providing funding and financial incentives. The American Council for an Energy-Efficient Economy (ACEEE) has scored these elements of national commitment and leadership—Australia ranks 18 of 25 (Castro-Alvarez, Vaidyanathan, Bastian, & King, 2018). The IEA came to the same conclusion: out of 28 countries, Australia is the only country not making any real progress (OECD/International Energy Agency, 2017).

1 | References for state and territory renewable energy targets are as follows: ACT (ACT Government, n.d.); Tasmania (Barnett, 2018); South Australia (RenewEconomy, 2019); Queensland (Department of Energy and Water Supply., n.d.); Victoria (Victoria State Government, 2019); Northern Territory (Langworthy et al., 2017).

References for state and territory zero emissions targets are as follows: (Climate Council, 2018a; Government of Western Australia, 2019; Northern Territory Government, 2019).

Emissions in the transport sector are increasing and are projected to increase further. Road transport¹ represents 86% of transport emissions and emissions increased by 2.6 MtCO2e from 2017 to 2018 (Department of the Environment and Energy, 2018). From 2018 to 2030, road transport emissions are projected to increase 6%, and total transport emissions by 9% (Department of the Environment and Energy, 2018). Domestic aviation emissions are projected to take the biggest leap, by 37% in the same years, followed by domestic navigation (i.e. ships etc.) by 35%.

Despite these developments, there are barely any policies in place. The government is relying on financing for businesses to upgrade their fleets, with just over 1000 lower-emissions vehicles financed through industry partnerships (Australian Government, 2017a). The government provides exemptions from some vehicle taxes for highly efficient vehicles. The past three emissions reduction fund auctions (June 2018, December 2018, July 2019) saw no certificates issued relating to transport (CER, 2018, 2019).

The government established a Ministerial Forum to coordinate federal and state government approaches to addressing emissions from motor vehicles, including consideration of a fuel efficiency standard for light vehicles (Australian Government, 2017a) but still has no standards at all, and has not taken any decision on introducing such standards, while nearly 80% of new light duty vehicles sold globally are subject to some kind of emissions or fuel economy standard.

Adopting strict standards could prevent up to the equivalent of 65 MtCO2 by 2030, which is significantly more greenhouse gas pollution than what New South Wales’ entire coal fleet produces in a year (Climate Council, 2018b). They would also significantly reduce car owners’ fuel bills, saving an estimated AUD 8,500 over a vehicle’s lifetime.

Compared to other countries, the uptake of electric vehicles (EVs) is very slow in Australia. The current uptake rate is around 0.34% of new vehicle sales (BITRE, 2019). See the graph below for a comparison of Australia’s EVs per 1000 capita, compared to a range of other OECD countries and China. Australia’s EV uptake is projected to increase to 15% by 2030 (Australian Government, 2017a, p. 37). The Australian government claims to be developing a national strategy for electric vehicles, expected to reduce emissions by up to ten million tonnes by 2030; no details of such a strategy are yet available.

1 | Road transport includes motorcycles, articulated trucks, rigid trucks, buses, light commercial vehicles and cars

National and state governments have offered some support for electric vehicle recharging infrastructure by installing public chargers (Climate Change Authority, 2019). Most states (ACT, NSW, VIC, QLD, SA) offer different degrees of registration discounts for electric vehicles.

The State of South Australia has introduced a tax incentive for EV purchase. The ACT government and Transport Canberra have trialled electric and hybrid buses and ACT has now released an Action Plan for zero-emissions vehicles. ACT—with a target to achieve net-zero GHG emissions by 2045—has introduced financial incentives for zero-emissions vehicles (exemptions from stamp duties, reduced registration fees), adopted zero-emissions vehicles in government fleet, and is investigating opportunities for production of hydrogen fuel and deployment of fuel cell Electric Vehicles in the government fleet (ACT Government, 2018).

Australia’s emissions from industry¹ (including direct combustion, fugitives,² and industrial processes) accounted for 29% of total emissions in 2018 (based on data from Department of the Environment and Energy, 2018). Direct combustion alone accounted for 17% of total emissions. Direct combustion is the burning of fossil fuels for heat, steam or pressure in either the manufacturing, energy or mining sectors.

With a rapid increase in the production of liquified natural gas (LNG) for export, LNG processing is one of the fastest-growing sources of emissions, and increasing gas extraction is also leading to more fugitive emissions (Climate Analytics, 2018a).

