Economic activity as a driver of environmental change

2016

The production of goods and services requires energy and materials—metals, minerals, water, food and fibre—all of which come from the environment. The impacts of resource extraction, production, transport, use and waste generation are central to how economic activity affects environmental condition and trends.

Understanding the relationships between economic activity, social wellbeing and environmental degradation is critical to creating a sustainable future. This includes understanding how ecosystem modification; resource extraction, production and consumption; and waste disposal affect the health and resilience of natural capital, and the ecosystem services provided (both market and nonmarket values).

Between 2011 and December 2014, Australia’s gross domestic product (GDP) grew at an average rate of 3 per cent per year. The average annual growth of GDP is projected to be 2.8 per cent during the next 40 years (Australian Government 2015). The GVA of Australian industries is shown in Figure DRV3.

The Australian Trade Commission describes the Australian economy as ‘a services-based economy, with this sector (excluding construction) accounting for around 70 per cent of real gross value added’ (ATC 2016).

The service industries are growing faster than the economy overall, particularly the information, media and telecommunications sector (ATC 2016), and tourism. Results from the international visitor survey for the year ending 30 June 2015 show that annual international visitor numbers increased 7 per cent compared with the previous year, to a new high of 6.6 million visitors (Tourism Research Australia 2015).

It is not just domestic economic growth that can generate pressures on the Australian environment. In an increasingly globalised economy, production of goods can be for both domestic consumption and export.

Australia produces more food, mineral and energy resources and products for export than for domestic use (DIS 2015, ABS 2016b). Economic activity generates environmental pressures through production, distribution, transport (e.g. powerlines, transport and loading facilities) and waste generation, including greenhouse gas emissions. Australia’s official total contribution to greenhouse gas emissions comprises emissions generated in Australia and emissions associated with the shipping of Australian resources, but not their use.

Changes in the economic wellbeing of other countries can affect our environment. Globally, economic output is projected to triple between 2010 and 2050 (Ward 2011). Rapid global economic growth has brought many positive results, but, at the same time, increased global demand for food, materials, energy and tourism can lead to increased pressures on the environment.

The following sections consider several sectors of the Australian economy in terms of scale (size and growth) and intensity (level of influence) of impacts on the Australian environment.

Energy

The growth in Australia’s energy consumption during the past 30 years has generally been lower than the rate of growth of the economy (DIS 2015; Figure DRV4). The total amount of energy used within the Australian economy (energy consumption) declined from 5908 petajoules in 2011–12 to 5831 petajoules in 2013–14.

The sources of energy consumed in Australia in 2013–14 were:

  • oil, liquefied petroleum gas and refined products (38 per cent)
  • coal (32 per cent)
  • natural gas (24 per cent)
  • renewable energy sources (6 per cent).

In 2013–14, the consumption of both oil and coal declined, compared with the previous year, by 1 per cent and 5 per cent, respectively. This reflects a decline in output in both the oil and coal sectors, and a shift away from the use of black and brown coal to generate electricity (DIS 2015).

The electricity supply, transport and manufacturing sectors account for almost 75 per cent of Australia’s domestic energy consumption. The transport sector alone accounted for 27 per cent of Australian energy consumption in 2013–14, overtaking the energy sector as the largest sector (DIS 2015).

The residential sector accounts for 7.7 per cent of Australia’s net domestic energy consumption. From 2002–03 to 2013–14, the total energy use by Australian households increased by 13 per cent, although residential energy use per person decreased by 5 per cent (ABS 2016b). In other words, although the intensity of energy use for the residential sector has improved, the overall quantity of energy used has increased.

Australia’s energy intensity—the ratio of primary energy consumption to economic indicators (such as GDP)—has improved in recent years (Figure DRV4), although energy intensity for all industries remained constant from 2012–13 to 2013–14 (ABS 2016b).

There was relative decoupling of domestic energy use from GDP before 2010–11, but, from 2010–11 to 2012–13, growth in energy use was higher than growth in GDP (Figure DRV5). A return to relative decoupling is potentially shown for 2013–14, although this decrease in energy growth is mainly a result of a decline in the mining and export of uranium (ABS 2016b).

