Current Policy Projections
Current policies overview
The reduction in emissions projected for 2030 is largely a result of the decline in economic activity in Australia due to the COVID-19 pandemic rather than any meaningful climate policy. The Australian government has not initiated a green recovery but has established a National COVID-19 Commissions Advisory Board led by a Chairman with ties to the mining and resources sector to help guide the economic recovery plans (Department of the Prime Minister and Cabinet, 2020). Australia’s current policies fall far short of the emissions reductions required to meet the 2030 target put forward in its NDC.
Australia’s total GHG emissions excluding LULUCF are projected to decrease to between 492 and 498 MtCO2e by 2020 and not achieve any substantial further reductions by 2030, with emissions staying between 487 and 506 MtCO2e. This is equivalent to a decrease in emissions from 2005 levels (excluding LULUCF) of only 4% to 7% by 2030. We expect GHG emissions in 2020 to be 10% to 11% lower than in 2019.
Support packages have been announced by the Commonwealth Government but it has not been targeted at a green recovery. The Commonwealth Government has committed AUD 213.6 billion and states have committed AUD 105 billion (Karp, 2020). The Reserve Bank of Australia (RBA) announced AUD 105 billion for government lending by the end of March 2020 (Karp, 2020). The Commonwealth targeted funds at welfare recipients and subsidies to help businesses with wages, and the RBA will help banks lend to businesses.
In response to COVID-19, the government appointed a National COVID-19 Commission, including fossil fuel and mining industry stakeholders, producing recommendations for a gas-led recovery (Mazengarb, 2020; Parkinson, 2020). The head of the COVID-19 Commission has explicitly said the organisation is not recommending “a green recovery per se” but recommends the government underwrite new gas pipeline infrastructure, as well as domestic gas supply and for state governments to subsidise gas-fired power generation (Murphy, 2020). The Prime Minister has signalled support for the gas sector expansion (Crowe, 2020). This is against advice from government agencies and industry groups, as well as research organisations, with the Australian Energy Market Operator (AEMO) publishing scenarios for integrated grid planning that show no expansion of gas-fired power generation is necessary (AEMO, 2020).
In September 2020, the Prime Minister announced a key objective of the government’s JobMaker plan involves ‘unlocking additional gas to drive recovery’ (Morrision, 2020). The Prime Minister stated the government will invest in the acceleration of five new gas basins, and support the development of the existing basins in Queensland (Morrision, 2020). The Prime Minister set an ultimatum to electricity companies to commit to 1 GW of dispatchable power, with investment decisions made by April 2021, to replace the planned closure of the Liddell coal-fired power plant (Morrision, 2020). If the demands were not met, the government-owned Snowy Hydro company would build a gas power plant (Morrision, 2020). The Prime Minister backtracked on the statement a few days later (Parkinson, 2020d). The plan contradicted analysis by the Liddell Task Force that assessed the impacts of Liddell’s closure and ignores latest plans for investments in large-scale batteries including by the owner of Liddell (AGL), and plans by the New South Wales government for new capacity and transmission (Parkinson, 2020c). The 1 GW gas plan also contradicts advice from government agencies and industry groups, as well as research organisations, with the Australian Energy Market Operator (AEMO) publishing scenarios for integrated grid planning that show no expansion of gas-fired power generation is necessary (AEMO, 2020). The threat of government subsidised competition and backtracking on statements creates high uncertainty for investors.
On the other hand, the Climate Council has called for a clean jobs plan, demonstrating how 76,000 new jobs could rebuild the economy whilst transitioning to a low-carbon economy (Climate Council, 2020). The plan is based on economic modelling analysing each state and territory, with shovel ready opportunities targeted at the hardest hit regions and occupations with job losses. Examples of policies and employment opportunities covered in the plan include 15,000 jobs in utility scale renewables, 12,000 in targeted ecosystem restoration, 12,000 for accelerated public and active transport infrastructure, 10,000 jobs for organic and food waste collection and processing, in addition to jobs in public building retrofitting, residential retrofitting and urban gardens.
Technology-neutral over climate focus
Australia’s long-term climate strategy is at risk of deprioritising effective low-emissions technology. The government released a “Technology Investment Roadmap Discussion Paper” in May 2020 for public consultation (Australian Government, 2020d). The Discussion Paper notes that in late 2020, the government will release the first “Low Emissions Technology Statement” to specify the government’s technology investment priorities, and will also produce a Long Term Strategy (LTS) before COP26 (Australian Government, 2020d). The discussion paper indicates a “technology neutral” approach to investment, with support for gas and CCS (as well as renewables), without ruling out coal and nuclear power.
