Planning and strategy

2016

An important role of government is to develop effective policies, implemented through supporting strategies and plans.

Emissions

Significant international action to reduce GHG emissions is now afoot. The international political response to climate change began at the Rio Earth Summit in 1992, and led to the Paris Agreement in 2015, to which 195 countries, including Australia, agreed. This new agreement, under the United Nations Framework Convention on Climate Change, aims to limit the increase in global temperatures to 2 °C above pre-industrial levels, while pursuing efforts to hold the increase to 1.5 °C.

Other international action includes the Montreal Protocol, which is focused on reducing the impact of ozone depleting substances, many of which are also significant GHGs. The phase-out of ozone depleting substances under the Montreal Protocol is estimated to have delayed climate forcing by up to 12 years (Distefano 2008).

The impacts of climate change will only be minimised in Australia if the international community achieves its GHG goals.

As its contribution to the international effort, the Australian Government has committed to domestic emissions reduction targets determined through consultation and detailed analysis. It has committed to reducing emissions to 26–28 per cent below 2005 levels by 2030, a target that the Australian Government believes is in step with the efforts of other comparable nations. However, this target is lower than that recommended by the Climate Change Authority of 40–60 per cent below 2000 levels by 2030 to meet an emissions budget of 10.1 billion tonnes of GHGs for 2013–50 (CCA 2015).

Australian governments have been implementing policies to reduce GHG emissions for more than 2 decades (see Box ATM6). Measures include labelling and minimum performance standards for appliances, changes to building codes to drive energy efficiency, and restrictions on land clearing. A range of market-based schemes have been implemented to promote emissions reductions, including national schemes such as the Renewable Energy Target and state-based schemes. The Australian Government is also committed to supporting developing countries to build climate change resilience and reduce emissions through the Australian aid program.

Renewable Energy Target

The Renewable Energy Target (RET) is a scheme designed to reduce GHG emissions in the electricity sector and encourage the generation of electricity from renewable sources. This is done by guaranteeing a market for additional renewable energy using tradeable certificates that are created by renewable energy generators (such as wind farms) and owners of small-scale renewable energy systems (such as solar photovoltaic systems).

The RET has contributed to renewable energy generation since 2001 (Table ATM1). Between 2001 and 2013, Australia’s renewable electricity capacity nearly doubled, from 17,800 gigawatt hours (GWh) in 2001–02 to about 32,500 GWh in 2012–13 (CCA 2012). About 2 million households have installed rooftop solar panels, and, in 2014, the cost of solar photovoltaic installation was one-sixth the price it was a decade earlier (Australian Government 2015a, APVI 2015). Between 2001 and 2012, the RET reduced emissions by an estimated 22.5 MtCO2-e (SKM 2012). Because of decreases in energy demands and declining forecast demand in 2020, the current target (introduced in 2015) is expected to increase the share of renewables to around 23.5 per cent of Australia’s electricity in 2020 (Australian Government 2015a).

Table ATM1 Renewable energy targets, 2001–15

Year

Changes to renewable energy targets

2001

9500 GWh by 2010

2009

45,000 GWh by 2020

2011

The Renewable Energy Target was split into 2 schemes:

  • The Large-scale Renewable Energy Target (LRET) supports large-scale projects. The LRET has annual fixed targets and a 2020 target of 41,000 GWh.
  • The Small-scale Renewable Energy Scheme (SRES) supports the installation of small-scale systems. The SRES has an implicit target of 4000 GWh, but is uncapped. The Climate Change Authority estimated that it may result in about 11,000 GWh of generation in 2020 (CCA 2012)

2015

LRET: 33,000 GWh by 2020. Native forest wood waste was reinstated as an eligible source of renewable energy, subject to the conditions that were in place before 2011

GWh = gigawatt hour

Wind turbines at Codrington Wind Farm, near Yambuk, Victoria, generating electricity on the coastal headlands at sunset

Wind turbines at Codrington Wind Farm, near Yambuk, Victoria, generating electricity on the coastal headlands at sunset

Wind turbines at Codrington Wind Farm, near Yambuk, Victoria, generating electricity on the coastal headlands at sunset

Photo by Arthur Mostead

Clean Energy Future

In 2011, the Clean Energy Future package was legislated (Clean Energy Act 2011) to create a carbon-pricing mechanism (a cap-and-trade emissions trading scheme). This commenced in July 2012. The package included a carbon price, which covered more than half of Australia’s emissions, and the Carbon Farming Initiative, which was a voluntary scheme that provided incentives to reduce emissions in the land sector.

The carbon-pricing mechanism required Australia’s largest GHG emitters to obtain and submit eligible carbon credit units for each tonne of carbon dioxide equivalent CO2-e they emitted, thus creating an incentive to reduce those emissions. The carbon-pricing mechanism covered emissions from electricity generation, direct combustion, landfills, wastewater, industrial processes and fugitives. The carbon-pricing mechanism had a 3-year fixed-price period (1 July 2012 to 30 June 2015), during which the price of Australian carbon units started at $23 per tonne of CO2-e and rose by 2.5 per cent per year. After this period, the price was to be capped at a level set by parliament, 5 years in advance (CCA 2014).

