The ALP has formally targeted net zero by 2050 and has stated that: “Our plan will reduce Australia’s emissions by 43% by 2030 – which will become Australia’s target under the Paris Agreement, keeping us on track for net zero by 2050.”
The issue in this note is whether the policy suite adopted will in fact achieve that level of reduction.
The obvious point made by anyone who actually thinks the environment matters is that the plan, even if achieved, is wholly insufficient.
But in this note we just tease out the policies and their likely impact.
There are really three key policies:
– Turning the emissions safeguard scheme into a “within sector” cap and trade;
– Some support for electric vehicles;
– A large fund to build renewable energy infrastructure but particularly transmission.
For this note I have no interest in stuff about jobs. Jobs talk is just about selling a policy, is impossible to verify and basically just represents a fantasy by the person talking about them. Jobs come and go. The jobs that people will be doing in 20-30 years will probably not even have been invented yet.
100 mega-tonne fall in emissions, at most, is all that’s likely by 2030
ALP policy will see emissions for facilities covered by the Safeguards scheme fall by at most 5 Mt per year between the financial years of 2024 and 2030; that’s seven years or 35 Mt. That total assumes EITE (trade exposed industry) emissions aren’t “tailored” and that no new facilities end up needing to be covered.
In addition, if the numbers modelled in the Australian Energy Market Operator’s Integrated System Plan (ISP) Step Change Scenario come to pass, there will be a 75 Mt fall in electricity sector emissions.
Transmission finance, particularly in my opinion for Basslink, will assist that but market forces alone will not force Queensland coal generation out by 2030 and maybe not in Victoria. Federal assistance to the Queensland government and private sector coal generation owners in NSW and Victoria on their way out would be a big help.
So, if we used an optimistic 100 Mt total reduction between safeguards covered and electricity, that’s about a 20% reduction from 2020 levels and about a 25% reduction, excluding land use from 2005 levels.
Transport emissions will not fall much without a tailpipe emissions mandate which would be passed by both houses in a heartbeat. There is no agriculture plan.
Emissions
Emissions can be categorised in several ways, of course. The following table uses the Australian government cuts in the first instance:
I don’t want to open the land-use can of worms, it just seems obvious that the reality is that even if the land use reduction is genuine, and it probably is partly genuine, and partly an accounting construct, the rest of the economy has on average done virtually nothing.
If you count it relative to GDP, carbon intensity has reduced significantly, but that is irrelevant to nature and irrelevant to our commitments. You don’t even get a participation certificate for GDP relative performance.
The ALP has no plan, that I am aware of, for agriculture emissions. The plan for transport is limited to support for EVs and virtually the entirety of Australia thinks the ALP missed a major trick by not supporting tailpipe emission standards similar to what Europe has adopted.
I won’t overly dwell on this, but the relevance is that EV support on its own, particularly limited EV support, is not going to get much of a reduction in transport emissions.
From memory, something like 80% of transport emissions is road transport. Vehicle emissions standards force manufacturers to supply product into the market. Who knows? We might even get some electric VWs into the country!
So the majority of the reduction is the 65% of emissions in electricity, stationary energy, fugitive emissions and industry process. In turn this divides in two, electricity policy and everything else which is bundled into the safeguards scheme.
On paper, the ALP has supported new coal and gas investment and has verbally and apparently in one case in writing told existing coal and gas operators “don’t worry”.
In my view the ALP will basically be hoping that everyone else – that is, state governments and the private sector, which in practice means the financial sector – do the hard work of actually limiting new coal and gas developments.
But, for instance, the Queensland state government appears less committed to the reality of what decarbonisation actually means than the federal government. It isn’t easy, it requires strong action and therefore making enemies. Enemies are bad for business and bad for politicians.
The IEA has historically shown it’s as useless a forecaster as anyone else, but equally it’s a very well respected forecaster and does some excellent analysis.
Since 2020 it has been saying:
– “All the technologies needed to achieve the necessary deep cuts in global emissions by 2030 already exist, and the policies that can drive their deployment are already proven.
– Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway, and no new coalmines or mine extensions are required.
So, ALP policy that says new coal and gas is OK has to show that the IEA is wrong, or alternatively that the ALP doesn’t actually mean what it says and is just playing politics, like the Coalition.
Safeguards scheme, the only ALP policy directly targeting emissions
It is hard to tell exactly what the current emissions of companies covered under the safeguards scheme is because several of the largest emitters have not had their “revised” baseline calculated or reported.
My observation, looking at the facilities data provided by the government, is that a lot of the emissions come from the coal and gas sector or EITE facilities. Recall that about 40% of Australia scope 1&2 emissions are generation in producing exports.
As a reminder, the safeguards scheme covers emissions by all single facility emitters with annual emissions greater than 100kt, except for electricity facilities.
The basic ALP plan says that the allowable emissions under this scheme are due to fall 5 mt per year from financial year 2024 (that is, one year before the next federal election) through to 2050.
Notwithstanding the lack of full facility reporting by the Australian government, the total covered emissions are about 145 Mt last year. So at 5 Mt per year reduction we get:
Even leaving aside that this scheme covers significantly less than 30% of Australia’s total emissions, it’s got some immediately obvious flaws:
– Firstly – and this is Adam Bandt’s point, which he could learn to put more precisely – as announced, the scheme says nothing about new emission sources. So if, say, Scarborough gas facility in WA is developed, Woodside’s scope 1&2 emissions will increase by over 2 Mt per year. So is the total allowance increased, or does every other emitter have to emit proportionately less? Who knows.