In 2019, the government called upon fossil fuel industry stakeholders to conduct a non-transparent review of climate policies, producing the ‘Final Report of the Expert Panel examining additional sources of low-cost abatement’ (named ‘the King Review’) (Mazengarb, 2019; Morton & Murphy, 2019). The government has indicated it will follow the King Review recommendations. These include amending the Emissions Reduction Fund legislation to allow for carbon capture and storage technology, adding an incentive scheme to reward large emitters for their abatements, and expanding Australian Renewable Energy Agency (ARENA) and Clean Energy Finance Corporation (CEFC) remit to take a “technology neutral” approach (Australian Government, 2020a, 2020b). By September 2020, the government confirmed ARENA and CEFC will receive AUD 1.9 billion in line with plans to expand their mandate to include CCS, and the move embodies a funding cut for ARENA compared to historical levels (Parkinson, 2020b). The government has already spent AUD 233 million on the National Low Emissions Coal Initiative and budgeted AUD 1 billion on the CCS Flagships program expiring in 2020 (Australian National Audit Office, 2017). There is no CCS program in operation in the electricity sector, and the only operating CCS project, the Gorgon gas project in Western Australia, has encountered numerous problems, resulting in capturing less carbon than contractually agreed, and commencing years later than planned (Morton, 2019).
Climate Solutions Package and the Emissions Reduction Fund
The Climate Solutions Package released in 2019, has been criticised in the media as a rebranding of old policies (Australian Government, 2019a; Murphy, 2019). The package includes the rebranded Emissions Reduction Fund (ERF) (now called the Climate Solutions Fund), unspecified energy efficiency measures, government investment into a “Battery of a Nation” project (new power links between Tasmania and the mainland), and the vague announcement of a non-specific future electric vehicle strategy.
The government claims these policies, along with energy performance standards (for air-conditioning and refrigeration), previous policies and projects such as Snowy 2.0, and unspecified “technology improvements”, will allow Australia to meet the 2030 target (Australian Government, 2019a). The package does not detail how it will meet the Paris commitments. The package suggests 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.
Australia’s Emissions Reduction Fund (ERF) - which is now part of the Climate Solutions Fund - is a reverse auction mechanism that is supposed to reduce emissions in a cost-effective manner. The Clean Energy Regulator, which serves as the economic regulator of the ERF, has indicated the fund avoided a mere 4 MtCO2e of emissions over the four auction rounds in 2017 and 2018, despite 123 contracts worth AUD 372 million (ABC News, 2019c). By the tenth auction in March 2020, 28 projects had been completed and 435 contracts were in hand (Clean Energy Regulator, 2020). So far, the ERF has delivered a nominal total of 52.7 MtCO2e in abatement, and has 140 MtCO2e of abatement contracted to be delivered (Clean Energy Regulator, 2020). These figures exclude terminated or lapsed contracts worth 15.7 MtCO2e in emission abatements as businesses did not deliver the agreed abatements.
In 2019, the ERF’s rebranding as the “Climate Solutions Fund” included a top up of AUD 2 billion. However, the government effectively cut the funds from AUD 200 million to AUD 133 million per year by spreading the AUD 2 billion over 15 years rather than ten. The government 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 the Climate Change Authority to introduce new policies aiming at decarbonisation and structural change (Climate Change Authority, 2017).
Business interest in the scheme has seen a steady decline. There were 7 million contracts cleared in June 2018 auctions, shrinking to just over 3 million in the December 2018 auction, and 59,000 abatement units in July 2019, increasing only to a level of 1.7 million in March 2020 (CER, 2019a; Clean Energy Regulator, 2020).
The fund has also been plagued by a mismatch of its abatement profile, concentrated in the land and waste sector, with Australia’s emissions driven by industrial, transport, 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 to January 2020. There are also serious doubts about the additionality of many of the ERF projects (Baxter, 2017).
States and territories
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).
