Australia’s Chaotic Climate Policies (Part Two): The Road to Net-Zero by 2050

Prof. Janek Ratnatunga, CEO, ICMA Australia

In part one of this series, the reasons why Australia’s carbon policy shifts have been more spin than substance; and why it is a laggard in international climate action were discussed.

In late-January 2021, the UN Secretary-General Antonio Guterres called on wealthy nations to abandon coal and set net-zero emissions targets to reach key milestones by the time the COP25 climate talks begin in Glasgow in November 2021. He said nations that were responsible for 65 per cent of global emissions had announced plans to reach net-zero by 2050 and by November he hoped that figure would be 90 per cent. He went on to say that no new coal-fired power plants should be built, and wealthy nations should abandon coal by 2030, and all nations aim to end its use by 2040. Also, that a carbon price should be embraced and an end date for financing all fossil fuels, starting with coal, should be introduced.[i]

Australia was, most likely, foremost on his mind.

This part two will cover the new and emerging technologies with the potential to deliver the strongest economic and emissions reduction outcomes for Australia, as per the government’s ‘Technology Investment Roadmap’ released in September 2020. This roadmap articulated a strategy to accelerate development and commercialisation of low emissions technologies. But first, a transition period is called for.

Transition from Coal to Gas

Gas has been used in Australia for decades in power generation, heating, and manufacturing. In Australia, large stores of it are found onshore and offshore, bound up in sedimentary basins capped by impermeable rock as well as in shale and coal seams. For domestic use, it is typically extracted by drilling then treated, piped to distribution hubs near cities and industrial centres, and plumbed into homes.

The Australian government backs the expansion of the gas industry for two main reasons.

The first is economic: more gas, the government says, means more affordable and reliable energy to domestic manufacturers that rely on it – thereby boosting employment. The second is to smooth the electrical grid’s transition from coal.

Many large Australian companies in the energy industry support the government in promoting gas as the “transitional” energy source, i.e.  one that (supposedly) emits far fewer greenhouse gasses than coal but is still capable of dispatching the around-the-clock energy needed to support the growing use of weather-reliant wind and solar generators. The government says it is focused on ensuring that electricity remains reliable and affordable as the market transitions from coal and, for this reason, it is promoting gas as the key plank of its plan.

The problem, however, is natural gas also faces some big challenges.

The first is that gas is still a heavy source of emissions. While it is a cleaner-burning fossil fuel than coal, it is a fossil fuel, nonetheless. Australia needs to reduce its reliance on all fossil fuels over time in order to achieve its climate targets. There are also growing questions among scientists about the extent of unmeasured methane emission leaks, known as “fugitive emissions”, which escape during drilling and processing. If the methane escapes unburnt into the atmosphere, in its first two decades it is a devastating 84 times more potent as a greenhouse gas than carbon dioxide.

The second problem is that gas has become very expensive. Gas prices began sharply rising on the east coast of Australia in 2017, when commercial and industrial buyers started receiving new contracts offered at above $10 a gigajoule, much higher than the historic levels of between $4-$6 a gigajoule. This price rise coincided with Australia deciding to sell natural gas in its super-chilled form, known as Liquefied Natural Gas (LNG), overseas. The construction of six new LNG export facilities at Gladstone in Queensland increased overseas demand for Australian gas – our top LNG export destinations are Japan, South Korea, and China – and required producers to tap more expensive gas fields to meet their obligations. This linked the east-coast gas market to international LNG prices, pushing up domestic prices.

Australia has become the world’s number one exporter of LNG. In 2019, cargoes of LNG accounted for about $50 billion in export earnings, sealing its position as the country’s second-biggest commodity export after iron ore ($100 billion a year).