In SoE 2011, the Australian Government’s projection for the average annual growth in total domestic energy consumption was 1.9 per cent to 2030, with an associated growth rate of annual energy use per person of 1.3 per cent. More recent Australian Government projections to 2050 have total energy consumption growing by only 1 per cent per year, which is about half the rate cited in SoE 2011 and only two-thirds of the historical growth rate between 2002 and 2012 (BREE 2014).

Energy intensity is projected to decrease at a rate of 1.7 per cent per year to 2050. This relative decoupling is based on continuing strong growth in less energy-intensive sectors of the economy, as well as increased energy efficiency through the adoption of new technologies (e.g. energy-efficient appliances, such as refrigeration and air-conditioning, and energy efficiency requirements in the Building Code of Australia) and fuel switching (e.g. from petroleum to diesel) (BREE 2014).

Although coal and gas are forecast to continue to supply most of our energy needs, their share in the energy mix is expected to decline, with renewable energy consumption projected to increase at the rate of 0.9 per cent per year to 2050. The projected annual growth in renewable energy is mainly driven by growth in wind and solar energy, at 2 per cent and 1.7 per cent per year, respectively (BREE 2014).

Further decoupling energy consumption from changes in GDP will depend on continued improvements in energy efficiency, the shift towards less energy-intensive sectors such as services, and an increase in the proportion of renewable energy generated (because of the relatively low level of greenhouse gas emissions produced by renewable energy compared with energy produced from fossil fuels).

Energy provides a good example of why it is necessary to consider both production and consumption as potential drivers of environmental change. Australia has an abundance and diversity of energy resources, with the world’s largest economic uranium resources, the fourth-largest coal (black and brown) resources, and substantial conventional gas resources (DoI et al. 2014). We also have an abundance of opportunities for solar and wind energy.

Australia is a major net exporter of energy. In 2013–14, Australia exported 15,718 petajoules of energy, including coal (10,578 petajoules; 67 per cent of energy exports), uranium oxide (3149 petajoules; 20 per cent) and natural gas (1267 petajoules; 8 per cent) (DIS 2015, ABS 2016b). Coal exports increased from 8035 petajoules in 2010–11 to 10,578 petajoules in 2013–14. In the same period, more than 80 per cent of Australia’s overall domestic production of primary energy (a total of 18,715 petajoules) was for export (ABS 2016b). The production and transport of energy for export are an important driver of change to the Australian environment, effected through a range of pressures created by mining/extraction and transport infrastructure, and waste production (including greenhouse gas emissions).

Emerging unconventional sources of natural gas, including coal-seam gas, are adding to export totals. The coal-seam gas sector in Australia has grown rapidly, albeit from a low base. Exports of liquified natural gas derived from coal-seam gas started in late 2014. As of 2014, the economic demonstrated resources (that is, resources that are established, analytically demonstrated or assumed with reasonable certainty to be profitable for extraction or production) for coal-seam gas were already about one-third that for conventional Australian gas resources, and the total identified coal-seam gas resources are larger than the estimates for total conventional gas resources (Geoscience Australia & BREE 2014).

Metals and minerals

Metals and minerals play an important role in the Australian economy, particularly in terms of exports. In current dollar terms, the value of our mineral exports (excluding oil and gas) increased from $45.9 billion in 2002–03 to $145.6 billion in 2012–13, dominated by iron ore, coal, gold, copper, alumina–aluminium and nickel (Britt et al. 2015).

Between 2000 and 2011, a major surge in commodity prices gave rise to the so-called millennium boom (Figure DRV6). Australia’s Chief Economist explains the effect of the millennium boom: ‘In response to high commodity prices, there was heavy investment in developing new production facilities, albeit with a lag. Over 2003 to 2014, over $400 billion of resources projects were initiated in Australia’ (Cully 2015).

The recent decline in commodity prices has, however, led to a significant reduction in capital investment in the resources sector and declining terms of trade (CSIRO Futures 2016).

The extractive resource industries have been a significant driver of change to the Australian environment. Changes to the environment by the mining sector arise from:

  • the physical footprint of mines and associated staff accommodation, transport and processing infrastructure
  • waste generation and management, including emissions of greenhouse gases
  • effects on water.

The impact of a sector depends not only on its overall size, but also on the nature of production technologies, production techniques, location and waste management, and the degree of environmental remediation and restoration achievable following production.

