After last May’s federal election Australia’s carbon reduction target was increased from a 26-28% reduction below 2005 levels to a 43% reduction.  Legislation to enable this further reduction in CO2 emissions and to “enshrine” a net zero target by 2050 was subsequently passed by the Australian parliament.

So what does this new target mean in tonnes of CO2 equivalents/year and how will the new ALP government’s plan differ from that of prior LNP governments? 

The table below shows Australia’s annual GHG emissions in millions of tonnes of CO2 equivalents for the baseline year of 2005 and for the 12 months ending June 2022.  Emissions in the 2005 baseline year were 630.3 million tonnes meaning that in the last 17 years emissions have decreased by about 22.7% to the current level of 486.9 million tonnes.  Australia’s official 2030 target, which under the prior federal government was to get to around 460 million tonnes by 2030, has been shifted to a new goal of 360 million tonnes.  

Table 1 Australia GHG emissions (millions tonnes/year) – 2005 and 2022

Claims made by the previous LNP  government that the nation was on track to meet a 26% to 28% reduction relative to 2005 by 2030 appears to be more or less supported by the data in Table 1.  To get from the current 22.7% reduction to a 26% reduction would only have required a further reduction of 20 million tonnes.  Given state based policies, the trajectory of new wind and solar investment and the likelihood of more electric vehicle sales the additional 20 tonne reduction is almost certain.

It is worth taking a closer look, however, at what has driven most of the emission reductions since 2005.  The table above shows that almost all of the reduction was associated with LULUCF emissions.  These record the impact on atmospheric emissions from the gain and loss of carbon sinks.  In 2005 Australia was destroying carbon sinks – effectively clearing land and chopping down trees – at a rate that reduced its capacity to sequester carbon by 92.4 million tonnes/year.  Remarkably the nation has turned that around to the extent that Australia is now increasing its carbon sequestration capacity – presumably by now planting more trees than it cuts down – by 39.5 million tonnes each year.  This change in land use practices reduced national GHG emissions by 131.9 million tonnes and accounted for the lion’s share of the 143 million total reduction. 

Put another way, Australia’s gross GHG emissions  – emissions of CO2, methane and other GHG gases from power plants, cars, factories and agriculture – between 2005 and 2022 went from 537.9 million tonnes in 2005 to a current level of 526.4 million tonnes.  This means they were only reduced by about 11 million tonnes over the 17 year period.  In terms of actual emissions reductions (putting changes to carbon sinks to one side) Australia clearly hasn’t been a world leader over the last 17 years.

In addition, climate activists have called foul on Australia’s LULUCF stepchange.  They contend that LULUCF emissions in 2005 were abnormally high making it a very convenient and inappropriate baseline year.  Using 2005 as a baseline meant that LULUCF emissions are not just an easy target but represent an emissions accounting assumption that without active policy measures Australia would have gone on eliminating carbon sinks at the rate of 92.4 million tonnes/year indefinitely.  This is highly unlikely to have been the case and at least some of the LULUCF improvement between 2005 and 2022 was land management activity returning to normal after an elevated level in 2005. 

To be clear, maintaining existing carbon sinks and creating new ones is a valid and important component of GHG reduction strategies.  The recognition that carbon sinks can remove anthropogenic CO2 from the atmosphere is the reason global climate targets are expressed in terms of net zero emissions rather than simply zero carbon (though this nuance is sometimes lost in the public discussion).  Planting more trees and protecting existing forests will play an important part in Australia getting to net zero and as we shall see are likely to play a key role in meeting the new 2030 climate change.

Ok, so let’s talk about the new 43% reduction target.  First, it is worth pointing out that the ALP government has not rejected the 2005 baseline as a flawed reference point.  They have, however, increased the amount of carbon emissions Australia must eliminate by 2030.  If we assume the benefit of the soft LULUCF baseline is fully captured then the new 360 million tonne target will require actual emissions cuts. After 17 years emissions (excluding LULUCF) only dropped by 11 million tonnes the new target will require a further 127 millions tonnes to be removed over the next 7 years.  That represents a massive increase in the rate of emission reductions!!!

Detailed modelling underpinning the Albanese government 43% reduction target is not available but some high level commentary (1) has been released and summarised in Table 2 below.   

Table 2 Comparison of the new national GHG emissions target (Millions tonnes/year) with current GHG emissions and a 2030 “business as usual” projection 

Examining the data in Table 2 in a line by line sequence it is firstly obvious that the electricity sector continues to do the heavy lifting.  The new policies are promising an acceleration in the current rollout of new wind and solar.  This acceleration means that the 70 million tonne reduction which was forecast under existing policies (mostly the result of state government policies) has now become a 107 million tonne reduction.  It is worth noting that the scope for further reductions from the electricity sector will soon be pretty limited.

Emissions from the transport sector, which had been trending up since 2005, are predicted to peak and start to decline over the next 8 years.  This will presumably be driven by increased focus and incentives for electric vehicles and supporting infrastructure.  One imagines that transport will need to become a much more significant source of emission reduction post 2030 but in the medium term the goal is to stabilise emissions from cars and trucks.

The final “other categories” grouping, which is basically everything except electricity and transport, is described in the new policy commentary as Industry and Carbon Farming. This reflects a major policy focus on major industries whose emissions are categorised in the 2005 baseline as Stationery Energy, Fugitive Emissions, Industrial Processes, Waste, Agriculture or LULUCF.  