The Achilles’ heel of gas is that it is still a global-heating fossil fuel. An estimated 19 per cent of Australia’s greenhouse gas emissions are caused by gas and its long-term use must be reduced over time for the world to meet the goals of the Paris agreement to limit global warming.[ii]

Carbon Farming

Australia can and should lead the world in regenerative agriculture (carbon farming). The essence of carbon farming is to return carbon to the soil – to sequester it from the atmosphere – by simple improvements in farming practices and effective application of technology. It involves holistically controlled grazing, zero tillage, biological rather than chemical fertilisation, biological primers, and pasture cropping. Many farmers would do this anyway, as these methods improve farm productivity and profitability.

Australian Government’s ‘Technology Investment Roadmap’ has listed soil-carbon measurement as one of five priority technologies with the aim of reducing costs by about 90 per cent to under $3 per hectare.[iii] Since European settlement Australian agricultural soils have lost about two-thirds of their carbon content. But as the soil-carbon expert John White has reported, a 0.5 per cent increase in soil carbon on only 2 per cent of our agricultural lands would more than offset all of Australia’s emissions from all sectors.[iv]

Farmers can generate credits for their improvements to the carbon content of their soils. Australian Carbon Credit Units (ACCUs) were developed as a key element of the Carbon Farming Initiative. The government also uses the A$2 billion Climate Solutions Fund to incentivise farmers by buying these credits via low-abatement reverse auctions. These credits are now traded – recently at $17 a tonne. In time, farmers should be free to trade these overseas, if the domestic market proves inadequate. They are being increasingly sought by large emitters seeking to voluntarily offset their emissions.

However, whilst the Coalition parties of the Australian government fight among themselves due to perceived ‘functional or political reality’, the Europeans and the British, amongst others, are talking about introducing carbon tariffs on Australia’s agricultural exports for as long as it remains a conspicuous laggard in response to climate.

Renewable Capacity (Wind, Solar, etc.)

There is good news here.

The Australian Energy Market Operator has forecast strong investment in renewables to continue with an additional 24GW of rooftop solar by 2030, tripling the nation’s small-scale solar generating capacity over the decade. Official government data has found that, despite the coronavirus-induced economic downturn, more than two million extra Australian homes were powered by new renewable energy generation last year as wind and solar projects hit record levels.[v]

The Clean Energy Regulator in Australia estimates that a record 7 gigawatts of new renewable capacity was installed throughout Australia in 2020 off the back of record rooftop solar investment, which was 11 per cent above the previous record of 6.3 gigawatts installed in the previous year. Data compiled by the regulator also found the share of renewables in the National Electricity Market exceeded 30 per cent for the first time in 2020; with a record 53 terawatt hours generated from renewable projects in the year. The analysis found that the renewables boom has helped Australia deploy new renewable energy 10 times faster per capita than the global average and four times faster per capita than Europe, China, Japan or the United States.[vi]

The government’s policy is to underwrite new firm generation capacity and establish a $1 billion grid reliability fund; as the renewables boom was increasing the reliance on firm generation, such as gas-fired or pumped-hydro. Australia has invested $7.7 billion or $299 per person in renewable energy, placing the nation ahead of Canada, Germany, Japan, Korea, New Zealand, and the United States on a per capita basis.

Carbon Capture and Storage (CCS)

This is an unproven technology that is being pushed by the fossil-fuel industry as its ‘saviour’. A case in point is the February 2021 amendment put forward by Australia’s National party that wants access to government funds that would permit high-efficiency low-emissions coal (clean-coal) plants to be commissioned (see part one of this article).[vii]

Carbon capture and storage describes capturing the carbon dioxide emitted by an industrial process – say, burning gas or coal for electricity or in cement and steel production – and permanently keeping it out of the atmosphere. For large projects, this generally means pumping it underground, typically into the geological formations from which oil and gas have been extracted in the first place.

CCS’s champions – which include not only the Australian government and resources sector but the International Energy Agency (IEA) and even the UN’s lead agency for assessing climate science, the Intergovernmental Panel on Climate Change (IPCC) – say the technology will be critical to meeting net zero emissions targets to slow the trajectory of global warming.[viii]

But its detractors – which include leading engineers and scientists along with climate activists – say that CCS is an unproven and expensive Band-Aid designed to extend the life of unnecessary, dirty industries. They say it is a diversion that has wasted billions of dollars that might have been better spent on reducing emissions.