The ABS has noted that:

Indicators of environmental pressure for the mining industry reveal a mixed picture. The energy consumed per unit of economic production (energy intensity) by the industry was variable between 1996–97 and 2012–13. After falling early in the period, the energy intensity of mining rose 45 per cent between 2000–01 and 2003–04, then declined thereafter to finish largely flat over the full 17-year period. (ABS 2015c)

Waste intensity for the mining industry recorded the greatest increase among the indicators of environmental pressure, increasing by 165 per cent in the 18 years to 2013–14. Most of this increase occurred between 2003–04 and 2010–11, when waste intensity rose by 177 per cent. This period coincides with a rapid expansion of the mining industry, and the opening and expanding of mines contributed to a major proportion of waste production in the mining industry. Similarly, the clean-up of laydown yards, historical waste stockpiling and demolition of closed mines produced large amounts of waste (ABS 2016c).

The intensity of greenhouse gas emissions recorded by the mining industry decreased by 17 per cent from 1996–97 to 2012–13, and water use intensity decreased by 56 per cent from 1996–97 to 2013–14 (ABS 2016c).

The intensity of the mining industry has decreased for some indicators. However, as mentioned previously, the overall scale of the mining industry, largely to meet demand for exports, has increased substantially in the past 15 years.

Food

The Australian food industry includes the production of raw materials used in food (the farming and fishing sectors); the export, import and processing sectors; and domestic sales to consumers. Food production creates a range of pressures on the environment, including land clearing and land-use changes, water use, and nutrient and chemical run-off.

At the end of 2014, agricultural activities covered 406 million hectares (17 hectares of agricultural land per person), or approximately 53 per cent of Australia’s total land area (ABS 2015d). This is an increase of 2 per cent from 2012–13, but a small decrease from the 409.7 million hectares reported in SoE 2011. The change in area of agriculture between 2012–13 and 2013–14 was driven by increases in Queensland and South Australia, and partially offset by decreases in the Northern Territory and Western Australia (ABS 2015d).

In 2013–14, Australia produced approximately 73.6 million tonnes (3 tonnes per person) of broadacre crops (wheat, oats, barley, sorghum, maize, rice, triticale, cotton, canola, sugar cane) from 25.7 million hectares. This compares with 68.3 million tonnes of broadacre crop production from 32 million hectares in 2010–11 (ABS 2012, 2015de).

In terms of livestock, between 2010–11 and 2014–15:

  • the total numbers of sheep and lambs in Australia declined from 73.1 million to 69.9 million
  • dairy cattle numbers increased slightly from 2.6 million to 2.7 million
  • hide and meat cattle numbers declined from 25.9 million to 24.3 million.

The area used for livestock and agriculture other than broadacre crops increased slightly from 378 million hectares in 2010–11 to 381 million hectares in 2013–14 (ABS 2012, 2015de).

Both crop yields and livestock numbers vary from year to year because of annual variations in weather conditions and markets.

Australia’s production of food exceeds domestic consumption, and Australia is a net exporter of food. In 2012–13, Australian net food exports were worth an estimated $20.2 billion ($31.8 billion of exports and $11.6 billion of imports; Figure DRV7). Since the publication of SoE 2011, the value of Australian food exports has increased by 13.1 per cent and food imports by 11.5 per cent (DoA 2014).

Source: Department of Agriculture (2014)

Figure DRV7 Value chain for fresh and processed food in Australia, 2012–13

In 2012–13, 266,191 hectares of woody vegetation were cleared in Queensland, an increase of 73 per cent from 2011–12. In 2013–14, clearing increased to 296,324 hectares, 11 per cent higher than in 2012–13. This was the highest total rate of woody vegetation clearing recorded since the end of broad-scale clearing permits in Queensland in 2006. Clearing for pasture was the single major land-cover replacement in both periods (90 per cent in 2012–13 and 92 per cent in 2013–14) (DSITI 2015).

The agriculture sector is the largest water consumer in Australia. An estimated 29 per cent of Australia’s agricultural production (by value) was produced under irrigation in 2011–12, with 38 per cent of irrigated agricultural production occurring in the Murray–Darling Basin.

