Climate change—reducing Australia’s emissions

Emily Hanna, Science, Technology, Environment and Resources

Key Issue
Climate policy continues to be controversial. Following the repeal of the carbon price in the last parliament, the Emissions Reduction Fund (ERF) is now Australia’s main mechanism to reduce greenhouse gas emissions. However, two-thirds of the ERF’s allocated $2.5 billion funding has now been spent. The ERF, and other policies, will need further funding to achieve our climate targets.

Under international climate agreements, Australia has two targets to reduce our greenhouse gas emissions:

5% below 2000 levels by 2020 (under the Kyoto Protocol) and
26-28% below 2005 levels by 2030 (under the Paris Agreement).

While Australia appears to be on track to meet its 2020 target, achieving the 2030 target may prove challenging. To achieve this target we need to know where our emissions are coming from and have effective policies to reduce those emissions.

Where do our emissions come from?

The Australian Government tracks our emissions of greenhouse gases (such as carbon dioxide and methane) through National Greenhouse Gas Accounts. The Department of the Environment and Energy publishes regular Quarterly Updates on Australia’s greenhouse gas emissions.

According to the most recent Quarterly Update, issued in May this year, Australia produced 535.7 million tonnes of carbon dioxide equivalent (Mt CO₂-e) emissions. These emissions came from various sectors:

Energy (Electricity)—187.5 Mt CO₂-e (or 35% of the total emissions) were produced by fuel combustion to make electricity (on- and off-grid).
Energy (Direct combustion)—94.5 Mt CO₂-e (18%) were produced by fuel combustion directly used in energy, mining, manufacturing, buildings and primary industries. Direct combustion excludes electricity use and transport.
Transport—93 Mt CO₂-e (17%) came from fuel combustion used in road, rail, domestic shipping and aviation, off-road recreational vehicles and pipeline transport.
Agriculture—68.5 Mt CO₂-e (13%) were produced from livestock (approximately 70% of agricultural emissions), application of fertilisers and soil additives, soil emissions and burning of agricultural residues.
Fugitive emissions—39.6 Mt CO₂-e (7%) were produced from fugitive gas emissions from coal, natural gas and oil extraction, processing and supply. Fugitive emissions can be unintentional (for example, a leak) or intentional (such as the burning of waste gases). The main source is coal mines (66%), with underground coal mines producing more than surface mines.
Industrial processes—33.7 Mt CO₂-e (6%) were produced from industrial and production processes that do not create energy. This includes metal production, chemical industry processes and synthetic gas production and use (for example, hydrofluorocarbons).
Waste—12 Mt CO₂-e (2%) were produced from waste decomposition, treatment and combustion. This includes solid waste in landfill (the major source in this category), waste in wastewater and compost.
Land use, land use change and forestry —6.5 Mt CO₂-e (1%) were produced from deforestation (such as land clearing), reforestation, revegetation and forest, crop and grazing lands management. There is a greater level of uncertainty in calculating emissions for this sector.

Australia’s climate policies

To meet our international climate targets we will need to reduce emissions across all the sectors outlined above. However, finding bipartisan agreement on the most appropriate policies to achieve these reductions has been challenging. Climate policy has been a polarising and highly political issue in Australia. Several proposals to establish an emissions trading scheme have come unstuck, with the former ALP Government finally establishing a carbon pricing mechanism in 2012. However, the ‘carbon tax’ was repealed by the Abbott Government in 2014. Instead, the Emissions Reduction Fund (ERF) is now the centrepiece of the Australian Government’s current policies to limit greenhouse gas emissions.

The Government is relying on the ERF, as well as a number of other policies, to reduce our greenhouse gas emissions, and meet our 2030 climate target (see Figure 1). These policies are designed to reduce emissions, increase energy productivity, and boost the uptake of renewable energy.

However, questions have been raised as to whether these policies, particularly the ERF, are sufficient to achieve our 2030 target, particular given that many do not currently appear to have sufficient funding.

The Climate Change Authority (discussed below) is currently reviewing whether Australia should have an emissions trading scheme, as well considering the policies that Australia should implement to meet the Paris climate agreement. The Authority’s report on these issues will be released by the end of August 2016.

Figure 1: Australia’s climate policies

Australia’s climate policies

Source: Department of the Environment

Emissions Reduction Fund

The ERF is a voluntary scheme designed to provide financial incentives for businesses, landholders and communities to reduce emissions. Under the ERF, the Government purchases greenhouse gas abatement, quantified by Australian Carbon Credit Units through an auction process administered by the Clean Energy Regulator. Before a project can participate (or bid) in an ERF auction, it must be eligible and registered with the Clean Energy Regulator.

So far, three auctions have been held under the ERF, resulting in the purchase of 143 million tonnes CO₂-e in emissions reductions at an average price of $12.10 per tonne. Of the $2.55 billion allocated to the ERF, over $1.7 million, or around two-thirds, has now been spent, leaving $816 million remaining. Further funding for the ERF will apparently ‘be considered in future budgets’.

