Climate Change Authority

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Chapter 1 About this review

The Climate Change Authority provides independent, expert advice on Australian climate change policy.

The Targets and Progress Review is intended to help the Commonwealth Government make decisions about Australia’s future emissions reduction goals. The Final Report will recommend a 2020 target and national emissions budget, a 2030 trajectory range and a 2050 emissions budget.

This Review is primarily about ends rather than means. It focuses on Australia’s goals for reducing emissions and progress toward those goals, rather than the policy mechanisms for achieving them.

The Authority has taken as a starting point Australia’s existing international obligations and undertakings, including its commitment to the global goal to limit average temperature increases to below 2 degrees above pre-industrial levels, and its 2020 emissions reduction targets under the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol.

In making recommendations, the Authority has taken into account the latest climate science and assessment of possible impacts, international action, Australia’s progress in reducing emissions, issues of international and inter-generational equity, the economic costs of different targets and opportunities for future emissions reductions.

The Authority is seeking stakeholder feedback on its draft recommendations ahead of its Final Report, to be submitted to the Minister responsible for climate change by 28 February 2014 for tabling in Parliament.

This chapter introduces the Targets and Progress Review and provides information about:

  • the Climate Change Authority, its role and guiding principles;
  • the scope of the Review;
  • the approach the Authority has taken in its analysis and recommendations; and
  • the structure and content of this Draft Report.

1.1 The Climate Change Authority

The Climate Change Authority is an independent statutory agency, established to provide expert advice on Australian climate change policy, including through a scheduled series of reviews of climate programs and legislation. The Targets and Progress Review is the Authority’s second review; the Authority completed its first review of the Renewable Energy Target in December 2012.

The Authority is chaired by Mr Bernie Fraser and consists of eight other members with expertise in climate science, economics, business and public policy.

The Authority’s work is guided by a set of principles listed in the Climate Change Authority Act 2011 (Cth). The Act states that, in conducting a review, the Authority must have regard to the principle that any measure to respond to climate change should:

  • be economically efficient;
  • be environmentally effective;
  • be equitable;
  • be in the public interest;
  • take account of the impact on households, business, workers and communities;
  • support the development of an effective global response to climate change;
  • be consistent with Australia’s foreign policy and trade objectives; and
  • take into account any additional principles the Authority considers relevant.

The Targets and Progress Review has been guided by these principles.

The Authority is required to conduct public consultation for all its reviews. The Authority has engaged with a wide range of interested parties during the Targets and Progress Review, including through presentations to stakeholder groups (details of stakeholder engagement are listed at Appendix A). The Authority sought broad comment on an Issues Paper, which it released in April 2013. The Authority received 73 submissions in response to the Issues Paper and considered those views in preparing this Draft Report. The Issues Paper and submissions are available on the Authority’s website at www.climatechangeauthority.gov.au.

The Authority proposes to continue to engage actively with stakeholders as it finalises this Review.

1.2 Review of Targets and Progress

The Commonwealth Government will need to make decisions in the near future (outlined in Box 1.1) about Australia’s 2020 target and post-2020 emissions reduction goals. Under the UNFCCC and the Kyoto Protocol, countries are considering ways to increase global action to reduce emissions and will have an opportunity to put forward stronger 2020 targets in 2014. At the same time, UNFCCC Parties are considering a post-2020 international climate framework. Australia is likely to be requested to put forward some indication of its post-2020 action in 2014 or 2015.

Box 1.1: Climate change milestones, 2013–2015

2013

November

UNFCCC meeting in Warsaw, Poland

2014

April

Australia due to submit a report to the UNFCCC on whether it will revisit its 2020 target under the Kyoto Protocol

September

World leaders’ summit to discuss global action on climate change

October

IPCC Synthesis Report of the Fifth Assessment Report (synthesising the previously released reports from the IPCC working groups)

November

Australia hosts G20 Leaders’ summit as 2014 chair of G20

November/December

UNFCCC meeting in Peru, including a review of global ambition for climate action (providing an opportunity for Australia to increase its 2020 targets)

2015

December

UNFCCC meeting in Paris, France; new agreement on post-2020 framework for global climate action due to be negotiated

This Review of Australia’s emissions reduction targets and progress toward them is intended to help inform the Government in reaching decisions on these matters.

In the Review, the Authority seeks to:

  • present evidence about climate science and international action to reduce greenhouse gas emissions;
  • assess Australia’s progress in reducing greenhouse gas emissions across the whole economy and within specific sectors;
  • recommend a long term emissions budget to 2050 that connects Australia’s emissions reduction goals to its national interest in limiting average global warming to below 2 degrees Celsius above pre-industrial levels, to be subject to regular review;
  • recommend a single 2020 emissions reduction target to replace Australia’s current 2020 target range of 5 to 25 per cent;
  • recommend trajectory ranges to 2030 bounding Australia’s medium term emissions reductions, and criteria for extending and adjusting the medium term trajectory range over time; and
  • identify and assess opportunities for emissions reductions in different sectors of the economy.

