Current Policy Projections
Current policies overview
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” (Morton, 2018b). Australia’s emissions have been increasing since 2014, when the federal government repealed the carbon pricing system, and the latest quarterly emissions data inventory to December 2018 (published in June 2019) shows continuing increases (Australian Government, 2018b). The government has also approved the start of what could prove to be the biggest coal mine in the world, the Adani mine in Queensland (ABC News, 2019a, 2019c)
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).
In October 2018 the Clean Energy Regulator, which serves as economic regulator of the fund, cancelled projects worth a total of AUD 24 million because they did not deliver the necessary cuts to carbon emissions (Cox, 2018). The funds will be redirected to new projects. The eighth auction of the fund was held on 10–11 December 2018 (Clean Energy Regulator, 2018). With AUD 226 million (Clean Energy Regulator, 2018) remaining of the initial AUD 2.55 billion, the future of the fund remained in question until the recent pre-election announcement (in February 2019) by the government to add a further $2 billion in funding over a ten year period for the continuation of the ERF (now to be called “Climate Solutions Fund”) (Australian Government, 2019).
By April 2019, the budget revealed the $2 billion would be spread over 15 years rather ten, effectively cutting the funds from $200m to $133m 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 7 million contracted abatement units cleared in June 2018 auctions (The Guardian, 2018a). This number shrank to just over 3 million contracted abatement units in the December 2018 auction (Clean Energy Regulator, 2018). 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). There are also serious doubts about the additionality of many of the ERF projects (Baxter, 2017).
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 con 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. 100m tonnes of carbon abatement is derived from unspecified “technology improvements and other sources of abatement” and another 10m tonnes 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 are 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 (Morton, 2018a). The government consulted with industry stakeholders on how to make the safeguard mechanism “fairer and simpler”, without addressing these issues, and with the proposed changes risking an increase in the level of emissions allowances (Australian Government, 2018a).
The government has also announced that it will no longer provide funds to the Green Climate Fund (GCF) (Mathiesen, 2019).
In a recentpoll, published just before the recent elections in May this year, 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.
In another recent survey, capturing the views of Australian business and industry, 92% of respondents say Australia’s current climate and energy policy is 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 were the unprecedented, nation-wide strike by school childrenin late November 2018and March 2019 (ABC News, 2018, 2019b).
Australia’s primary energy consumption is dominated by fossil fuels; in 2016-17 38% came from oil, followed by 32% coal, 25% gas, followed by a mere 6% of renewable energy (Department of Energy and Environment, 2018). In 2016, federal and state energy ministers commissioned a review of the national electricity market, the so-called “Finkel Review”. 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 insufficient) 2030 reductions proposed for the entire Australian economy (Hare et al., 2017).
The recently re-elected federal government has even rejected the inadequate National Energy Guarantee (NEG), and refuses to discuss any emissions reduction policy for the electricity sector; intending to only implement the reliability obligation on electricity generators (a component of the NEG) (Sydney Morning Herald., 2019). The government 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.
Driven by the notion of low-electricity prices, the federal government seeks to introduce several policies ostensibly aimed at maintaining the competitiveness of coal-based generation (Murphy, 2018). These include an underwriting programme with the provision of floor prices, contracts for difference, and loan provisions. Such policies work at cross purposes with the stated objective, given the rapid decline in costs of renewables (RenewEconomy, 2018b).
This stands in stark contrast to the need to reduce the use of coal in electricity by two-thirds between 2020–2030 globally and phase out coal by 2050, as found by the IPCC Special Report on Global Warming of 1.5 °C (IPCC, 2018). The Australian government is refuting the key messages of the IPCC report stating that the report did not “provide recommendations to Australia” (Hannam & Latimer, 2018). OECD countries, including Australia, need to phase out coal by 2030 (Climate Analytics, 2016; 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.
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 photo voltaic 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.
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 (RenewEconomy, 2019).
Despite this, coal has featured prominently 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 - neither from utilities and industry, nor from the general public. Nine coal-fired power stations have been retired in the last five years, includingHazelwood, 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. 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, 2018a).
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. Wholesale power prices have doubled since the carbon price scheme and related legislation was axed, fueling calls for an emissions intensity-based carbon pricing scheme for the electricity sector (The Sydney Morning Herald, 2017). Even this measure was ruled out by the former Turnbull government, although analysis suggests it could save households and businesses up to AUD15 billion in electricity bills over a decade (The Sydney Morning Herald, 2016).
