Briefing Book Article, 47th Parliament

Climate change and emissions reduction

Dr Emily Hanna, Elizabeth Smith

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Key issue

The effects of climate change and related emissions reduction targets and policies continued to gain attention during the 46th Parliament. In the lead-up to the 2021 international climate conference COP26, the question of whether Australia would increase its 2030 target and commit to net zero emissions by 2050 attracted global attention. Focus will once again be drawn to emissions reduction targets as COP27 approaches in November 2022, particularly after the COP26 decision that requests countries strengthen their 2030 targets by the end of 2022 to align with the Paris Agreement temperature goal (Article 29, p. 5).

Background

Changes in climate continue to be observed globally and in Australia. These changes are primarily attributed to increases in greenhouse gases (GHG), such as carbon dioxide (CO₂) and methane, in the atmosphere. Global CO₂ levels achieved a new high in 2020 with an annual average of 413 parts per million (p. 5) and continue to rise. The International Panel on Climate Change (IPCC), the United Nations’ climate change science body, stated in 2021:

It is unequivocal that human influence has warmed the atmosphere, ocean and land… Observed increases in well-mixed greenhouse gas (GHG) concentrations since around 1750 are unequivocally caused by human activities. (p. 5)

The average global surface temperature recorded between 2011 and 2020 was 1.09 °C higher than the average between 1850 and 1900, with the 2010’s the warmest decade recorded over that period (p. 5). The warmest 7 years on record occurred from 2015 to 2021 (p. 6). According to the Bureau of Meteorology, ‘Australia’s climate has warmed on average by 1.47 ± 0.24 °C between when national records began in 1910 and 2020’.

Global mean sea level has risen by 0.2 m from 1901 to 2018 (p. 5). It reached a new high in 2021 with the rate of increase more than doubling between 1993–2002 and 2013–21 (from 2.1 mm per year to 4.5 mm per year) (p. 9). This is partly due to the thermal expansion of seawater from increased temperature and extra water from melted land ice.

These increases in average temperature, as well as sea level, influence extreme weather and climate events globally including heatwaves, heavy rainfall, droughts, tropical cyclones and compound extreme weather events (p. 10). In Australia, the warming climate has increased the frequency of extreme heat events, and there has been an increase in the frequency and severity of dangerous fire weather conditions, and the intensity of heavy rainfall events (pp. 4–5-: 8).

People’s physical and mental health can be negatively affected by climate change, including through extreme heat, increased bushfires and the change in disease distribution (p. 13). Food production can be reduced by drought and excessive heat, while flooding and more intense storms can damage infrastructure (p. 11). Climate change also adversely affects terrestrial, freshwater and marine ecosystems in a variety of direct and indirect ways, with cumulative impacts over time (p. 11). This can result in reduced food security and loss of tourism in degraded ecosystems (p. 13).

Paris Agreement

Climate change has been recognised for decades as a critical global challenge that must be dealt with internationally. Reflecting this, the United Nations Framework Convention on Climate Change (UNFCCC) was adopted and opened for signature in 1992 at the ‘Rio Earth Summit’, where Australia became a signatory. The UNFCCC provides a framework for international action on climate change, with the ultimate aim of ‘stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system’ (Article 2, p. 9). There are currently 197 parties to the agreement (as of May 2022), representing nearly every state worldwide.

Two international agreements to act on climate change have been made under the UNFCCC: the completed Kyoto Protocol and the in-force Paris Agreement. The Paris Agreement aims to ‘strengthen the global response to the threat of climate change’ by:

Holding the increase in the global average temperature to well below 2 °C above pre‑industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre‑industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change (Article 2(1a), p. 3).

In addition to the focus on limiting climate change (through mitigation such as by reducing GHG emissions), adaptation and climate finance are other key aspects of the Paris Agreement.

