If Australia is to successfully cut its greenhouse gas emissions in line with a global goal of limiting warming to 1.5°C, it could require an economy wide carbon price of as high as $100 per tonne, according to a new analysis by carbon markets specialists Reputex.
In the new report, Reputex estimates that Australia could achieve a net zero emissions target by 2050 with the introduction of a lower, $30 per tonne carbon price, but such a target would be only consistent with Australia’s contribution towards a global goal of limiting global warming to 2°C.
To meet the 1.5°C goal, Australia would need to follow a substantially stricter carbon budget, that would require reaching the zero net emissions ten years earlier, no later than 2040. Under this stricter scenario, the necessary carbon price to drive reductions would approach $100 per tonne, according to Reputex.
“Under such a scenario, Australia would face a carbon budget of just 7 gigatons (Gt) between 2015 and 2050. Having already emitted around 3 Gt between 2015 and 2020, significant investment will therefore be required for Australia to maintain net-negative emissions from 2035-2050 in order to align with a 1.5°C budget by 2050,” Reputex says.
Countries adopted a commitment to achieve zero net emissions by the second half of the 21st century under the Paris Agreement, being the recognised benchmark for the level of action necessary to limit global warming to no more than 2°C, with an additional commitment to aiming for no more than 1.5 degrees of warming.
The more ambitious target would require an accelerated decarbonisation of the Australian economy, with Reputex predicting that almost all sectors of the Australian economy would need to purchase carbon offsets to achieve a net zero emissions target.
“In this scenario, all sectors (except Buildings and Electricity) are modelled to create demand for offsets, particularly more expensive soil management and tree planting activities than are necessary in a 2°C scenario,” Reputex added.
“This causes the long run offset price to rise steeply in a more ambitious 1.5°C scenario, reflecting reduced time for the land sector to ‘ramp up’ traditional sequestration efforts, and the limited timeline for the emergence of technological advancements in ‘expensive to abate’ sectors. Under such a scenario, by 2050, much more substantial demand for carbon sequestration leads to offset prices well in excess of $100/t.”
The analysis noted that even under a scenario where Australia aims for zero net emissions by 2050, the higher carbon price still would not support the viability of carbon capture and storage projects.
“Even at higher offset prices, the widescale deployment of emerging technologies such as carbon capture and storage (CCS) is not expected to be possible in time to avoid required immediate large-scale investment in land-sector sequestration activities,” Reputex added.
The analysis coincides with a commitment from federal Labor leader Anthony Albanese to embrace government support for carbon capture and storage projects as part of a peace offering to the Morrison government in an attempt to resolve ongoing battles over climate and energy policy.
According to Reputex, the difference in the carbon price required reflected the flexibility that came with allowing for 30 years to reach next zero emissions, compared to just a 20-year window, suggesting that the earlier the federal government starts the shift to zero emissions, the cheaper it will be.
“Over this timescale, the longer period to 2050 is critical for the decadal scale of carbon forestry required to offset a modest amount of residual emissions. We anticipate these emissions to be around 100 Mt in 2050, or approximately twice the current amount of national sequestration,” the Reputex analysis says.
Spot prices for Australian Carbon Credit Units (ACCUs) have ranged between $15 and $18 for the last few years, but demand for abatement would increase significantly beyond current levels if Australia was to formally adopt a zero emissions target.
Australia previously had a carbon price of $23 per tonne as introduced by the Gillard government in 2012, which rose to $24.15 per tonne in 2013, but which was subsequently abolished by the Abbott government, despite continued strong economic growth during a period that also included the largest ever cuts to Australia’s greenhouse gas emissions.