Consistent with Australia’s international commitments, the recommended emissions reductions goals are net of trade. This means that international emissions reductions purchased by Australia can count towards Australia’s target, but any emissions reductions that Australia sells overseas cannot be counted toward the target.

Legislation requires the Authority’s Final Report of the Targets and Progress Review to be completed by 28 February 2014.

Box 1.2: Key definitions – Australia’s emissions reduction goals

This figure illustrates the concepts of budget, target and trajectory. The vertical axis indicates the level of emissions, while the horizontal axis indicates time. The figure is indicative only, so no units are included. A dotted line indicates a trajectory of decreasing emissions over time to a target. The target is a point in the figure indicating a specific level of emissions at a point in time. The budget is illustrated by a shaded area, which includes all the space under the trajectory line.

Target: A goal for national emissions for a specified year. The Authority will recommend a 2020 target expressed as a percentage reduction in emissions from 2000.

Budget: Australia’s cumulative emissions allowance over a period of time (see diagram). The Authority will recommend a short term budget for total emissions between 2013 and 2020 (the 2020 budget), and a long term budget between 2013 and 2050 (the 2050 budget).

Trajectory: Australia’s indicative year-by-year national emissions pathway to its target. The Authority will recommend a trajectory from 2013 to 2020. It will also recommend a trajectory range from 2020 to 2030 to guide future trajectories (see ‘trajectory range’ below). The year-by-year points on the trajectory are indicative (non-binding) targets in each year. The area under the trajectory constitutes an emissions budget.

This figure illustrates the concepts of target, trajectory and trajectory range. The vertical axis indicates the level of emissions, while the horizontal axis indicates time. The figure is indicative only, so no units are included in the figure. A dashed line indicates a trajectory of decreasing emissions over time to a target. The target is a point in the figure indicating a specific level of emissions at a point in time. The trajectory range is illustrated by two dotted lines that begin at the target and diverge to different points, later in time. The wedge shape bordered by the two dotted lines is the trajectory range.

Trajectory range: Range within which future trajectories may be set (see diagram). A trajectory range provides an indication of future trajectories and flexibility to take into account new information. The Authority is recommending a trajectory range from 2020 to 2030.

‘Net’ emissions: Australia’s target, and all of the other goals discussed above, relate to ‘net emissions’ – that is, they are goals for emissions from the domestic economy after accounting for any emissions units imported from other countries or exported by Australia. Actual emissions in Australia could be higher if offset by purchases of international emissions reductions.

This Review covers two legislated reviews under the Clean Energy Act 2011 (Cth), which require the Authority to:

  • make recommendations about Australia’s emissions reduction goals, including specifically an indicative national emissions trajectory and a national carbon budget (referred to in this report as an emissions budget) and carbon pollution caps (section 289); and
  • report on Australia’s progress in achieving its medium term and long term emission reductions targets, as well as progress to meeting a national emissions budget (section 291).

The matters to which the Authority must have regard in conducting these reviews are set out in the Clean Energy Act and listed at Box 1.3.

Box 1.3: Legislated review requirements

The Clean Energy Act sets out specific matters to which the Authority must have regard in the Targets and Progress Review:

Review of caps, trajectories and budgets (section 289)

(a) Australia’s international obligations under international climate change agreements;

(b) undertakings relating to the reduction of greenhouse gas emissions that Australia has given under international climate change agreements;

(c) Australia’s medium term and long term targets for reducing net greenhouse gas emissions;

(d) progress toward the reduction of greenhouse gas emissions;

(e) global action to reduce greenhouse gas emissions;

(f) estimates of the global greenhouse gas emissions budget;

(g) the economic and social implications associated with various levels of carbon pollution caps;

(h) voluntary action to reduce Australia’s greenhouse gas emissions;

(i) estimates of greenhouse gas emissions that are not covered by this Act;

(j) estimates of the number of Australian carbon credit units that are likely to be issued;

(k) the extent (if any) of non-compliance with this Act and the associated provisions;

(l) the extent (if any) to which liable entities have failed to surrender sufficient units to avoid liability for unit shortfall charge;

(m) any acquisitions, or proposed acquisitions, by the Commonwealth of eligible international emissions units;

(n) such other matters (if any) as the Climate Change Authority considers relevant.