Mitigation

The Paris Agreement relies on ratcheting up emissions reduction ambition over time to achieve its goals and to address the emissions gap that exists between the temperature target in the Paris Agreement and the likely increase in temperature resulting from existing emissions reduction pledges by parties. All parties submit Nationally Determined Contributions (NDC) that state their domestic emissions reduction targets post-2020 and how they plan to achieve the reduction, as well as efforts to adapt to climate change. Under Article 4, parties are required every 5 years to bring forward plans that reflect their ‘highest possible ambition’ for greater emissions reduction contributions. Parties are expected to increase their ambition in each successive NDC. These 5-yearly commitments were due at COP26 (26th Conference of Parties to the UNFCCC) in 2021. Parties who had an NDC period ending in 2025 needed to communicate a new NDC with a 2030 emissions reduction target, while those who already had a 2030 target needed to ‘communicate or update’ their NDC and were encouraged to increase their target. Leading into COP26, attention was on the 2030 targets and whether parties would commit to net zero emissions by 2050.

International pressure to increase targets came from multiple sources including the UN, individual countries and international organisations. After the initial UNFCCC NDC synthesis report found that international emissions reduction commitments (from NDCs at the end of 2020) fell ‘far short of what is required’ to limit warming to the Paris Agreement goals (p. 5), the UN Secretary-General stated:

… governments are nowhere close to the level of ambition needed to limit climate change to 1.5 degrees and meet the goals of the Paris Agreement. The major emitters must step up with much more ambitious emissions reductions targets for 2030.

Following the release of the International Panel on Climate Change (IPCC) Working Group I report, Climate change 2021: the physical science basis, the IPCC expressed the urgency of increasing ambition , finding that ‘unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5 °C or even 2 °C will be beyond reach’. COP26’s first goal was to ‘[s]ecure global net zero by mid-century and keep 1.5 degrees within reach’, with host, the UK, pressuring other countries to strengthen their emissions reduction commitments. Organisations from numerous sectors also stated support for increasing emissions reductions, including for example, the International Energy Agency.

Australia also faced pressure from other countries to increase emissions reduction ambitions, including from some Pacific Island countries for whom climate change is an existential threat. Within Australia, stronger emissions reduction targets were supported by organisations such as the Business Council of Australia and the National Farmers Federation.

Climate finance

The provision of climate finance from developed to developing countries is part of acknowledging both the differing contributions of countries to climate change, and their varying capacities to mitigate and adapt to climate change. The goal for developed countries to mobilise climate finance of US$100 billion per year by 2020 is expected to be met in 2023.

Australia provided $1.4 billion in climate finance to developing countries during 2015‍–20 to support adaptation and emissions reduction, including over $300 million to the Pacific to support climate change and disaster resilience. The Morrison Government committed to $2 billion in climate finance over 2020–25, including $700 million to continue supporting Pacific climate change and disaster resilience and renewable energy. The Australian Labor Party (ALP) has committed to establishing a Pacific Climate Infrastructure Financing Partnership to support climate and clean energy infrastructure projects, and an Australia‑Indonesia Climate Resilience and Infrastructure Partnership with an initial $200 million in grant funding.

Adaptation

Parties to the Paris Agreement are required to engage in adaptation planning which includes developing and implementing a National Adaptation Plan (NAP) and submitting ‘adaptation communications’ to the UNFCCC, outlining their actions and progress. Australia updated and released its new NAP, the National climate resilience and adaptation strategy 2021–2025, in October 2021. This was presented at COP26, alongside Australia’s first Adaptation communication.

More information on the strategy and Australia’s action on adaptation is provided in the ‘Natural disaster and climate risk’ article in this Briefing book.

Australia’s emissions targets

In 2015, Australia committed to an ‘economy-wide target to reduce greenhouse gas emissions by 26 to 28 per cent below 2005 levels by 2030’ under the Paris Agreement (p. 1). This target is ‘developed into an emissions budget covering the period 2021‍–30’ (p. 3), meaning that meeting the target is judged on whether total emissions over the period remain within the target budget, not whether the actual emissions level in 2030 is 26%‍–28% below the emissions in 2005. The latest multi‑year budget given in Australia’s 2021 emissions projections is 4,915 million tonnes of carbon dioxide equivalent (Mt CO₂‑e) under a 26% reduction and 4,847 Mt CO₂‑e under a 28% reduction (p. 3).

