Policy uncertainty and the removal of the carbon tax have shrunk available emissions reduction opportunities immensely, including those in the building sector, according to a new report by RepuTex.
The report, The Lost Years – An Updated Marginal Abatement Curve for Australia to 2030, is the first to look at Australia’s marginal cost of abatement in 2030 since the well-known McKinsey and Company report in 2008.
It found that emissions reduction opportunities are rapidly decreasing across six key sectors – power, forestry, industry, buildings, agriculture and transport – and becoming more expensive, thanks largely to policy uncertainty and delays in investment.
In the buildings sector, for example, the report found that a lack of strong policy encouraging best practice in building efficiency meant that abatement opportunities were now fewer in number and more expensive. It also found the removal of the carbon tax effectively halved the amount of profitable opportunities for emissions reductions.
Only 15 per cent cut by 2030 possible
According to the report, the Australian economy will be able to cut greenhouse gas emissions by just 15 per cent on 2000 levels by 2030, at a cost of $10.6 billion. This is a sharp decrease on the 2008 estimate of a 60 per cent cut by 2030.
“The new data indicates that a significant portion of Australia’s earlier 2030 emissions reduction potential has been lost due to delayed investment, due largely to policy uncertainty around the carbon tax, and more recently, the renewable energy target,” RepuTex executive director Hugh Grossman said.
“In the absence of strong, continual climate policy, investment in clean electricity generation, forest protection and energy efficiency has not been as strong as it could have been, meaning that existing carbon-intensive assets are able to continue to compete against new technologies rather than being phased out, locking in emissions growth in the near-term.
“This can be seen with the return of coal generation to Australia’s fuel mix and the slowdown in renewable energy investment, along with lower investment in building energy efficiency and sequestration projects.”
By 2020, only a five per cent cut is expected (the government’s target) and this falls to just two per cent if all abatement opportunities above $100 a tonne are removed.
Mr Grossman said meeting the government’s five per cent reduction in greenhouse gas emissions by 2020 based on 2000 levels was forecast to cost $5.3 billion – more than double the $2.55 billion allocated to the Emissions Reduction Fund, the first auction for which is expected to occur in mid-March.
Energy efficiency the big hope
He said energy efficiency opportunities would play the largest role in Australia’s emissions reductions, contributing more than one-third of all abatement through to 2030, as many of these projects were “negative cost” – saving money over their lifetimes, including opportunities in residential and commercial building efficiency.
The forestry, industry and power sectors were expected to comprise 75 per cent of emissions reductions.
Effective government policy, the report said, would be key to stimulating additional activity in order to achieve the low-cost emissions reductions.