Clean Energy Future

2.1 Australia’s pollution profile

The starting point for the Government’s clean energy future plan is understanding the profile of Australia’s carbon pollution – how much pollution we put into the atmosphere and how it is generated – and understanding the structure of our economy, which explains the special nature of our challenge. Australia’s carbon pollution levels are very high given our population size, and our economy is highly dependent on highly polluting energy sources. To maintain our international competitiveness in the future as more countries take action on climate change, we need to reduce our carbon pollution and generate cleaner pathways to economic growth.

Australia emitted 565 million tonnes of carbon pollution in 2009, the latest year with available figures. On a per person basis, that is the equivalent of every Australian adult driving a medium-sized petrol-powered car almost 200,000 kilometres during the year.

2.1.1 Given our population, our pollution is high

Australia’s carbon pollution represents around 1.5 per cent of global greenhouse gas emissions. That makes us one of the top 20 polluting countries in the world. Our annual carbon pollution is roughly the same as that of countries like Spain, France, Italy, South Korea and the United Kingdom. All of those countries have populations two to three times larger than Australia. In fact, Australia produces more carbon pollution per person than any other developed country in the world; more even than the world’s biggest economy, the United States (Figure 2.1).

Figure 2.1: Global comparison – overall and per person emissions in 2005

Source: Climate Analysis Indicators Tool, Version 8.0 (World Resources Institute, 2010). Note land use change isexcluded.

2.1.2 Where the pollution comes from

The profile of Australia’s carbon pollution is driven by our use of fossil fuels. Our pollution per person is high because we have an energy sector that is very emissions-intensive. For every kilowatt hour of electricity generated in Australia, considerably more carbon pollution is released than in most other countries.

Reflecting the availability of cheap and abundant coal, electricity generation is Australia’s largest source of carbon pollution (Figure 2.2).
Electricity generation is responsible for just over a third of Australia’s total carbon pollution.
Direct fuel combustion – reflecting the use of gas and other fuels in industry and homes – accounts for another 15 per cent.
Transport and agriculture each contribute around another 15 per cent.
The remaining sources are ‘fugitive’ emissions – mainly the methane and carbon dioxide which escape into the atmosphere when coal is mined and gas is produced -
along with pollution from industrial processes and decomposition of waste in landfills and elsewhere.
Trees absorb carbon dioxide, so when land is cleared there is an increase in carbon pollution and when vegetation grows there is a decrease.
The net impact of these sources – deforestation, reforestation and aforestation -contributes 3 per cent of Australia’s total carbon pollution.

Figure 2.2: Australia’s carbon pollution profile

Source: 2009 emissions from the National Greenhouse Gas Inventory 2011, DCCEE analysis.

2.1.3 How pollution is growing

Australia’s carbon pollution is increasing rapidly. Even taking into account existing climate change policies such as the Renewable Energy Target and the Carbon Farming Initiative, our carbon pollution is projected to rise to 679 million tonnes in 2020 in the absence of further action. That represents an increase of 22 per cent over the two decades from 2000 to 2020.

Our levels of carbon pollution are not only rising but, without a plan to cut carbon pollution, they are projected to rise faster in the future than in the past. Growth in carbon pollution over the next decade is expected to be dominated by emissions associated with the extraction and processing of energy resources driven by strong export demand. Fugitive emissions from coal minesand oil and gas projects, as well as direct fuel combustion emissions from liquefied natural gas projects, account for almost half of the growth in Australia’s total emissions from 2010 to 2020 (Figure 2.3).

Figure 2.3: Sectoral emissions growth 2010 to 2020

Source: Treasury modelling, 2011 (medium global action scenario).

2.2 Setting targets to reduce pollution

Carbon pollution reduction targets set goals for the nation. They should be environmentally meaningful, economically manageable and practical,and should represent our fair share of global reductions. Pollution reduction targets provide certainty for businesses to plan investments, for governments to design policies and for households to understand how their actions contribute to national progress.

The scientific advice is that stabilising concentrations of carbon pollution in the atmosphere at 450 parts per million provides a reasonable chance of avoiding the most dangerous impacts of climate change by limiting global temperature rises to less than 2 degrees Celsius.

At the United Nations 2009 Copenhagen Climate Change Conference, and at the 2010 conference in Cancun, more than 100 countries have agreed to limit carbon pollution so that the average global temperature rise can be held below 2 degrees Celsius above pre-industrial levels, which is broadly consistent with global concentrations of 450 parts per million. The United States and China, the world’s biggest polluters, have committed themselves to this ambition. With this global goal in place, countries from around the world haveset targets to reduce their carbon pollution.