Australia’s updated NDC, submitted on 28 October 2021 just before COP26, reaffirmed the 26%–28% reduction commitment, adding that the emissions projections showed that Australia ‘is on track to reduce emissions by up to 35% below 2005 levels by 2030’ (in emissions budget terms) (p. 3). The NDC also included the newly-adopted ‘target of net zero emissions by 2050’ (p. 3). Consistent with the 2030 target, the 2050 target is economy‑wide and covers ‘all sectors and gases included in Australia’s national inventory’ (p. 3). In contrast with the 2030 target, the 2050 target reflects Australia’s net emissions in a single year (p. 9). Using a target of ‘net zero’ rather than ‘zero’ allows for continued emissions, but any emissions need to be balanced by removing GHGs (such as through carbon sequestration) so that net emissions are zero.

The June 2022 NDC update strengthens the 2030 emissions reduction target to 43% below 2005 levels, and reaffirms the 2050 net zero emissions target. The 2030 target has changed to be both an emissions budget target (with an indicative value of 4,381 Mt CO₂‑e for 2021‍–30) and a single year target. The 2030 and 2050 targets both remain economy-wide and cover the same GHGs as previously.

Australia’s states and territories have all individually committed to net zero emissions by 2050 at the latest (p. 4). Most also have interim targets for 2030 that are more ambitious than the national target, giving Australia ‘a de-facto emissions target of 37–42 per cent below 2005 levels’ by 2030 on a yearly comparison basis (p. 6).

Australia’s emissions

As shown in Figure 1, Australia’s annual total emissions are slowly declining overall. Compared to the year to June 2005, the baseline year for the Paris Agreement emissions reduction target, emissions have dropped 21.4% to December 2021 on a year-to-year comparison (p. 3).

The main sectoral trend driving the long term decrease in Australia’s total emissions is the reduction in emissions from the Land Use, Land Use Change and Forestry (LULUCF) sector (p. 10). Figure 1 demonstrates the large influence the LULUCF sector has on Australia’s long‑term emissions trends. Since 1990, emissions in this sector have dropped 120.3% or 234.1 Mt CO2-e, due to decreases in land clearing and native forest harvesting, soil carbon improvements, and plantation and native vegetation growth (p. 10). The LULUCF sector is now a net sink for GHGs in Australia, meaning it is absorbing more GHGs than it emits (p. 20).

Figure 1 Australia’s total annual emissions including and excluding LULUCF (Mt CO2-e) from December 1990 to December 2021

graph - showing Australia’s total annual emissions including and excluding LULUCF (Mt CO2-e) from

Source: ‘National Greenhouse Gas Inventory Quarterly Update: December 2021’, Department of Industry, Science, Energy and Resources (data extracted from ‘Annual emissions data’ table).

In the year to December 2021 (the latest available figures as of June 2022), electricity accounted for 32.9% (160.4 Mt CO2-e) of Australia’s emissions, making it the largest sector (p. 9). The decline in electricity emissions since the sector’s peak in 2008‍–09 (p. 11), as well as a reduction in agriculture emissions since 1990 (p. 10), have also contributed to the decrease in total emissions. In contrast, the 3 main sectors driving emissions up since 1990 are stationary energy (excluding electricity), transport and fugitive emissions. The stationary energy sector includes emissions from the combustion of fuels (such as natural gas), mostly in the manufacturing, mining, residential and commercial sub-sectors.

Australia’s action

Emissions Reduction Fund

Since 2014, Australia’s primary emission reduction policy has been the Emissions Reduction Fund (ERF) and its safeguard mechanism. The ERF provides a financial incentive for businesses and organisations to reduce their emissions or sequester carbon by participating in eligible projects that deliver emissions abatement or reduction. Participants earn one Australian Carbon Credit Unit (ACCU) for every tonne of CO₂-e stored or avoided by the project. ACCUs can then be sold to generate income.

The role of the ERF’s safeguard mechanism is to limit covered emissions (defined as direct scope 1 emissions) from Australia’s industrial sectors. The mechanism requires facilities that emit covered emissions of more than 100,000 tonnes of CO₂‑e a year to keep net emissions below a specified limit (a baseline). These facilities account for roughly half of Australia’s emissions and mostly belong to the mining, oil and gas extraction, manufacturing, electricity generation and waste industry sectors. The electricity sector is treated slightly differently, with a sectoral baseline collectively applied to relevant grid‑connected generators.