In Australia, however, CCS technology was being referred to as “clean coal technology” in government and industry circles, much to the frustration of climate scientists. “Clean coal is like dry water. It’s an oxymoron,” says Dr Martin Rice, head of research for the Climate Council.

Recently, there has also been a surge of interest in what is known as Bioenergy with Carbon Capture and Storage (BECSS). This is the process of capturing emissions released when a biomass is used for energy. A Biomass is a measure of biological matter, customarily expressed in weight. The biomass of a forest includes all organisms, trees, fungi, insects, and so forth. When a biomass is growing in is sequestering carbon dioxide (CO2). However, when it is used to produce energy (e.g., for electricity and heat) then it is releasing CO2 to the atmosphere; thus, the result is a zero-sum (i.e. the CO2  that was captured by the bio-mass when it was growing is released when the biomass is converted to energy).

However, the theory goes that if this energy can be somehow captured and stored it will result in ‘negative emissions’, i.e., CO2 is prevented from being released to the atmosphere. BECCS is the process of extracting bioenergy from biomass and then capturing and storing the carbon that released in this process – thereby removing it from the atmosphere. In a BECCS process, some of the carbon in the biomass can be converted to CO2 or biochar which can then be stored by geologic sequestration or land application.

Some advocates see this as the future of CSS. In 2014, the IPCC presented 116 models of how the world might reach the Paris Agreement’s target of keeping climate change to 2 degrees or lower, and in 101 of them carbon removal from the atmosphere, mainly via BECSS, was considered. This provoked criticism from a range of scientists who argued that the world, via the IPCC, was at risk of putting its hopes of avoiding the global calamity of climate change in a technology that was at best unproven and at worst fanciful.[ix]

Electric Vehicles

Electric Vehicles are undisputedly more climate friendly than conventional petrol or diesel cars.[x]

Just a month after he took office, President Joe Biden ordered a complete policy U-turn for the USA in terms of climate action. As a centrepiece of the US’s commitment to hit net-zero emissions by 2050, he pledged to convert the US federal government’s fleet of 650,000 vehicles to electric cars. This bold policy was a catalyst for General Motors which immediately announced that it would stop making petrol commuter vehicles by 2035 and is now rolling out big-budget advertisements claiming that its commitment to reach net-zero emissions by 2040 can jumpstart the country’s beleaguered auto industry.[xi]

President Biden’s electric vehicle transition, estimated to cost around $20 billion, is backed with market-driving policies including tightened fuel efficiency rules for cars, extending the $10,000 rebate for electric vehicle buyers, and funding the roll-out of 500,000 charging stations across the country. The President has also launched a $2 trillion green stimulus fund, which will include funding for electric vehicle manufacturing, which he claims will generate one million new jobs across the automotive supply chain.

The contrast with Australia, USA’s electric vehicle policy could not be starker. The Australian government released in early February 2021 its long-awaited electric vehicle strategy, which unlike other developed nations included no targets for market share, and no incentives to drive uptake. The Australian government has ruled out offering taxpayer subsidies for the private uptake of plug-in hybrids and battery electric cars, arguing in its long-awaited strategy that subsidies would not represent value for money in efforts to drive down carbon emissions. Instead, Australian businesses were encouraged to invest in plug-in hybrid and electric car fleets in an attempt to increase private uptake by flooding the second-hand market with new vehicle technologies at lower prices.[xii]

Hydrogen Export Supply Chain

An international race is on to be the first nation to develop a hydrogen export supply chain. The fuel source is viewed as a potential boom commodity if it is adopted as a zero-emissions replacement for petroleum products. Australia, with its abundant land and sunshine, can become a hydrogen superpower, and the Morrison government has committed $500 million to support the hydrogen industry.