A recent poll from June 2020, found that 70% of Australians expect the government to protect the environment as part of the economic recovery efforts (IPSOS, 2020). Another poll found 72% of Australians view the bushfires of November 2019 to January 2020 as a wakeup call on the impacts of climate change, with 73% agreeing that the Prime Minister should lead climate action (Australian Institute, 2020). The Australian Climate Roundtable, an alliance of leaders from business, farming, investment, union, social welfare and environmental sectors issued a statement calling on the government to adopt a net-zero emissions by 2050 target. The statement also recommends policies to unlock private sector investment in resilience, and integrating the COVID-19 recovery with mitigation efforts (Australian Climate Roundtable, 2020).
COVID-19 did not have a substantial impact on electricity during Australia’s first wave of COVID-19. A lot of economic activity went uninterrupted by the lockdown, as mining and mineral processing continued, and work patterns shifted from workplaces to residential buildings (Saddler, 2020). Electricity consumption in the National Energy Market (NEM) was 2.4% lower in March 2020 than in March of the previous year, partially explained by the weather (Saddler, 2020).
The latest Quarterly Update of Australia’s National Greenhouse Gas Inventory from December 2019 documents that emissions fell in 2019 due to generation from renewable energy and drought affecting the agriculture sector. Emissions from the direct combustion of fuels for manufacturing and mining increased, mainly related to an 11% increase in LNG exports (Department of Industry Science Energy and Resources, 2020c).
The electricity sector will remain fossil fuel-intensive with current policies, given there is no explicit emissions reduction policy for the electricity sector, and instead an explicit push to support gas and coal-fired power generation.
The government has encouraged utilities to extend the coal-fired power generation lifespan beyond scheduled shutdown dates (Taylor, 2019). It also continues to support fossil fuel electricity generation, offering incentives through a power subsidy, considering support for a new coal fired power plant (“Underwriting New Generation Investment Scheme”) (Coorey, 2019; DEE, 2019c). The government is financing AUS 4 million for a study into a new coal fired power plant in Queensland (Thornhill, 2020). This stands in stark contrast with the need to phase out coal by 2030 (Climate Analytics, 2019a). Scenarios by the Australian Energy Market Operator (AEMO) show a cost-effective pathway towards high shares of renewable energy can be achieved with policy and planning (AEMO, 2020). The federal government refuses to discuss any emissions reduction policy for the electricity sector, claiming it wants to focus on reducing prices and supporting investment in coal and gas to ensure reliability despite all evidence pointing to the fact that this would lead to higher costs than investing in more renewable energy (Toscano & Harris, 2019).
Renewable energy has increased in recent years, representing 21% of Australia’s total electricity generation in 2019, compared to 19% in 2018 (ARENA, 2020). Government projections indicate 50% of electricity will be generated with renewable energy by 2030 (DEE, 2019a). The projections show a year on year growth in renewable generation and consequently there is a projected 23% decline in electricity sector emissions from 2020 to 2030 (DEE, 2019a). Reputex also found Australia could achieve 50% renewable energy by 2030 under current policy, with state targets and schemes being the dominant signal for investment (Reputex, 2019).
A number of studies show the technical and economic feasibility of a transition to 100% renewable energy by the 2030s through simple and affordable policies, such as incentives for dispatchable renewables and storage, funding for transmission links, and incentives or legislation for retiring high polluting coal power (Blakers et al., 2017; Diesendorf, 2018; Gulagi et al., 2017; Howard et al., 2018; Riesz et al., 2016; Teske et al., 2016).
Renewable energy is the lowest cost option for power in Australia however investments will decline due to a lack of targets and planning at the federal level. Wind and solar are the lowest cost option for electricity generation in Australia compared to any new build technology, including an additional six hours of storage (BloombergNEF, 2019; CSIRO, 2018). The renewable energy sector has experienced growth (graph below), but investments in renewables are predicted to decline and curtailment and delays to grid connections are becoming an increasing problem (De Atholia et al., 2020; RenewEconomy, 2020)
Indeed, in the second quarter of 2020, investment in large-scale renewable energy projected was at its lowest level since 2017, falling 46% from the previous quarter and 52% lower than the quarterly average for 2019 (Clean Energy Council, 2020b). Reasons for the decline in investment include policy uncertainty, regulatory risks, grid connector issues and lack of investment in the network (Clean Energy Council, 2020a, 2020b; McConnell, 2019). Small-scale renewable energy is experiencing strong growth due to the uptake of rooftop solar by private households and small businesses. Some 2.2 GW of capacity were installed in 2019 compared to 1.6 GW in 2018 and this was expected to increase to 2.7 GW in 2020 before the pandemic struck (CER, 2019b, 2020).