Unabated gas, like coal, has a limited ‘best before date’ before it needs to be phased out for a Paris Agreement compatible future (Climate Action Tracker, 2018).However, liquefied natural gas (LNG) has been the biggest driver of Australia’s carbon footprint in the last three years (The Guardian, 2018c). Large projects, such as the Browse LNG plant have been submitted for environment approval without plans to reduce or offset greenhouse gas emissions, with emissions from LNG projected to neutralise emissions avoided through the national renewable energy target (The Guardian, 2018e).
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 increase in fugitive emissions, with questions regarding the emissions reporting leading to concerns that emissions might be higher than presently reported (Hare, Roming, Hutfilter, Schaeffer, & Beer, 2018).
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). These subsidies support coal and gas industry and their exports, despite the need for global phase out.
On the subnational level, climate action is more visible. All states and territories - except Western Australia - now have strong renewable energy targets and/or zero emissions targets in place (Climate Change Authority, 2019; Climate Council, 2017). South Australia is close to achieving the 50% renewable energy target it set for 2025, and is on track to meet its aspirational target of a 75% share of renewable energy in power generation by 2025 that the previous government had announced (AEMO, 2017).
South Australia also aims to achieve net zero greenhouse gas emissions by 2050 (Government of South Australia, 2016). 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, 2019). 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, 2018d).
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, but by high electricity prices, highly affordable solar power systems, and people’s desire to act on climate change.
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).
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).
Emissions in the transport sector are increasing and are projected to increase further. Despite this development, 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. Only six ERF projects have been registered to improve vehicle efficiency, mostly focusing on heavy transport and ships.
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). While nearly 80% of new light duty vehicles sold globally are subject to some kind of emissions or fuel economy standard, Australia does not have any such standards for passenger vehicles, which cause the largest share of emissions, only relying on information programmes such as the Green Vehicle Guide and the Fuel Consumption Labelling Standard (Vieweg et al., 2017).
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 0.2% of new vehicle sales (ClimateWorks Australia, 2018). This is projected to increase to only 0.3% by 2020 and 15% by 2030 (Australian Government, 2017a, p. 37). Although, the Australian government claims to be developing a nation strategy for electric vehicles, expected to reduce emissions by up to ten million tonnes by 2030; no details of such are strategy are yet available.
National and state governments have offered some support for electric vehicle recharging infrastructure through 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).
Many studies have shown that Australia can decarbonise its industry sector and transition away from fossil fuels by 2050. The IEA has pointed out the vast opportunities in Australia based on the “extreme abundance of solar and wind resources” to spur international trade in renewables-based, hydrogen-rich chemicals and fuels (IEA, 2017). In this sector, too, subnational action is on the rise while the federal government’s action lags behind.
South Australia is betting on a hydrogen economy on the horizon, having recognised the tremendous benefits and opportunities attached to it (New South Australia, 2018). 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).
It is no wonder that South Australia has its eye on the prize, and it has developed a Hydrogen Road Map that sets out a clear course towards a hydrogen economy. South Australia aims to capitalise on its competitive advantages, including high renewable energy deployment, and wind and solar resources, to accelerate the transition to being a producer, consumer and exporter of hydrogen (Government of South Australia, 2017). It will host Australia’s first renewable-hydrogen electrolyser plant, a.k.a. “liquid sunshine” producer.
Other states are starting to recognise their potential, with the Premier of Western Australia (WA) recently establishing of a Renewable Hydrogen Council to develop a state strategy. This strategy will build on WA’s vast potential, extensive experience with natural gas infrastructure that can be applied to hydrogen, and specific opportunities including for export to existing and future markets for LNG (Perera, 2018).
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). Industry emissions reductions from the latest projections indicate a 4% emissions decrease from 2020 to 2030, mainly due to the HCF phase down (Australian Department of the Environment, 2018).
Agriculture emissions are projected to increase by 9% by 2030 (Australian Department of the Environment, 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 (Australian Department of the Environment, 2018).
The Carbon Farming Futures programme ran from 2012 to 2017, and invested $139 million 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 MtCO2-e sink (i.e. it removed 22 MtCO2-e from the atmosphere). By 2030, the sector is projected to be a negligible sink of a less than 1 MtCO2-e (Australian Department of the Environment, 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). 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).