2.2.1 Australia’s targets for the decade ahead

The Government has committed to responsible targets to reduce carbon pollution and to play our part in the global effort to avoid dangerous climate change. The Government has committed to reduce carbon pollution by 5 per cent from 2000 levels by 2020 irrespective of what other countries do, and by up to 15 or 25 per cent depending on the scale of global action.

Meeting the 5 per cent target will require abatement of at least 159 Mt CO₂-e,or 23 per cent, in 2020 (Figure 2.4). ^[1] This is equivalent to taking over 45 million cars off the road by 2020.

Figure 2.4: Projected growth in emissions and the abatement challenge

Source: Treasury modelling, 2011 (medium global action scenario).

2.2.2 A new long-term target

As part of its plan to secure a clean energy future, the Government has adopted a new long-term target: to reduce carbon pollution by 80per cent compared with 2000 levels by 2050.

This is consistent with the findings of the Intergovernmental Panel on Climate Change’s Fourth Assessment Report that, to stabilise concentrations ofcarbon pollution at 450 parts per million, 2050 targets for developed countries should be between 80 to 95 per cent below 1990 emissions. Treasury modelling shows this target can be achieved with modest cost to our economy.

The Australian Government’s long-term target is also consistent with targets announced by other developed countries, including the United Kingdom and Germany.

It is in Australia’s national interest to contribute to reducing global pollution because our climate’s future is inextricably linked to global climate action. The new long-term target will drive Australia’s transformation to a clean energy future. It will give businesses and investors the certainty they need to start retooling our economy to maintain growth while lowering carbon pollution.

2.3 Choosing the best policies

Once countries sign up to targets and pledges to reduce carbon pollution, their governments, businesses and citizens have choices about what actions to take. Around the world, a considerable array of policies and actions are being implemented to tackle climate change.

2.3.1 Action around the world

Globally, more money is now being invested in new renewable power than in new fossil fuel electricity generation and more than 85 countries have renewable energy targets either legislated or planned. China is now the world’s largest manufacturer of solar panels and wind turbines. China has the most renewable energy generation capacity of any country. The United States is moving to regulate carbon pollution, including from large industrial facilities. President Barack Obama has announced a new Clean Energy Standard which aims to double the share of clean energy in America’s electricity supply by 2035.

Many countries have put a price on carbon pollution, including through emissions trading schemes that create economic incentives for industry to reduce pollution. Some policies have been in place for many years. Thirty-one European countries – including the United Kingdom, Germany and France – have a price on carbon pollution through emissions trading schemes. New Zealand started emissions trading in 2008. Carbon taxes are also in place in the United Kingdom, India, Switzerland, Denmark, Finland, Norway, Sweden, the Netherlands, Costa Rica and Ireland.

2.3.2 Action in Australia: a plan for a clean energy future

Australia needs to decouple growth in pollution from growth in the economy. We need to reduce our dependence on existing pollution-intensive technologies. We need to use cleaner forms of energy, including renewable energy. We need to learn how to use energy more wisely. And we need to make the most of opportunities to reduce pollution and store carbon on the land.

To maintain our living standards and international economic competitiveness, we need to make these changes in a measured and practical manner. It will be critical to use the most environmentally effective and economically efficient policies that can be devised. All of this is required to reduce the risks toour environment, our economy and our international competitiveness that a ‘wait and see’ approach would bring.

Australia is already taking some important actions to reduce carbon pollution. In 2009, the Government expanded the Renewable Energy Target, which will ensure 20 per cent of Australia’s electricity comes from renewable sources by 2020. This means, by the early 2020s, the amount of electricity coming from sources like solar, wind and geothermal will be almost as large as all of Australia’s current household electricity use.

Yet even with these existing measures in place, Australia’s carbon pollution is projected to continue to rise by almost 2 per cent a year. This is why the Government has adopted a comprehensive plan to secure a clean energy future. The plan brings existing policies together and introduces several critical new initiatives. It has four elements: a carbon price, renewable energy,energy efficiency, and action on the land. This plan will allow households,communities, businesses and governments to work together to build a clean energy future.

[1]The Carbon Farming Initiative (CFI) helps to lower domestic emissions. However, in the absence of a domestic carbon pricing mechanism, this does not contribute to meeting Australia’s abatement challenge. Without a domestic carbon pricing mechanism in place, credits created under the CFI would be either sold to foreign purchasers or used in the domestic voluntary market (for example, by companies seeking to be carbon neutral). If CFI credits are exported, then the purchasing country is entitled to count the abatement, not Australia. If CFI credits are used and cancelled in the voluntary market, the Government has committed that this abatement would be additional to meeting our targets.

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