Share of renewable electricity generation
Ironically, the proposed government investment to fast track the “Battery of the Nation” project (new power links totalling 1.2 GW 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. In the past year, renewable energy has displaced some black coal, particularly in Mount Piper power station NSW (Saddler, 2020). Nine coal-fired power stations have been retired in the last five years, including Hazelwood, a 1.6 GW 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).
The government continues to subsidise the fossil fuel industry by about AUD 12 billion 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 (ODI, 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. This increase in gas production is also leading to a large increase in fugitive emissions.
Oil and gas activity: production
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). In 2020, Australia will have 10 LNG plants operating with plans to export 82 Mt (DEE, 2019a). Production will be ramped up to 87 Mt by 2030 (DEE, 2019a).
Such plans for LNG production raises questions over the increasing uncertainty and risk of stranded assets, and decreasing exports and revenues with signs of increasing oversupply due to the economic down related to the COVID-19 pandemic (Macdonald-Smith, 2020a, 2020b). For example, there are delayed investment decisions relating to the massive Burrup Hub expansion planned off the Western Australian coast, which would alone contribute an additional 16 MtCO2e by 2030 if it were to go ahead (Climate Analytics, 2020; Morton, 2020a). Coal production will also be ramped up from 634 Mt in 2020 to 659 Mt in 2030 (DEE, 2019a).
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).
States and territories are stepping up and committing to their own targets. Six out of eight states and territories in Australia have committed to a renewable energy target in or beyond 2025 (Climate Council, 2019). Some states have set ambitious targets for 100% of renewable energy:
- ACT has committed to 100% renewables by 2020
- Tasmania aims to be 100% self-sufficient in renewable energy by 2022 (Climate Council, 2019). It has set a new ambitious target for 200% renewable energy by 2040 (Gutwein, 2020)
- 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 (Morton, 2018)
- 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.
Around 35% of dwellings in South Australia, 36% in Queensland and 29% of Western Australia had solar PV by 2019, a trend that is showing no sign of slowing down (Climate Council, 2019). 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 et al., 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). Five years after its publication, its impact has yet to materialise.
The government introduced the Energy Efficient Communities Program in 2019 committing $50 million in grants for businesses and community organisations to improve energy efficiency and reduce electricity bills (DEE, 2019b). By 2020, this program’s budget was reduced to $40 million (Department of Industry Science Energy and Resources, 2020a).
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 et al., 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).
Lockdown measures have had a large impact on the transport sector, temporarily reducing road emissions but likely causing long-term reductions in aviation emissions (Quicke & Jones, 2020). April 2020 saw a drop in petroleum consumption, down 12.7% from April 2019 (Australian Government, 2020).
In 2019, transport emissions represented 18% of total emissions and have increased by 22% since 2005 (DEE, 2019a). Road transport represents the largest source of transport emissions, accounting for 85% (DEE, 2019a). Car emissions have grown by 25% since 1990 (DEE, 2019a). Government projections in 2019 expect transport emissions to increase 7% from 2020 to 2030, due to economic growth, population growth and an increase in transport activity (DEE, 2019a). Transport emissions should decline, particularly with the right policies in place related to increased energy efficiency and the rise of electric vehicles.
The transport sector has very few 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, 2017). The government provides exemptions from some vehicle taxes for highly efficient vehicles. The past four emissions reduction fund auctions (June 2018, December 2018, July 2019, March 2020) saw no certificates issued relating to transport (CER, 2018, 2019, 2020).
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, 2017) 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 (Climate Analytics, 2019b).
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 market share of electric vehicles in Australia is 0.6% of new vehicle sales, in comparison to 2.5% to 5% in developed countries (Electric Vehicle Council, 2020). The sales of electric vehicles tripled in 2019 despite the lack of government support (Electric Vehicle Council, 2020). 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, 2017, p. 37). The Australian government claims to be developing a national strategy for electric vehicles, expected to reduce emissions by up to 10 million tonnes by 2030; no details of such a strategy are yet available.
EVs per capita
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).
The Climate Change Authority (2020) has recommended implementing a GHG standard for light duty vehicles, and a cost-benefit analysis for an emissions standard for heavy duty vehicles.
