Australia reached peak gas years ago, but it needs a ban on new home connections, and plans for a faster exit

Australia must start preparing for life after gas or risk bill hikes, missed climate targets and manufacturers shutting up shop, warns a prominent think tank.

Bans on new household gas connections, reworked green hydrogen incentives and a windfall profit tax on the export industry feature in the Grattan Institute’s extensive report on Australia’s deteriorating relationship with the fuel.

The think tank says demand for both domestic and exported liquefied natural gas (LNG) product is projected to decline.

It argues an even faster drop off will be needed than implied by the federal government’s gas strategy projections to meet Australia’s international climate commitments, including net zero by 2050.

Burning gas to cook food, manufacture goods and generate electricity releases greenhouse gas emissions but so does getting it out of the ground and processing it, together amounting to roughly 20 per cent of Australia’s carbon pollution.

Australia’s Future Gas Strategy implies net zero can be reached while gas production and use stay elevated beyond 2050.

Such a scenario would rely on far more renewable gases, widespread use of carbon capture and storage, and large volumes of carbon removals, solutions that “are unlikely to be available in the volumes required at prices people are willing to pay”.

Households are already turning away from gas, with demand peaking in 2020 and declining 16 per cent since.

Bans on new gas connections and incentives for landlords to swap in electric appliances are recommended to keep electrification going, as well as careful management of the network “death spiral”.

Recognising electrification leaves behind a shrinking pool of customers covering the cost of the pipes moving gas around, the case is made for clamping down on new spending and splitting the costs of decommissioning the network fairly.

Governments nervous of strong gas phase-out signals are warned consumers that do not have are realistic opportunities to electrify will be left paying more for the benefit of a few diehards.

Consumers who really want to use gas should be nudged towards using Liquid Petroleum Gas (LPG), as used in some regional and rural areas already.

“This would mean they take full responsibility for their choice, by handling their own supply instead of relying on a network where their choice is cross-subsidised by those who can least afford it,” the report said.

The case is also made for a reset on renewable fuels industry policy, including repurposing hydrogen production tax incentives for smaller grants and loans in recognition the sector is still fledgling and lacks scaled demand.

Australia also needs to get the market settings right to ensure it has enough gas-powered generation capacity and to maximise the benefits of the LNG export sector, including a tougher tax regime and an effective domestic reservation scheme.

Source: AAP