The only industry sector policy that is projected to create a fall in emissions is the hydrochlorofluorocarbon (HFC) phase down. Australia legislated a phase-down of HFC imports in 2017. The phase-down will reduce the total quantity of permitted HFC imports every two years until an 85% reduction from 2011–2013 levels is achieved by 2036 (Government, 2017).

There is no strategy or plan by the government or industry to decarbonise the industry sector and transition away from fossil fuels, despite the many studies demonstrating Australia’s industry sector can decarbonise its industry sector and transition away from fossil fuels (BZE, 2019; Climate Analytics, 2018b; ClimateWorks Australia, 2014).

In November 2019 the government released the National Hydrogen Strategy, developed by the Council of Australian Governments’ (COAG) Hydrogen Working Group (COAG Energy Council, 2019). Renewable energy-based hydrogen is an opportunity for the integration of large shares of renewable energy and decarbonisation of end-use sectors in particular in heavy freight transport and industry where direct electrification is not feasible. However, the National Hydrogen Strategy refers to a “technology-neutral” approach and defines “clean hydrogen” as “hydrogen produced using renewable energy or using fossil fuels with substantial carbon capture”. There is a risk that it will be used to prop up the fossil fuel industry in Australia. Of the announced 370 million AUD funding from existing allocation to the Clean Energy Finance Corporation (CEFC) and the Australian Renewable energy Agency (ARENA) only the small portion of 70 million AUD from ARENA is designated explicitly for projects generating hydrogen from water with electrolysers and it is unclear what the remaining 300 million AUD funding through CEFC will be used for (Seccombe, 2019). In comparison, there is a Hydrogen Energy Supply Chain coal to hydrogen project with a budget of 500 million AUD from various Australian and Japanese sources, of which the Australian government and the Victorian government are contributing 50 million AUD each (Seccombe, 2019). The pilot project will not implement carbon capture and storage, but may offset emissions, and carbon capture and storage will only be installed if the full project goes ahead as part of the CarbonNet Project for sequestration, on which the federal and Victorian governments have so invested some $150 million (due in 2030) (Seccombe, 2019).

Both South Australia and Western Australia have renewable hydrogen strategies (Government of South Australia, 2017; WA Dept. of Primary Industries and Regional Development, 2019) and the Queensland government has released a Hydrogen strategy focusing on green hydrogen and export opportunities (Queensland Government, 2019). Experts say that with the right conditions, Australian hydrogen exports could be worth AUD 1.7 billion a year and could generate 2,800 jobs by 2030 (ACIL Allen Consulting, 2018).

1 | The Industry Sector includes direct combustion emissions from manufacturing, energy, and mining (but not from buildings, nor from agriculture and fisheries), and fugitive emissions (coal, oil, and gas), as well as industrial processes and product use emissions.

2 | Fugitive emissions in this section refers to emissions from the extraction, processing and delivery of fossil fuels. Not emissions from the electricity sector, mining plant and equipment, or transport of the fuels.

Australian government assumptions indicate agriculture emissions are projected to increase by 9% by 2030 (Department of the Environment and Energy, 2018). Beef cattle is projected to be the biggest contributor, with an increase in grain fed beef cattle as they are less prone to drought, but produce higher levels of emissions (Department of the Environment and Energy, 2018).

The Carbon Farming Futures programme ran from 2012 to 2017, and invested 139 million AUD in 200 projects and 530 farm trials (Department of Agriculture and Water Resources, 2017). It promoted research and best practice techniques to reduce emissions. The only policy to disseminate regional best practise and ramp up research came to an end and has not been replaced.

Historically, the LULUCF sector has been a large source of emissions in Australia. In 2018, it represented a 22 MtCO2e sink (i.e. it removed 22 MtCO2e from the atmosphere). By 2030, the sector is projected to be a negligible sink of less than 1 MtCO2e (Department of the Environment and Energy, 2018).

It is not clear how these projections take into account the alarming increase in deforestation rates observed and projected in particular in Queensland, where about 395,000 hectares of native vegetation were cleared in 2015-16, 33% more than the previous year (Queensland Government, 2017). A recent study found 7.7 million hectares of forest and woodland had been cleared in Australia from 2000 to 2017 (Ward et al., 2019). Australia is the only developed country deforestation hotspot in the world, with estimates that three to six million hectares of forest could be lost by 2030 in Eastern Australia (The Guardian, 2018b; WWF, 2018).