Is Australia set to spoil the party when it comes to climate change commitments at the December 2015 UNFCC Conference of the Parties in Paris?
While chaos reigns in the network network regulatory space with electricity prices driven upwards over the past 10 years by blowouts in electricity distribution network spending, is the situation any better in the climate change space? What is the state of the Australian electricity sector’s greenhouse gas emissions and are the current policies going to improve things?
This is a key issue going into the December 2015 UNFCC Conference of the Parties (COP) in Paris. This conference holds the hope of a global climate agreement, which - if it occurs - would be the first international agreement since the 1997 Kyoto Protocol. This time, countries must come to the conference with their Intended Nationally Determined Contributions (INDC). These can be quoted in different forms such as Australia’s Climate Change Authority’s (CCA) recommended reduction in CO2 equivalent emissions of 30 per cent below 2000 levels by 2025 and further reductions of up to 30 per cent by 2030 to ensure Australia’s fair contribution to global efforts.
These calculations all take into account the carbon budget approach recently updated to 1,700 billion tonnes of CO2 in total if we are to have a two in three chance of limiting global average temperature rises to two degrees Celsius.
The US and China, following a historic agreement this year, have both pledged significant reductions. The US has pledged a 26 to 28 per cent reduction on 2005 levels by 2025, while China has pledged a 60 to 65 per cent reduction in per unit GDP emissions by 2030. This is a significant pledge and comes alongside a commitment to having 20 per cent of energy coming from non-fossil fuel sources by the same date. China has committed to having its emissions peak by 2030. Canada has also committed to a 30 per cent reduction from 2005 levels by 2030.
The last major player that has already made its INDC commitment is Europe (including the UK), which is targeting a 40 per cent reduction on 1990 levels by 2030. This is quite significant. Interestingly, Russia pledged a 70 to 75 per cent reduction by 2030 below 1990 levels, but this relies mostly on reduction in deforestation and other land-use changes. This is hard to take seriously!
Meanwhile, what is really happening in Australia? Are we serious about coming to the party with a sufficiently strong offer or are we going to be party poopers? So far, it is looking like it is going to be the latter. Environment Minister Greg Hunt's response to the CCA’s recommendations were that they are far too ambitious and by far the largest in the world. From what he said, it looks like Australia might be going in with the bipartisan position we’ve had for the past few years. This is unfortunately a very short-range proposal of five per cent reduction on 2000 levels by 2020. Given that we seem to be well on track for this one due to the unplanned reduction in electricity consumption since 2008 (eight per cent to date) this is looking like an easy goal.
Finally, what are the actual policies on the ground at the moment? Well, the Carbon Price is well and truly gone and the evidence is strong that emissions have been tracking upwards since its repeal, which is unsurprising. A slight ray of hope is that the uncertainty over the renewable energy target is finally over. The original large-scale target of 41,000 megawatt/hours has been revised down to 33,000 megawatt/hours. However, the key driver of uncertainty of the two yearly reviews of the target has been removed with no reviews until the target deadline of 2020. The small-scale target (that pertains to solar PV and solar hot water installations) has not been touched, which is also good news.
One of the major low-hanging fruit in emission reduction is still outstanding: a national energy efficiency scheme. This is something that has been talked about by both major parties forever and a day. Perhaps we will hear about it soon given that the recent Energy White Paper pushed energy efficiency pretty strongly. But I wouldn’t hold my breath.
What do all these imply for Australia’s INDC going into Paris in December? My guess is that there will be a minor symbolic improvement in our commitments that looks good on paper but is weaker than the other major economies. Something perhaps like five per cent by 2020 and 15 per cent by 2030 with an aspirational 50 per cent by 2050.
I look forward to being pleasantly surprised.