The new ALP government is proposing to require the 215 largest carbon emitters (mines, smelters, refineries etc), which are currently responsible for about 140 million tonnes (almost 60% of the current 238 million tonnes of non electricity and transport emissions) to reduce their emissions by 5 million tonnes/year starting in 2024. This is the basis for the bulk of the additional 31 million tonnes shown in the right hand column of Table 2.  The federal government is proposing to use existing legislation set up under a prior LNP administration that specifically applies to any operation with annual emissions above 100,000 tonnes.  There are apparently 215 individual facilities that meet this criteria. The existing legislation gives the federal government the power to apply an industry or facility specific baseline emission target that can be met either through actual on site emissions reductions or by purchasing government certified carbon credits which reflect carbon reductions made elsewhere.  This makes it a pretty typical “cap and trade” mechanism that has been successfully used in other applications to reduce emissions.  It can reward players who are able to reduce emissions by allowing them to sell credits and hence monetise investments in cleaner technology while allowing other entities to keep operating – albeit under a higher cost regime – while they develop plans for emission reduction.  

Under prior LNP administrations emission baselines for facilities covered by what has been called the “Safeguard Mechanism” were set higher than actual emission levels and hence acted more as a ceiling preventing further emission increases than a driver for emission reductions.  Under the new ALP government this will change.  The new policy proposal is for baselines to be stepped down each year by an amount that requires carbon emissions reductions of 5%/year through 2030.  The ability to satisfy reduction targets through the purchase of carbon credits will remain in place which is presumably the logic for the “Industry and Carbon Farming” nomenclature.  

Legislative changes allowing the “Safeguard Mechanism” to function in this fashion have yet to be passed by federal parliament and there will obviously be plenty of scope for change and further commentary.  It is worth making a few general points about what is being proposed.  Firstly it is obvious that major industrial facilities will need to be part of the national decarbonisation journey particularly when one considers that the transition from coal power to wind and solar is well underway. It is also important to acknowledge that companies covered by the “Safeguard Mechanism”  include major employers as well as some that are potentially critical to the national economy and security – think food production, mining, waste treatment and manufacturing. Some portion of the current 215 entities covered by the “Safeguard Mechanism” can be considered as either too big or too important to be allowed to fail under a threat of decarbonisation.  After being able to avoid the full impact of decarbonisation under the series of LNP governments the big big end of the industrial sector is now being told it needs to join the emission reduction process.

The fact that there has been in principle support for the new focus on major industrial players from employer and industry groups reflects a pragmatic response that accepts decarbonisation is inevitable and that what is being suggested is potentially workable – as long as there is a robust carbon credit market available.  

It is also important to recognise, as one assumes the new government is acutely aware, that the major industrial entities covered by the “Safeguard Mechanism” will have very different emission reduction pathways.  For some there will be available technology investment options that are ready for implementation. For others the pathways may be only theoretical or highly speculative.  An example of the challenges facing some major industries was provided in a prior JTZC article (2) covering Aluminium refineries and smelters.  Aluminium is one of many industries that use natural gas or diesel to either generate high temperatures or provide high levels of energy input (3).  Electricity, either green or conventional, is not practical for these processes.  Hydrogen is a zero carbon alternative that offers a theoretical decarbonisation pathway. The challenge is that cheap, readily available green hydrogen is far from a commercial reality.  

From a political perspective the ALP proposal should be seen as pragmatic, middle of the road approach.  Clearly there is wide community support of greater climate ambition and actual emissions reductions.  Accelerating the roll out of renewables to further decarbonise the electricity sector is not without risk but the new federal government has explicit support from a majority of the general public and tacit support from all state governments.  The same more or less applies to the promotion of more electric vehicles.  The decision to seek emission reductions from major industry is also logical – these organisations know that the changes have been coming, they should be ready and will have the horsepower to engage with government as they attempt to implement necessary changes.  One suspects that the government has chosen to deal with these sophisticated players in the knowledge that later battles to drive emission reduction and technology change with small business (especially agriculture) and the general public will be more difficult.  

Being pragmatic and middle of the road inevitably means that there will be opposition from both sides of the political spectrum – conservative activists will use talking points highlighting economic risks and a loss of international competitiveness underpinned by what they will see as unproven climate science.  If industries are forced to decarbonise without a realistic pathway and timeline some of these criticisms may prove to be correct – one way to meet tough targets is to simply close down.  On the other side of the aisle, environmental activists and the Greens are voicing opposition to the use of carbon credits rather than actual emission reductions. This will be the topic for a future discussion but reflects the fact that the reputation of carbon credits is somewhat mixed.  Are they legitimate investments in carbon reduction, such as planting trees which will remove carbon from the atmosphere as they grow, or are they sleight of hand schemes that allow industry to keep emitting while only pretending to reduce emissions elsewhere?  

The new ALP policy absolutely needs a robust and accessible carbon credit scheme – as discussed above many industrial entities simply do not have the technical pathways to reduce emissions by 5% each year – at least not yet.  Forcing them to do so without access to credits will effectively force them to close.  The Greens, who have signalled their intention to oppose the current proposal and seek changes, are dubious about carbon credits, want their use to be minimised and to disallow coal and gas facilities from using them.  Obviously forcing coal and gas producers to close is no bad thing for folks on this part of the political spectrum.

Hopefully the above has answered a few questions – outlined the new emission targets in terms of how much GHG emission reduction is being sought and where it is proposed to come from, put the proposed new scheme in context relative to what the previous government was planning and touched on some of the political challenges the new government will face.  It is clear that Australia is moving into new territory and major industry players will become the focus of national decarbonisation.  The new lead players on the Journey to Zero Carbon

1. https://www.reputex.com/wp-content/uploads/2021/12/REPUTEX_The-economic-impact-of-the-ALPs-Powering-Australia-Plan_Summary-Report-1221-2.pdf
2. https://journeytozerocarbon.com/?p=531
3. https://journeytozerocarbon.com/?p=331