It seems that, even to achieve the weak 2030 emission target set by the government, some significant abatement action will be needed. And it will require significant policy intervention. In the G20 communique and the Energy White Paper, the major measures discussed (apart from the ERF) seem to have been vehicle performance standards, an energy productivity strategy, and vague references to appliance and building standards. And, of course, both the small and large RETs will be important.
The drivers of emission reductions seem likely to be:
– Ongoing industry restructuring, driven by increasing local gas prices, ageing industrial facilities that are progressively less competitive, especially as ‘free trade’ deals are done that open our economy up to imports, and in response to a lack of government support for emerging industries and innovation;
– Ongoing slow economic growth due to both external and internal factors;
– The Emission Reduction Fund;
– Other ‘direct action’ on vehicle fuel efficiency, appliance efficiency and possibly building energy efficiency. The vehicle measures may well encourage plug-in hybrid and electric vehicles: as the greenhouse intensity of grid electricity declines, these will reduce emissions. The challenge for the government on energy efficiency will be that the kinds of policies most likely to deliver cost-effective emission reductions are fairly interventionist, and are anathema to many coalition politicians and their supporters.
– Both the small and large RET: the small RET drives rooftop solar and low emission hot water, and is effectively not capped. The large RET will require a rapid ramp-up of activity, but may then fizzle after 2020 until a 2030 target is locked in.
– Closure (eventually) of some coal power stations, although the timing is difficult to predict: this is likely to depend on when individual power stations face plant failures or major maintenance of refurbishment costs. In the absence of a carbon price there is no pressure to close the worst of the coal power stations, as the brown coal ones have the lowest running costs, which means they generally bid into the market at a lower price than black coal plant.
Policy changes in the electricity industry will have a range of impacts. In particular, if regulators allow high fixed charges to be applied, the economics of energy efficiency, batteries and smart management as well as rooftop solar will be undermined. Response to increasing gas prices (including fixed charges) seem likely to accelerate efficiency improvement and switching away from gas. In many cases, this will lead to a net reduction in emissions, as efficient electric technologies such as heat pumps have lower emissions than gas.
The table below shows my estimate of greenhouse gas emissions by industry and sector (for 2011-12). This gives some insights into emissions, and emission intensity by industry.
The good news is that the services sector (60% of GDP) has very low emissions intensity, so growing that sector (especially if we drive energy efficiency, renewables and energy productivity) can deliver economic growth while reducing emissions.
The metals sector (dominated by aluminium smelting) is a key sector: as documented by the Australia institute, aluminium smelting is subsidised, so cutbacks there will help the economy and cut emissions.
We really need to cut road (freight and private travel) and air travel, so our PM will have to rethink his anti-public transport position and encourage urban restructuring to reduce the need for travel, while also accelerating roll-out (and smart utilisation) of the NBN so we can replace physical movement by virtual travel. NBN is really the highway of the 21st century, but it needs to be fast and high capacity.
Residential emissions also have to be a major focus: there is scope to link action on vulnerable households to abatement. A major focus on existing homes, as well as much stronger (and enforced) regulations and incentives for new buildings (especially apartments) will also be necessary: this will be interesting, as many in the building industry still seem reluctant to act in this area.
Low embodied emission building materials will also have to receive much more attention than in the past. There are exciting developments in this space, including advanced engineered timber, low emission concrete replacements, and optimised structural design.
The mining sector will also have to cut emissions: the growing LNG export sector will place increasing pressure on emissions, as this is a very greenhouse-intensive process. When the Queensland LNG plants come onstream in the next few years, emissions from the LNG industry alone could exceed 30 Mt, around three times the recent level. The Qld LNG industry is more greenhouse intensive, as it uses coal-fired grid electricity for much of its input energy, instead of gas. Around 40% of the mining industry’s present emissions are from electricity use, while (subsidised) diesel fuel is over a quarter. The industry will need to enthusiastically adopt energy efficiency and renewables to cut those emissions!
It seems that, regardless of who is in government, we are in for some big changes as we begin to respond to climate change. Many powerful business groups will have to face some very different realities. Unless those in government choose to allow them to use lots of cheap international carbon offsets so they can remain asleep at the wheel.
Alan Pears is one of Australia’s best regarded sustainable energy experts. He is a senior industry fellow at RMIT University and associate consultant at Buro North. This article was first published in Renew magazine, reprinted with permission of author.