Decreasing emissions from the electricity sector (the largest source of emissions in the national inventory) were reported between December 2012 and June 2014 (DIICCSRTE 2012; DoE 2013, 2014b). Attribution of this trend to the effectiveness of the carbon-pricing mechanism is difficult, because electricity demand during this time had also decreased. However, in June 2015, emissions from the electricity sector had increased while demand for electricity had flattened, suggesting an increase in the emissions intensity of delivered electricity (DoE 2015a). Between December 2012 and June 2014, emissions from the transport, industrial and agriculture sectors also decreased (DIICCSRTE 2012; DoE 2013, 2014b), whereas in 2015 only emissions from the agriculture sector had decreased (DoE 2015a).

Emissions Reduction Fund

As part of the Australian Government’s Direct Action Plan, the Clean Energy legislation, with its carbon-pricing mechanism, was repealed in 2014, and the Emissions Reduction Fund (ERF) was introduced. The ERF involves crediting, purchasing and safeguarding emissions reductions.

Crediting involves determining an amount of emissions reductions delivered by an emissions reduction project. The Clean Energy Regulator then purchases emissions reductions through a reverse auction system (i.e. the Clean Energy Regulator buys GHG emissions reductions at lowest prices through a competitive tender process). The measurement used for the ERF auction is the Australian carbon credit unit (ACCU), where 1 ACCU represents 1 tonne of GHG emissions reduced.

A Safeguard Mechanism was also developed to ensure that emissions reductions achieved through the crediting and purchasing elements of the ERF are not offset by significant increases in emissions above baseline levels elsewhere in the economy. Baseline levels are defined as the highest level of emissions for a facility reported to the National Greenhouse and Energy Reporting Scheme between 2009 and 2014. The Safeguard Mechanism came into force on 1 July 2016 and will apply to around 140 large businesses that have facilities with direct emissions of more than 100,000 tonnes of CO2-e per year (i.e. businesses that account for half of Australia’s emissions). Although this mechanism is very important to ensure that emissions from these large facilities do not increase under the ERF, it will do little to reduce their emissions. The success of the ERF may be influenced by the extent to which these large emitters participate in the purchasing element of the ERF.

Two reverse auctions for the ERF were held in 2015, which saw the Clean Energy Regulator purchase, using approximately half of the money available in the fund ($1.22 billion of $2.55 billion), 93 million tonnes of abatement from 275 projects at an average price of $13.10 per tonne. Most of these projects involve rural activities (i.e. carbon credits are generated by paying to stop the destruction of native vegetation, so effectively could be achieved at no cost through regulatory intervention). Some debate exists about whether the funds available to the ERF will be sufficient to reach emissions reductions required to meet the Kyoto Protocol 2020 target. Clarke et al. (2014) used a computable general equilibrium model to estimate that the budget allocated for the ERF provides about 50 per cent of that required to meet Australia’s GHG abatement commitments. Assuming the same average price per tonne achieved during the 2015 reverse auctions for future sales, the fund will be able to purchase another 101 million tonnes of emissions. This will be 44 million tonnes (about 19 per cent) short of Australia’s 5 per cent target (Christoff 2015).

However, the Tracking to 2020 (DoE 2015b) update on emissions projections estimates a contribution by the ERF of 92 MtCO2-e to the cumulative abatement task required to meet the Kyoto Protocol 2020 target (in total, reduced from 236 MtCO2-e to –28 MtCO2-e in this projection). Under this projection, the target will be exceeded by 28 MtCO2-e. If we consider that the ERF contributes significantly (one-third) to this projected reduction, it will be important to monitor the effectiveness of the ERF as the target date approaches and act accordingly if the need arises.

Other competitive tender auctions for environmental management have been successful in Australia. The New South Wales Greenhouse Gas Reduction Scheme ran from January 2003 to June 2012, and was the first mandatory GHG emissions trading scheme for the electricity sector in the world. It demonstrated that a market-based mechanism could be used to achieve environmental objectives at a relatively low cost to consumers and government. It stimulated a wide range of accredited abatement projects, creating 144 million abatement certificates, which represented around 144 MtCO2-e of GHG abatement (IPART 2013). BushTender was an on-farm biodiversity conservation procurement auction that was run in Victoria between 2001 and 2012. BushTender demonstrated value for money for the state and Australian governments (Stoneham et al. 2003), and resulted in the management and protection of more than 35,251 hectares of native vegetation.

Clean Energy Innovation Fund

The Clean Energy Innovation Fund, announced in March 2016, will provide $1 billion to support emerging clean energy technologies in the move from demonstration to commercial deployment. The fund will be jointly managed by the Australian Renewable Energy Agency and the Clean Energy Finance Corporation.

Box ATM6 Summary of Australia’s climate change legislation and authorities

The Clean Energy Act 2011 established an Australian emissions trading scheme, to be preceded by a 3-year period of fixed carbon pricing designed to reduce carbon dioxide emissions. However, the Clean Energy Act was repealed by the Clean Energy Legislation (Carbon Tax Repeal) Act 2014.