Australia’s emissions from industry1 (direct combustion, fugitives,2 and industrial processes) account for 30% of total emissions (excluding LULUCF), making it the second largest emitting sector (DEE, 2019a). The main cause is direct combustion, accounting for 18% of total emissions (DEE, 2019a). Direct combustion is the burning of fossil fuels for heat, steam or pressure in either the manufacturing, energy or mining sectors. Fugitive emissions account for 10% of Australia’s total emissions in 2019 (DEE, 2019a). Industrial processes and product use (IPPU) accounts for 7% of Australia’s total emissions.
The only industry sector policy that is projected to create a fall in emissions is the hydrochlorofluorocarbon (HFC) phase down legislated in 2017 (DEE, 2019a). 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 fuel (BZE, 2019; Climate Analytics, 2018; ClimateWorks Australia, 2014, 2020).
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).
Australia’s Safeguard Mechanism 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 will drive national emissions growth through to 2030. In March 2019, baselines were increased, allowing emissions to increase (Department of the Environment and Energy, 2019b). The mechanism has been criticised for serving no purpose (Morton, 2020c). Baseline changes have led to projected increase of emissions from these facilities by 12% in the two years of operation, cancelling out publicly funded emissions reductions under the Emissions Reduction Fund (Morton, 2020c).
The government intends to offer an incentive scheme allowing large emitters to earn revenue for emitting less than under the safeguard mechanism baselines (Australian Government, 2020a, 2020b). Without reducing the baselines, large emitters will be paid while the policy remains ineffective in emissions reductions (Morton, 2020b). The safeguard mechanism has not been designed to reduce emissions, but rather to limit them. But approving flexible safeguard mechanism baselines has achieved the opposite, letting companies increase their baseline emissions. Declining baselines would be much more effective policy update (Climate Change Authority, 2020).
A recent government announcement indicates carbon capture and storage projects will qualify under the emissions reduction fund (Australian Government, 2020a, 2020b). This move has been highly criticised, as it adds to the mounting taxpayers dollars that have been spent on CCS—with few signs of commercial or environmental viability (Mazengard, 2020).
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, 2019b).
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.
Agriculture accounted for 12% of Australia’s total emissions in 2019 (excluding LULUCF, see Figure 1) and emissions are set to increase 11% from 2020 to 2030 (DEE, 2019a). Emissions in the agriculture sector are derived from enteric fermentation (digestive processes of some animals), liming and urea application, manure management, rice cultivation, agricultural soils and field burning (DEE, 2019a). Operating equipment, fuel and electricity in this sector are covered in the other relevant sectors such as electricity.
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.
The Climate Change Authority has also noted the need for a ramp up of research in this sector, and recommends the allocation of additional funds for low emissions agricultural research and carbon farming, in addition to investment and incentives to support “climate-smart” and low emissions agriculture and environmental services (Climate Change Authority, 2020).
While the forest sector is currently a net sink, and regrowth of Australia’s previously harvested forests outweigh the forests that are currently harvested, the rate of forest clearing is still high (DEE, 2019a).
The Australian government has made a preliminary estimate of net emissions for the 2020 fire season of around 830 MtCO2e (based on the fires up to 11 February 2020) (Australian Government, 2020c). Emissions from wildfires such as the devastating and unprecedented bushfires in 2019/2020 that burnt an estimated 7.4 million hectares of forest (mostly in national parks and conservation areas) are not accounted for in the inventory, as they are treated as a “natural disturbance” beyond control, and it is assumed that the equivalent amount will be sequestered during forest recovery (Australian Government, 2020c).
Australia is the only developed country that is classified as a deforestation hotspot in the world, with estimates that three to six million hectares of forest could be lost by 2030 in Eastern Australia (Slezak, 2018; WWF, 2018).
Government LULUCF emissions data is regularly recalculated for historical and projected emissions. The recalculations highlight how uncertain this sector is, and data changes have significant repercussions on Australia’s progress on meeting emissions targets.
Historically, the LULUCF sector has been a large source of emissions in Australia. The latest inventory (2018) has increased the estimated level of emissions from LULUCF in 1990 by 7 Mt and decreased 2017 emissions by about the same amount compared to the previous inventory (Department of Industry Science Energy and Resources, 2020b; Department of the Environment and Energy, 2019c).
The latest government projections assume an increase of the forestry sink to 10 MtCO2e as a result of the emissions reduction fund, despite the low level of abatement achieved so far with this instrument. The CAT takes into account the uncertainty of these projections with a range of -1 MtCO2e sink based on the previous government projection (2018) and -10 projected recently (2019) (DEE, 2019a; Department of the Environment and Energy, 2018).