– Second, the ALP has explicitly stated that EITE (emissions intensive trade exposed industries) will have their baselines “tailored”. I don’t know what tailored means, but I am informed by Blind Freddy that it probably means those companies won’t have to do any more than their neighbouring companies; i.e. Australia will follow, not lead.
So what this means, in my opinion, is that we will be lucky to see 5 Mt per year from this sector – at least not from government policy, it may come from business itself just trying to get ahead of the rules. Just ahead.
“Don’t worry” – ALP to coal and gas industry
Several “proper” newspapers, including the AFR, have reported that the ALP has told major coal and gas
companies including in one case in writing: “don’t worry” about the ALP’s carbon position.
Now, the exact form of the words is clearly important and here I am just reporting what I have read elsewhere. However it’s quite clear that there is no opposition by the federal ALP to new coal mines or gas resource extraction.
Anthony Albanese has explicitly stated he supports new coal mines “if they stack up environmentally.”
Environmentally does not mean CO2-related, but other environmental issues.
The ALP can state this because the private sector does all the hard work of making new coal mines difficult to finance.
You simply can’t support new coal and gas developments and expect Australia to do its part in keeping the increase in global temperatures to under 2°C. It’s plain and simple BS.
This is what gets the mainstream political parties in trouble. Talking the talk and not walking the walk.
Targets without policy are BS. It’s what makes the ALP in Queensland look like a paper tiger. It’s what makes
federal ALP policy, notwithstanding its being light years in front of the Coalition, also look like a paper tiger.
Either you believe in limiting global warming or you support coal mining and gas extraction. It’s one or the other. You cannot sit on the fence.
Transmission support is the main ALP electricity policy
Federal ALP support to decarbonise electricity is in the form of transmission investment, as advised by
AEMO and quite possibly administered by the Clean Energy Finance Corporation.
The fund will have $20 billion available, which is a huge sum of money. In my opinion, not much of that money will get spent in the Albanese government’s first term.
The ALP also plans to overhaul the Regulatory Investment Test [RIT-T] for transmission, but that will take time.
If the federal government is going to underwrite transmission, as recommended by the ISP, then we don’t need
any RIT test. If the government is going to wait for RIT-T approval then federal funding isn’t really needed. Maybe
there is a halfway house, but my view is that the transmission need is urgent.
Electricity emissions fall by 100Mt over 15 years in the Step Change Scenario of the ISP. This, of course, is
entirely due to market forces and state government policies.
The problems are:
1. Step Change requires transmission
It depends on the transmission being built. That’s the problem that the federal government hopes to solve. Specifically, there is one, but only one transmission program required by the ISP that has a real funding
issue, and that’s Basslink. Tasmania can’t easily afford Basslink, or more to the point, Tasmanians argue
that the benefits of Basslink accrue in part to NSW and even to Queensland and South Australia as well
as to Tasmania and Victoria and so want all states to pay. But that won’t easily fly. So federal funding
would be a help.
Some federal funding might also be able to accelerate some of the other transmission projects. Transmission, though, still faces lots of opposition and needs more social license. Arguably social license needs to be “bought”. Theory around social license says that there may be four stages where business moves from opposition to acceptance to welcomed to being trusted. At the moment transmission is in the opposition phase and struggles to get even to acceptance. One way forward is to recognise the impacts on local landowners and communities and negotiate financial access as the land owner had the power to refuse the deal. Federal funding could perhaps in some way, and at risk of keeping things above board and visible, could perhaps assist in the process.
2. Step Change also requires the Queensland and, to a lesser extent, Victorian governments to get on board
It depends on all Victorian coal generation closing down by 2030 and a 6GW reduction in Queensland coal generation capacity by 2035, of which 3GW is due by 2030. It’s not clear at all to me that the Victorian government will support closing all the coal generation in the state by 2030 and, particularly if replacement capacity hasn’t been built, and probably built in Victoria. So that’s close to 9GW of wind and solar that needs to be built in Victoria over eight years.
You need to be an optimist to see that. But at least Victoria has a legislated target and some policy mechanisms. The problem in Queensland is horrendous. Queensland has all the renewable resources but the generation is mostly owned by the state, and the state government doesn’t want to close the coal generation down. So until the Queensland government gets real, we aren’t going to see the Step Change scenario eventuate.
3. A coal closure plan would provide Queensland with an incentive and help, certainty in Victoria
Nothing in the federal ALP policy offers any incentive to the Queensland government to close its coal generators. The federal ALP could likely do itself a favour by making it easier for the Queensland government to sell coal generator closures to its voters by offering a scheme that would see the coal plants closed in a timely and orderly
fashion and allow the state to put in place some policies that actually will achieve and beat the Queensland government targets. Clearly this would involve offering some money to close the stations. It could be dressed up any way you like and would have to offer a similar deal in NSW and Victoria, but that’s the way to get it done.
There are welcome other policies and funds
The ALP does have a variety of other policies from a fund for new technologies to community batteries, EV charging infrastructure and more, all of which is incredibly useful and welcome.
As welcome as it is, I question whether it will have the cut through either to voters or in emissions reduction as “proper” policy. Federal government is in power to make the top down rules.