A range of projects to reduce emissions have been funded under the ERF so far. These include, for example, projects to replace Melbourne street lights with more energy efficient light bulbs, native forest and vegetation regrowth projects and the use of gas from waste to create energy.

However, the ERF has been criticised as an inefficient way of reducing our emissions, amid suggestions that the Government is paying polluters for emissions reductions that would have happened anyway even without the scheme. The Climate Change Authority concluded in a 2014 report that ‘by itself, and as currently funded, the [ERF] scheme is unlikely to deliver sufficient emissions reductions to reach even Australia’s minimum 2020 target’.

The ERF also includes a ‘safeguard mechanism’, which aims to ensure that emissions reductions achieved by the ERF are not offset by rises in emissions elsewhere. The safeguard mechanism came into effect on 1 July 2016, and encourages large businesses not to increase their emissions above historical levels. The mechanism applies to emitters with annual emissions of over 100,000 tonnes CO₂-e. While the mechanism has been criticised as weak, some commentators have suggested it could provide the basis for an emissions trading scheme. The mechanism will be reviewed in 2017.

Energy productivity

To meet our 2030 emissions reduction target, the Government is also relying on the National Energy Productivity Plan (NEPP), which aims to enhance energy productivity by 40% between 2015 and 2030. Energy productivity combines traditional energy efficiency measures (such as more efficient appliances) with new technology and services (such as smart appliances and solar power). The main aims of NEPP are to encourage more productive consumer choices and promote more productive energy services.

Measures listed in the NEPP include, for example, improved vehicle efficiency; and improved residential building energy ratings and disclosure. The NEPP could result in reduced greenhouse gas emissions in numerous sectors including transport, agriculture, industry, and electricity.

The Government expects the NEPP to contribute over one quarter of the emissions reductions required to meet our 2030 target. However, as of July 2016, there does not appear to be any additional funding specifically allocated to implement this plan.

Other policies and measures

Renewable energy is an important method of reducing emissions in the energy sectors, which produce over half of Australia’s emissions (see above). Policies to increase uptake of renewable energy are discussed separately in the brief on renewable energy policy.

The Government has also announced measures to further reduce emissions of hydrofluorocarbons (HFCs) by 85% by 2036, with measures planned to start by 2018. These potent greenhouse gases are commonly used in refrigeration and air conditioning. The Government has said it will implement measures to reduce HFC emissions by up to 80 Mt CO2-e by 2030. These measures include banning imports of HFC containing equipment and working with business to encourage proper installation and maintenance of HFC-containing equipment to reduce gas leakage and energy use.

The Government is also exploring options for improving the fuel efficiency of Australia’s vehicle fleet, through the Vehicle Emissions Ministerial Forum, established in October 2015. The Forum released a Discussion Paper in February 2016 to seek views on measures to reduce emissions from the road transport sector. This includes consideration of Euro 6 vehicle emissions standards, improved fuel quality standards and measures to increase the fuel efficiency of light vehicles.

Climate advisory bodies

As part of a package of measures along with the ‘carbon tax’, the former ALP Government created government agencies to review climate change policies and clearly communicate climate science to the public.

The Climate Change Authority is an independent statutory authority which came into effect in 2012. It provides the government and parliament with ‘rigorous, independent advice on climate change policies to improve the quality of life for all Australians’. It does this by carrying out reviews on climate change policies and initiatives such as the Renewable Energy Target.

The Abbott Government introduced legislation in the last parliament in an attempt to abolish the Climate Change Authority as part of its effort to dismantle the former ALP Government’s climate policy structure. However, the first abolition Bill was rejected by the Senate, while the second Bill eventually lapsed. Although the attempted abolition was not successful, one half (four) of the Authority’s Board member positions were left vacant for over a year from 2014. This occurred after the members quit because, according to some commentators, the then-Government:

... made it clear that it would not listen to its [the Climate Change Authority’s] advice (although it does seem to have been influenced by its recommendations on vehicle emissions standards and international permits).

These actions resulted in the Climate Change Authority’s future being questioned by commentators. Although new Board members were appointed in late 2015, the Authority’s future is still unclear, given that it is currently not funded beyond 2017.

In contrast, the Abbott Government successfully abolished the Climate Commission in 2013. The Climate Commission had been set up by the Gillard Government to communicate climate science to the Australian public in an understandable manner. Such was the public outcry after the Climate Commission’s dismantling, that a social media campaign to crowd-fund a replacement body raised nearly $1 million in under one week. The resultant independent Climate Council aims to:

... provide independent, authoritative climate change information to the Australian public. Why? Because our response to climate change should be based on the best science available.

As well as providing information on climate-related science and climate change impacts (for example, health), the Climate Council provides reports on policies related to climate change such as renewable energy. The not-for-profit Climate Commission continues to rely on public donations to support its work.

Climate change—reducing Australia’s emissions

Where do our emissions come from?

Australia’s climate policies

Emissions Reduction Fund

Energy productivity

Other policies and measures

Climate advisory bodies

Further reading