A mix of policy, effective management, technology and consumer preference can mitigate the impact of agriculture on the environment. Agriculture is considered in detail in the Land report, which notes that agricultural land management continues to become more sophisticated. For example, there have been ongoing reductions in the intensity of agricultural chemical use in the cotton industry, mainly because of:

  • the adoption of genetically modified cotton (Acworth et al. 2008)
  • more careful use of fertilisers in sensitive environments (e.g. Great Barrier Reef catchments)
  • more flexible approaches to grazing management to reduce erosion and increase productivity.

The impact of food production is also felt in the marine environment. The Marine report notes that:

Australia’s commercial wild-caught marine fisheries are highly diverse and contribute significantly to the economy. ... In 2013–14, wild-caught fisheries generated $1.5 billion, up from $1.4 billion in 2012–13, and produced approximately 150,000 tonnes of seafood for local, domestic and export markets (Flood et al. 2014, Savage & Hobsbawn 2015). Nearly 50 per cent of total production is exported, with the majority going into Asian markets, while imports account for almost 70 per cent of the fish consumed in Australia (Savage & Hobsbawn 2015).

Demand for food products is likely to grow with Australia’s increasing population. Export demand for Australian food is also likely to increase, potentially competing with domestic demand for food. Increased demand for these products will likely lead to increased pressure on the environment from conversion of native habitat to areas under agricultural production, increased intensity of use and increased nutrient loads.

Fibre and timber

Fibre and timber production generally involves the clearing of native forest and/or the use of plantations. The scale of fibre and timber production in Australia, in terms of area of native forest under forest management, has declined in recent decades.

Australia has around 124.7 million hectares of forest cover, including 2.0 million hectares of industrial plantation forest. Approximately 10.5 million hectares of native forest and industrial plantations in Australia are under forest management and chain-of-custody certification (Australian Forestry Standard 2010). This area includes the majority of public native forests managed for wood production.

Approximately 21.5 million hectares of forest area are within nature conservation reserves, and 39.2 million hectares of forest area are protected for biodiversity conservation on public and private land (ABARES 2015). An estimated 41.1 million hectares of Australia’s forests are under some form of Indigenous ownership or management (ABARES 2015).

In 2012–13, the total log volume harvested was 25.3 million cubic metres (m3), comprising 21.3 million m3 of industrial plantation log volume and 4.0 million m3 of native forest log volume (including cypress pine).

The average annual area of native forest harvested and regenerated is 79,000 hectares (ABARES 2015). In dollar values, Australia imported more wood products ($4.6 billion) than it exported ($2.5 billion) in 2013–14 (ABARES 2015).

Water

Water is considered in detail in the Inland water report. By including a brief section on water in this report, we can emphasise that the use of both surface water and groundwater is influenced by the key drivers of population and economic activity. The consumptive use of water by households, agriculture or industry generally removes water from the environment.

Total water consumption by households and industry in 2013–14 was 18,644 gigalitres (GL) (ABS 2015f). This compares with 14,101 GL consumed in 2008–09 (the period reported on in SoE 2011).

From 2008 to 2014, the agriculture industry accounted for between 50 and 62 per cent of Australia’s water consumption (ABS 2015c). The ABS notes that:

Water consumption by the agriculture industry was steady at around 7300 GL per year between 2008–09 and 2010–11, before increasing significantly through the latter part of the period. The rise in water consumption through 2011–12 to 2012–13 was driven by sheep, beef and grain farming, which increased water consumption by 2825 GL, or 192 per cent, and was the largest contributor to water consumption by the agriculture industry (accounting for 44 per cent of total agricultural water consumption in 2012–13). (ABS 2015f)

In response to the climatic conditions of the early 2000s (e.g. drought), the agriculture industry became more efficient with water use through infrastructure improvements, technology advancements and changes to crop selection. Between 2009–10 and 2012–13, however, increased water availability resulting from higher rainfall accompanied a 73 per cent rise in the volume of water consumed per unit of economic output produced by the agriculture industry. (ABS 2015f)

Water consumed by other sectors in 2013–14 include water supply, sewerage and drainage services (2295 GL; 12 per cent of the total consumption); households (1872 GL; 10 per cent); mining (652 GL; 3 per cent); and manufacturing (581 GL; 3 per cent) (ABS 2015f).

