With almost all of its budget spent, the Emissions Reduction Fund is likely to achieve only seven per cent of the CO2 emissions reductions needed for Australia to meet its current 2030 target, according to Climate Institute chief executive John Connor.
The claim stands in contrast to a report by Energetics the government released this month showing it is possible to achieve the 2030 target within the current policy framework.
The Energetics analysis said the current framework included the Emissions Reduction Fund, the Safeguard Mechanism and the “yet-to-be-developed” National Energy Productivity Plan.
It showed energy productivity measures accounted for 44 per cent of CO2 abatement potential between 2021-2030, and a potential further 38 per cent from land use change, including improved farming practices.
Energy productivity includes low carbon transport initiatives as well as low carbon precincts and growth in the use of digital technology to displace transport use.
Co-author and Energetics research director Dr Peter Holt said the latter two opportunities were likely to require more support beyond current policy settings to realise their potential.
Renewable energy and management of industrial processes was expected to deliver five per cent each, and the remainder could be achieved through opportunities related to fuel switching, agriculture, fugitive emissions and waste.
Dr Holt said there were a number of assumptions made in the report, including that all proposed liquid natural gas projects will come online by 2020. Fugitive emissions from these were incorporated into the baseline, he said.
Assumptions were also made that there would be “more aggressive controls” in future on fugitive emissions from coal seam gas projects, he said.
In the report, Energetics’ analysis of carbon emissions between 1993 to 2015 showed a reduction of the intensity of emissions per unit of GDP, excluding emissions from the “land use, land-use change and forestry” sector. The average year by year reduction in greenhouse gases per unit of GDP was 2.17 per cent.
Absolute emissions growing
However, while that sounds like the decoupling of economic growth from carbon emissions is gathering pace, recent research from RepuTex showed that our overall national emissions are continuing to climb in the absolute sense and that the big polluters are still not engaging.
RepuTex said the latest estimates from the Department of Environment, released at the start of May 2016, show that Australia’s emission will rise to 577 megatonnes by 2020 – three per cent above 2000 levels.
RepuTex associate director of research Brett Harper told The Fifth Estate the reason the Energetics analysis showed that emissions intensity per unit of GDP is going down was because GDP was climbing faster than emissions growth, and the analysis assumes this trend will continue.
“The assumptions [in an analysis] almost always are that GDP will go up,” he said. “It’s a question of whether emissions growth is faster or slower.”
He said the international trend was for emissions and economic growth to be decoupling, especially in countries like China where the electricity supply is being “cleaned up” and moving away from coal-fired power.
In the US and Europe also, Mr Harper said, there was evidence economic growth was occurring without the previous historic growth in emissions.
In Australia, he said the decline in emissions from the Australian electricity sector over the past five years could be traced the impact of energy efficiency programs, such as rating of white goods appliances.
He said, however, we were not tracking to the 26-28 per cent reduction overall by 2030 we signed up to with Paris.
“The emissions trend [overall] is not in that direction and there are no real projections showing how it is possible to get there [in the Energetics report],” Mr Harper said.
“It is unclear what the pathway is, and I don’t think anyone has proposed policies that will get us there.”
In an analysis published this month, Reputex noted that the recent Emissions Reduction Fund auction saw “mega-projects” like Terra Carbon’s Catchment Conservation Alliance project in Queensland drive the price of carbon credits to a new low of $10.23.
“While the ERF continues to support the land-sector, we note that Australia’s national emissions remain on a growth path, driven by high emitting companies, which have to date not participated in the ERF due to high economic barriers,” Reputex said.
“This indicates stronger incentives are needed for the industrial sector to engage in the local offset market, with minor policy tweaks potentially able to more directly bring high emitting companies to the climate table.”
It said the ERF had been successful in contracting credits, but “appears unable to curb Australia’s national emissions growth”.
Australia will instead meet its Kyoto Protocol agreements to cut emissions by five per cent on 2000 levels by utilising an “accounting benefit” of approximately 130 million tonnes CO2e.
That means any emissions increased from today will be added to Australia’s post-2020 emissions reduction task, and will “compound the cost of action later”.
As there is no further funding for the ERF in the 2016 budget, RepuTex said there was a risk of a “demand gap” for local project developers. There was also a need for stronger incentives for the industrial sector to participate in the local offset market, either through compliance or voluntary policy.
Energetics report slammed
The Climate Council slammed the Energetics report for making “heroic assumptions”.
These include assuming existing policy is “turbo-charged” and will need to be even more so throughout the 2020s. Achieving the Paris target under existing policies would also require activities that currently have a carbon price of around $50-$70 a tonne.
The report also excluded decarbonisation of the electricity sector, stating that the study “largely excluded abatement opportunities that drive the decarbonisation of electricity as there are no existing policies to support this beyond the existing RET”.
“We included the deployment of larger volumes of rooftop solar PV as we believe this to be cost effective to participants. Noting the current surplus of generation capacity in Australia, the importance of electricity decarbonisation as a means of achieving Australia’s abatement cannot be understated.”
Dr Holt said that even though the energy sector’s potential was not included to any great extent, there was a definite shift happening away from traditional centralised coal-fired energy generation.
One of the drivers that will amp up this trend is the fact 75 per cent of Australia’s coal-fired generation assets have passed their engineering lifespan, and have reached the point they need to be replaced, he said.
This means there is a need for change, and that includes not only new technology but also how that technology is deployed, and what storage systems are used.
The Climate Council said the Energetics report highlighted the need for much tighter regulation through measures such as the government’s Safeguard Mechanism.
Mr Connor said there also needed to be significantly more funding for the Emissions Reduction Fund and/or direct or indirect carbon pricing of around $70 tonne for certain activities.
“None of these policies or funding is yet on offer, but we look forward to further details in the near future.
“The report notes the importance of electricity decarbonisation and the current absence of government policies in this regard. The Climate Institute also urges the government to adopt such policies and integrate them into a plan for an Australian economy with net zero emissions by 2050.”
Direct Action’s additionality problem
Climate economist Dr Paul Burke from the ANU Crawford School of Public Policy this week released an independent analysis of Direct Action that queries if it will get Australia on track to meet the Paris target as it often leads to inefficient spending on projects that would go ahead even without government support.
“Unfortunately, projects that would have gone ahead even without a subsidy – anyway projects – have a cost advantage that makes them well-placed to win the auctions,” Dr Burke said.
“When projects of this type receive funding, taxpayers’ money is being used ineffectively.
“The research concludes that Direct Action is likely to be delivering emission reductions that are smaller than the government has claimed.”
He said examples of anyway projects include many landfill gas capture projects that have been given payments even though they can generate revenues from the gas, upgrades to supermarket lighting and vehicle fuel efficiency initiatives.
Other Direct Action winners include projects to reduce tree clearing, he said. While some of the funding will help preserve vegetation, it is unclear if all farmers included had been planning to clear vegetation.
Dr Burke also said Direct Action had not worked as an incentive for key sectors of the economy, such as electricity generation, to reduce emissions.
“The previous policy of carbon pricing was a more effective approach than Direct Action,” he said.