The Carbon Credits (Carbon Farming Initiative) Act 2011 allows Australian carbon credit units to be issued in relation to an eligible offsets project. The Act was amended in 2014 to allow the Clean Energy Regulator (CER) to purchase emissions reductions through a reverse auction system as part of the Emissions Reduction Fund (ERF).

The CER is a statutory authority established in 2012 under the Climate Energy Regulator Act 2011. The CER administers responsibilities in relation to the Renewable Energy Target, the crediting and purchasing of abatement under the ERF, the National Greenhouse and Energy Reporting Scheme, and the Australian National Registry of Emissions Units.

The Climate Change Authority (CCA) is a statutory authority established in 2012 under the Climate Change Authority Act 2011. The CCA conducts climate change research and periodic reviews of climate change measures, and reports on Australia’s progress in meeting national emissions reductions targets. Parliament rejected an attempt to repeal the Climate Change Authority Act (Climate Change Authority [Abolition] Bill 2013).

The Clean Energy Finance Corporation (CEFC) is a statutory authority established in 2012 under the Clean Energy Finance Corporation Act 2011. The CECF facilitates increased flows of finance into the low-emissions energy sector through investment in renewable energy, energy efficiency and low-emissions technologies, administering $10 billion (until 2018) of legislated funding. The CEFC co-finances clean energy projects with the private sector, working with the market to build industry capacity. Parliament rejected an attempt to repeal the Clean Energy Finance Corporation Act (Clean Energy Finance Corporation Act [Abolition] Bill 2013).

The Australian Renewable Energy Agency (ARENA) is a statutory authority established in 2012 under the Australian Renewable Energy Agency Act 2011. ARENA aims to improve the competitiveness of renewable energy technologies and increase the supply of renewable energy in Australia. ARENA is responsible for administering around $2.4 billion (until 2022) of legislated funding for research into, and development, demonstration, deployment and commercialisation of, renewable energy and related technologies; and the storage and sharing of knowledge and information about renewable energy technologies.

Energy efficiency

Several Australian Government programs target improvements in energy efficiencies. Energy efficiency will contribute to a reduction in energy demands and thus emission levels. The National Energy Productivity Plan (NEPP) forms the overarching framework for improving energy efficiency, and sets the goal to improve Australia’s energy productivity by 40 per cent between 2015 and 2030 (COAG Energy Council 2015). The NEPP includes a number of measures, such as options to improve vehicle efficiency, and promote innovation and competitive energy markets.

Mandatory minimum energy performance standards and mandatory energy rating labels have been the main policy tools used to improve the energy efficiency of appliances and equipment in the residential, commercial and industrial sectors since 1986. Meanwhile, the Australian Government Department of Industry has administered a number of programs designed to improve energy efficiency in buildings, including construction codes, energy rating schemes and disclosure of energy performance. The Community Energy Efficiency Program is providing $106 million to co-fund energy efficiency upgrades to local council and community facilities, and the Low Income Energy Efficiency Program has provided $55 million across trial approaches to reduce the energy costs of low-income households.

The NEPP will also target vehicle fuel efficiency. A ministerial forum that investigated vehicle emission standards and vehicle testing arrangements reported in 2016. This initiative has links with measures under the National Clean Air Agreement to reduce air pollution. In addition, a program funded through the Clean Energy Finance Corporation ($50 million) will provide incentives for fleet purchases with low-emissions vehicles.

Other programs include:

  • 20 Million Trees, which aims to plant 20 million trees by 2020 to re-establish green corridors and urban forests in urban and regional Australia
  • the Solar Towns Program, which will provide $2.1 million to community organisations to support the installation of solar photovoltaic panels and solar hot water systems to the buildings
  • the Low Emissions Technology Roadmap, which will help identify opportunities for, and barriers to, research, development and take-up of new and emerging low-emissions technologies across Australia
  • low-emissions fossil fuel technology programs, which target technologies to develop low-emissions fossil fuel technologies, including operations of the Australian Government Department of Industry
  • the National Carbon Offset Standard, which provides a benchmark for businesses and other organisations voluntarily seeking to be carbon neutral for their operations, products, services or events
  • the Carbon Neutral Program, which allows organisations, products, services and events to be certified as carbon neutral against the National Carbon Offset Standard
  • Energy Efficiency Information programs, which develop a range of information, capacity-building and knowledge-sharing web resources, including the Energy Efficiency Exchange, Your Energy Savings and Your Home websites.

In 2015, the Australian Government also released the National Climate Resilience and Adaptation Strategy (Australian Government 2015b) to articulate how Australia is managing the risks of a variable and changing climate.

Keywood MD, Emmerson KM, Hibberd MF (2016). Climate: Planning and strategy. In: Australia state of the environment 2016, Australian Government Department of the Environment and Energy, Canberra, https://soe.environment.gov.au/theme/climate/topic/2016/planning-and-strategy, DOI 10.4226/94/58b65c70bc372