Care must be taken in considering the variability from year to year in Australia’s use of water, because some sectors, such as agriculture, can take advantage of high rainfall and water storage. This can mask changes in efficiency and allocations for environmental flows. For instance, the annual volume of water that Australia consumed in 2012–13 was the highest since the ABS started producing water accounts in 2008–09 (ABS 2014a). However, this can be largely explained by the opportunistic use of water storage replenished after the drought.

In contrast to water use by the agriculture industry, household water consumption is far less subject to annual variations in rainfall, except under extreme drought conditions when urban supplies are more tightly regulated. Total water use in 2013–14 in the major cities showed no significant changes from recent years, with Sydney, Melbourne and south-east Queensland (which all use mainly surface water) recording slight increases in water use since 2011–12. Perth and Adelaide are using increasing amounts of desalinated water (BoM 2015).

SoE 2011 was published at the end of a widespread, severe drought. Australian governments had put into place several measures to manage rural and urban water demand, and to make water use more efficient. For example, approaches such as water-sensitive urban design and water pricing, and policies that require inclusion of rainwater tanks in new house constructions can help reduce household consumption from mains water supplies. It is too early to determine whether the improvements these measures brought in water conservation and water productivity are persisting.

Solid waste

The Australian economy generates a range of waste products at all stages of the production–consumption cycle, including solid waste, greenhouse and other gases, chemical waste, and sediment. Some of these may end up as pollutants in our land, air, water or marine environments. The various types of pollution are generally covered in the SoE 2016 thematic reports. Here, we examine the impact of solid waste, because the balance between waste production and recovery is a useful illustration of how the scale and intensity of economic activity can be affected by policy.

SoE 2011 looked for evidence as to whether our growing economy was generating more solid waste in absolute terms, or at a slower rate than the economy was growing. Data to 2008–09 indicated that Australia’s total solid waste production was increasing somewhat faster than the economy, but this was effectively offset by the rate of increase in waste resource recovery. The net result of solid waste to landfill was largely stable at about 22 million tonnes per year. By 2009, Australia was recovering (re-using and recycling) more than half of the waste produced.

The Australian Government commissioned research (Randell et al. 2014) to look at the nature and fate of solid waste across Australia for 2010–11 (Figure DRV8). Australia generated around 62 million tonnes of waste in 2010–11, including 14 million tonnes of fly ash (a byproduct of coal combustion in power stations). On average, Australians generated 2.2 tonnes of waste per person, 60 per cent of which was recycled or recovered for embodied energy. Inclusion of fly ash increases the average per-person waste generation by 28 per cent (to 2.8 tonnes), with a resource recovery rate of 56 per cent.

In total, the quantity of waste generated in Australian jurisdictions correlates with population and gross state product, and appears to generally increase with income per person and with the level of urbanisation (Randell et al. 2014).

The Australian Government study suggests an urgent need to reduce the amount of solid waste generated, and to decouple waste generation from population and economic growth. Our total generation of waste (before recovery) is growing faster than the GVA of production (ABS 2016c).

From 1997 to 2014, the population rose by 27 per cent, GVA increased by 73 per cent, and waste generation increased by 163 per cent (ABS 2016c; Figure DRV9).

Waste management is of particular concern to local governments, which have to manage an increasing volume of solid waste. The Western Sydney Regional Organisation of Councils exemplifies recent efforts to improve the management of solid waste. Ten western Sydney councils spent more than $106 million in 2013–14 to manage approximately 700,000 tonnes of waste generated from households in the region.

The Western Sydney Regional Waste Avoidance and Resource Recovery Strategy 2014–17 recognises that dealing with the predicted population and economic growth for the next 15 years requires proper planning to ensure that the region can manage the increasing volume of waste. The strategy focuses on (WSROC 2014):

  • avoiding and reducing waste generation
  • increasing recycling
  • diverting more waste from landfill
  • better managing problem wastes
  • reducing litter and illegal dumping
  • improving regional governance.

    Greenhouse gas emissions

    Increasing atmospheric concentrations of greenhouse gases are contributing to global climate change. Although the climate has always been a major influence on the state of the Australian environment, with high natural variability from year to year, there is strong evidence that the climate is changing at a rate unprecedented in the geological record, largely as a consequence of increased concentrations of greenhouse gases in the atmosphere. Climate change is altering the structure and function of natural ecosystems, and affecting economic activity and human wellbeing. It also exacerbates the effects of other pressures on the environment.