The safeguard mechanism has been criticised for allowing facilities to increase their baselines, resulting in emissions covered under the mechanism rising by 7% since it began in 2016 (p. 8). Following the 2020 King Review that examined new sources of low cost emissions abatement, the Morrison Government began establishing a Safeguard Crediting Mechanism that would operate by allowing facilities to undertake ‘transformative’ abatement projects and earn ‘Safeguard Mechanism Credits’ by reducing emissions below their established baselines. The proposed scheme is described as a ‘low‑emissions technology deployment incentive scheme’ as opposed to an ‘offset scheme’ like the ERF (p. 2). The ALP also committed to implementing such a scheme (p. 31) and committed to reducing facility baselines ‘predictably and gradually over time’ (p. 5).

Further concerns have been raised about the ERF and safeguard mechanism. One of the issues raised since 2016 is that some ERF projects may not be achieving genuine emissions reductions. Recently, critics have claimed there are integrity issues with many ACCUs that are issued to some of the main types of abatement projects and that they ‘do not represent real and additional abatement’. These claims have been strongly denied by the Clean Energy Regulator, its Emissions Reductions Assurance Committee and the Carbon Market Institute. The ALP has noted these concerns and had previously committed to ‘undertak[ing] a short review into ACCUs to ensure their integrity’ (p. 34).

Other programs and agencies

Other programs and agencies that support emissions reduction include the following:

The Renewable Energy Target scheme incentivises investment in renewable energy from energy generation companies (large-scale scheme) and households and small businesses (small-scale scheme). It will continue to operate until 2030.
The Clean Energy Finance Corporation invests in clean energy technologies, projects and businesses through loans and equity investments.
The Australian Renewable Energy Agency (ARENA) provides grant funding to early-stage technologies. Recent changes to the ARENA regulations will allow it to fund a broader range of projects, including clean energy technologies.
International low emissions technology (LET) partnerships facilitate LET research and projects, spearheaded by Special Adviser to the Australian Government on Low Emissions Technology, Dr Alan Finkel.

A full summary of current agencies, policies and measures (including by sector) is provided in Appendix A of Australia’s long-term emissions reduction plan (pp. 106–18).

Major parties’ policies

A major focus of the Morrison Government’s approach to reaching net zero emissions, as described in the October 2021 NDC update, was to implement a ‘technology‑led approach to emissions reduction’. This centred around investment in LETs to make them ‘cheaper, and more widely available’. The priority technologies were clean hydrogen, energy storage, low emissions steel and aluminium, carbon capture and storage, soil carbon and ultra low-cost solar. The approach was underpinned by the Technology investment roadmap (the strategy to identify, develop and deliver LETs), and part of Australia’s long-term emissions reduction plan (the whole-of-economy plan to achieve Australia’s 2050 target). The plan outlined actions and funding commitments for the priority LETs anticipated to deliver 40% of the domestic emission reductions required to reach the 2050 target (p. 15). It also described the broader deployment of enabling technologies (such as electric vehicle charging infrastructure), emerging market opportunities (such as expanding markets for minerals used in low emissions economies and clean hydrogen exports) and fostering global collaboration (p. 9).

The ALP released its Powering Australia policy in December 2021, outlining a plan to achieve a 2030 emissions reduction target of 43% below 2005 levels. It covers a range of policies , confirmed in the June 2022 NDC, including:

a $20 billion plan to upgrade the national electricity grid and establish new electricity infrastructure to integrate more renewable energy (p. 22)
investment from the National Reconstruction Fund, with up to $3 billion to support renewables manufacturing and the deployment of LETs (p. 28)
changes to the Safeguard Mechanism (as noted above)
the Powering the Regions Fund, which will redirect uncommitted ERF funds to facilitate investments in industry decarbonisation, including in energy efficiency, clean energy industries and workforce development (p. 32)
a national electric vehicle strategy (p. 40).

The Albanese Government has committed to introducing legislation for the emissions reduction targets when Parliament returns. Some analysts question how the Government’s policy can achieve the projected emissions reductions and consumer savings (within the electricity sector) without accelerating the early closure of coal-fired generators. The Government is expected to face pressure in the new Parliament – including from the Australian Greens (who have called for a moratorium on all new coal and gas projects) and other climate‑motivated crossbenchers – to commit to more ambitious climate change action.