But Australia’s investment to date pales in comparison to other nations. Saudi Arabia, the world’s biggest oil exporter, is investing $6.5 billion in the hydrogen industry to drive down production costs and make exports economically viable. Other heavy fuel users in Japan, France, Spain, and Germany are planning to invest more than $10 billion each in production and to switch from fossil fuel energy generation to hydrogen.[xiii]

At present hydrogen can be generated at scale using either renewable energy to split water, known as green hydrogen, or using gas, which emits carbon that may in future be captured and stored, known as blue hydrogen. The problem is that future exporters of hydrogen would then have the problem of transporting and shipping this hydrogen which needs to be stored under pressure or converted into ammonia.

Interestingly, the world’s first commercially available line of hydrogen-powered domestic products, including a barbecue, a bicycle and most crucially a unit that creates and stores hydrogen power, has been developed by an Australian company, LAVO, working with the University of NSW. The company claims that the LAVO battery, which is about the size of a large fridge, can be hooked up to an existing array of solar panels. Inside it, electrolysers use that power to convert water into hydrogen and oxygen. The oxygen is vented and the hydrogen is stored in patented hydride canisters (a fibrous metal alloy not dissimilar to iron-filings in appearance) in inside the unit for use as needed.

LAVO’s chief executive, Alan Yu, claims that the unit can store three times as much power as the largest popular commercially available wall-mounted batteries, allowing it to power the average household for two to three days on a single charge. Also, the developers claim that the transportation problem could be solved by the hydride used in the LAVO system, which is safer and easier to transport than hydrogen stored under pressure or converted into ammonia.[xiv]

Listen to the Scientists and the Economists

The Covid-19 pandemic taught policy makers in Australia some important lessons in meeting its climate challenge. Australian federal and state leaders put aside ideology and listened to the scientists and the economists. Australia’s conservative leaning government instituted policies that did not come to it naturally – rules that impeded personal freedom and the dumping of billions of dollars of taxpayer money into the economy to prop it up, as business activity withered on the vine.[xv]

The number one lesson is to listen to the science. For the pandemic that meant trusting in the expert modelling to set targets for when restrictions could ease. Decisions were based on evidence and data, not focus groups or guestimates of what was politically palatable. And it worked – Australia was one of the few countries in the world that successfully contained a sizeable outbreak.

Australian leaders can be proud of that achievement, and with the same strategy it can win that war against global warning by heeding the scientific advice to guide policy. Recently a new report from some of Australia’s most senior climate scientists and policymakers showed that to be on track to meet the 1.5-degree objective of the Paris Agreement, Australia should cut emissions by 74 per cent by 2030.

The second lesson learnt from Australia’s COVID-19 response is the compounding costs of delay. “Go hard, go early” has become the mantra for both stopping the spread and stimulating the economy. The circuit breaker lockdown in different states was this theory put into practice. Unfortunately, climate change is a very different crisis and the world has already squandered decades so we can hardly say acting now is ‘early’. However, it is still not too late if we go hard today.

Wilfully ignoring the issue or tinkering about with half-measures only leaves a much bigger problem to deal with later. The danger with climate change is that we are fast approaching tipping points where global warming becomes an unstoppable chain reaction. As such, what is required is the political conviction to act decisively during the next decade, and that means forward-loading the emissions cuts with strong targets for 2025 and 2030.

Herein lies a solution to the climate impasse in the Australian Federal Parliament. As discussed in part one of this series, while a credible national mechanism to cut pollution is the logical choice, a small but influential rump of the Australian federal government’s right wing has thwarted progress for too long, and even the PM Morrison’s much-hyped climate pivot looks more like a delaying tactic.[xvi]

Summary

The reality is that if Australia is to have any chance of reaching the tighter objective of the Paris Agreement, and upon which its Pacific island neighbours rely for their survival, namely, to limit global warming to 1.5 degrees, then it must get to net zero emissions by 2035, with a 74 per cent cut by 2030.[xvii]

The problem is, each month the world fails to take significant action, carbon accumulates in the atmosphere. The goal of reaching net-zero by 2050 gave us a good chance of meeting the Paris Agreement target of holding warming to as far under two degrees as possible when it was first set in 2015. But since the world has not reduced emissions enough since then, the goal posts have shifted closer.