    Since SoE 2011, there has been a major development in international cooperation to address the global issue of climate change. The Paris Agreement involves 195 countries that aim to limit the increase in global temperatures to 2 °C above pre-industrial levels. The Australian Government’s commitments have become clearer with its signing of the Paris Agreement, and there are indications that some mitigation measures are effective and that a coordinated plan to achieve Australia’s Renewable Energy Target exists.

    Governments at all levels have continued to implement policies to reduce greenhouse gas emissions. Nationally, a cap-and-trade emissions trading scheme that started in 2012 was replaced in 2014 with a Direct Action Plan, which includes the Emissions Reduction Fund.

    Several state and territory governments have introduced legislation, policies and programs that seek to go further than Australia’s national commitments. For example, the South Australian Government has committed to producing 33 per cent of the state’s electricity requirements from renewable energy sources by 2020. The Australian Capital Territory (ACT) Government has established emissions reduction targets for the ACT of 100 per cent renewable energy by 2020 and 40 per cent reduction in greenhouse gas emissions on 1990 levels by 2020.

    The following emissions data and projections are drawn from Tracking to 2020 (DoE 2015), unless otherwise noted.

    In 2014–15, the proportions of greenhouse gases emitted in Australia by sector were:

    • electricity generation—33 per cent
    • stationary energy use, excluding electricity—17 per cent (i.e. direct combustion of fuels in the manufacturing, mining, residential and commercial sectors)
    • transport—17 per cent (i.e. direct combustion of fuels in transportation by road, rail, domestic aviation and domestic shipping)
    • agriculture—14 per cent
    • fugitive emissions—7 per cent (i.e. unintended emissions of gases from industrial activities)
    • industrial processes—6 per cent
    • land use, land-use change and forestry—4 per cent
    • waste—2 per cent.

    The energy sector continues to dominate greenhouse gas emissions, increasing from 74 per cent of net emissions in SoE 2011 to 76 per cent in 2015. Electricity sector emissions have decreased significantly (by 12 per cent) from peaks recorded in 2008–09. However, projections show electricity emissions rising until 2016–17, when the effects of the Large-scale Renewable Energy Target begin to take effect. The decrease in coal-fired electricity generation will also contribute to the decline in emissions from electricity generation.

    Direct combustion emissions have increased by 27 per cent since 1999–2000 and are projected to increase by 19 per cent compared with 2014–15 levels by 2019–20. The majority of this growth is driven by an expected growth in exports of Australian commodities.

    Transport sector emissions have increased by 25 per cent since 1990–2000 and are projected to be 11 per cent above 2014–15 levels by 2019–20. Fugitive emissions from fossil fuels have decreased by 2 per cent since 1999–2000 and are projected to increase by 21 per cent compared with 2014–15 levels by 2019–20.

    Agricultural emissions have decreased by 10 per cent since 1999–2000 and are expected to continue to decrease from 2014–15 levels by 2 per cent by 2019–20.

    Industrial process and product-use emissions have increased by 19 per cent since 1999–2000 and are expected to increase slightly by 6 per cent compared with 2014–15 levels by 2019–20.

    Waste sector emissions have decreased by 23 per cent since 1999–2000, despite increased waste generation per person, because of increased recycling and methane capture.

    Emissions from land use, land-use change and forestry decreased by 64 per cent from 2000 and are projected to continue to decline. However, deforestation emissions are projected to increase in the short term because of the reintroduction of permits for land clearing in Queensland.

    Cape Grim Baseline Air Pollution Station, situated 90 metres above sea level

    Cape Grim Baseline Air Pollution Station, situated 90 metres above sea level

    Cape Grim Baseline Air Pollution Station, Tasmania

    Photo by CSIRO

    Jackson WJ (2016). Drivers: Economic activity as a driver of environmental change. In: Australia state of the environment 2016, Australian Government Department of the Environment and Energy, Canberra, https://soe.environment.gov.au/theme/drivers/topic/economic-activity-driver-environmental-change, DOI 10.4226/94/58b659517ce65