The global response to the coronavirus pandemic has shown us that we can all work together to radically and quickly change our lifestyles for the greater good. We need to consider how we can prepare for a world that will be faced with regular extreme weather, unpredictable water and power supplies, food shortages and the resulting unrest that will come with these.

We need to face our worst fears and then work through them starting, well, yesterday.

Create community, build skill bases, buy water tanks and solar panels with batteries, grow a garden, future-proof your house if you have one, demand more action from governments and encourage others with compassion and determination.[xviii]

Basically, we need to be good be stewards of our collective future … and the only way we can do this is together.

Professor Janek Ratnatunga, CMA, CGBA

CEO, ICMA Australia

 

The opinions in this article reflect those of the author and not necessarily that of the organisation or its executive

IN NEXT ON-TARGET: Professor Brendan O’Connell, ICMA President will consider “How Accounting and Finance Professionals Can Help in Climate Action”

[i] Nick O’Malley, (2021), “Global Climate Action Surges from Fossil Fuels”, The Saturday Age, January 30, p.15.

[ii] Nick O’Malley and Nick Toscano, (2021), “What is the role of gas in a green economy?”, The Age, January 18, p.12-13

[iii] Australia is close to satellite measurement and verification technology.

[iv] John Hewson (2021), “Emissions Verdict is Catastrophic”, The Age, January 28, p.21

[v] Rob Harris (2021), “Australia leading world with record renewable take-up, new data finds”, Sydney Morning Herald, February 1. https://www.smh.com.au/politics/federal/australia-leading-world-with-record-renewable-take-up-new-data-finds-20210201-p56yfu.html

[vi] Ibid.

[vii] David Crowe and Mike Foley (2021), “Liberals fuming as Nats coal revolt gathers steam”, The Age, February 18, p.18.

[viii] Nick O’Malley (2021), “What is carbon capture and storage (and does it work)?”, The Age, January 24, p. 24-25.

[ix]  Ibid.

[x]  Janek Ratnatunga (2020), “Electric Blues: Cost-Benefit of Taxing Electric Car Usage”, On Target, December 17, https://cmaaustralia.edu.au/ontarget/electric-blues-cost-benefit-of-taxing-electric-car-usage/

[xi] Reuters (2021), “General Motors announces plan for all-electric lineup by 2035”, The Guardian, January 29, https://www.theguardian.com/environment/2021/jan/28/gm-electric-vehicles-cars-gas-diesel

[xii] Rob Harris (2021), “Morrison government rules out subsidies in electric vehicle strategy”, Sydney Morning Herald, February 5. https://www.smh.com.au/politics/federal/morrison-government-rules-out-subsidies-in-electric-vehicle-strategy-20210204-p56zju.html

[xiii] Mike Foley (2021), “Almost alone: Australia isolated on climate despite PM’s ambitions, Sydney Morning Herald, February 7. https://www.smh.com.au/politics/federal/almost-alone-australia-isolated-on-climate-despite-pm-s-ambitions-20210205-p56zu6.html

[xiv] Nick O’Malley (2021), “Hydrogen battery powers household on single charge”, The Age, January 21, p. 14

[xv] Jacqueline Maley, (2020), “Not so splendid Isolation”, Sunday Age December 13, p.35

[xvi] Jono La Nauze (2021), “Pandemic Lessons can drive Climate Action”, The Sunday Age, Opinion, 14th February, p.25.

[xvii] Adam Morton (2021), “Australia needs to cut emissions by at least 50% by 2030 to meet Paris goals, experts say”, The Guardian, January 28, https://www.theguardian.com/australia-news/2021/jan/28/australia-needs-to-cut-emissions-by-at-least-50-by-2030-to-meet-paris-goals-experts-say

[xviii] Nicola Philp (2021), “Climate is Ripe for us to change”, The Age, January 28, p.21.