Review of progress (section 291)

(a) the level of greenhouse gas emissions in Australia;

(b) the level of purchases of eligible international emissions units (whether by the Commonwealth or other persons);

(c) the level of greenhouse gas emissions that:

(i) are attributable to activities in the Australian economy; and

(ii) are not reflected in the provisional emissions numbers of liable entities;

(d) voluntary action to reduce greenhouse gas emissions;

(e) such other matters (if any) as the Climate Change Authority considers relevant.

1.3 A new climate change policy for Australia

The Authority recognises that the recently elected Commonwealth Government intends to implement different policy settings from those in the Clean Energy Act. This Review, however, is more about ends than means. It focuses on Australia’s goals for reducing emissions and past progress towards those goals, rather than the policy mechanisms for achieving them. It should therefore be relevant to Government consideration of Australia’s future climate goals, whatever the preferred policy instruments for pursuing such goals.

It is understood that the centrepiece of the Government’s new Direct Action Plan will be an Emissions Reduction Fund. The Government has issued Terms of Reference for the development of a White Paper on the Emissions Reduction Fund. It will release a Green Paper setting out the Government’s preferred options for the design of the Fund in December 2013, and a White Paper in early 2014 outlining the final design of the Fund. The Authority has not speculated about the precise parameters of the Plan ahead of the Government’s decision. The Authority believes the analysis of Australia’s emissions reduction activities in this report, including opportunities for emissions reductions in the Australian economy, is likely to be relevant to the implementation of such a policy.

At the same time, some aspects covered in this Review are specific to the carbon pricing mechanism, including the Authority’s recommendations on the level of carbon pollution caps. The Authority is required to make these recommendations by the current legislation; they are detailed in Part E of the Draft Report.

1.4 The Authority’s approach to recommending emissions reduction goals and assessing Australia’s progress

The Authority has weighed a broad range of considerations in reaching the draft recommendations in this Review. Prominent among these was Australia’s participation in efforts to limit global warming. The Authority has weighed this interest against the costs of reducing emissions, and sought to reach a view about Australia’s appropriate share of the global emissions reduction task.

Figure 1.1 illustrates the key considerations of the Targets and Progress Review, as explored in this Draft Report.

Figure 1.1: Targets and Progress Review – key considerations and structure of the report

This figure illustrates the structure and content of the Targets and Progress Review. The figure begins on the left with the Objective: ‘Limit global warming to below 2 degrees’. An arrow points to the Parts of the report, which are grouped. Parts A and C are grouped together first, and Parts B and D are grouped together second. Part A includes two elements: ‘what the science tells us’ and ‘international action to reduce emissions’. Part C includes two elements: ‘Australia’s equitable share of emissions’ and ‘Economic implications for Australia’. Part B includes ‘Australia’s progress to date in reducing emissions’. Part D includes ‘Domestic and international opportunities for emissions reduction’. Following the Parts of the Draft Report, an arrow points right to the Recommendation: ‘Australia’s emissions reduction goals (Part C) and caps (Part E)’.

The Authority has taken Australia’s existing international obligations and undertakings as a starting point for its deliberations, including Australia’s commitment to the collective goal to limit average global warming to below 2 degrees. It has also taken into account Australia’s other emissions reduction commitments, including:

  • Australia’s international undertaking under the UNFCCC to reduce emissions by 5 per cent (unconditional undertaking) or up to 15 per cent or 25 per cent below 2000 levels by 2020; and
  • Australia’s international undertaking under the Kyoto Protocol to limit average annual emissions in the period 2013 to 2020 to 99.5 per cent of 1990 levels, a calculation based on the unconditional 5 per cent target.

None of the Authority’s recommendations would lead to Australia breaching its existing international obligations and undertakings; in other words, Australia’s existing UNFCCC and Kyoto Protocol commitments have been taken as minimums.

This report is divided into five parts.

Part A: Introduction and context

The Authority has considered Australia’s emissions reduction goals in a global context. Part A outlines the Authority’s consideration of:

  • what climate science tells us about the threats climate change poses to Australians (Chapter 2);
  • how climate science can inform the calculation of global emissions budgets, and possible limits on greenhouse gas emissions to achieve a given limit on global warming (Chapter 3);
  • observed trends in action taken by other countries to address climate change (Chapter 4); and
  • Australia’s role in global climate change action, including how different Australian emissions reduction targets compare with the targets of other key countries (Chapter 5).
Part B: Australia’s policy and progress to date

Australia’s progress to date in reducing emissions is relevant to considering future action to reduce emissions. Part B considers:

  • Australian policy to address climate change (Chapter 6); and
  • Australia’s progress in reducing greenhouse gas emissions (Chapter 7).
Part C: Australia’s emissions reduction goals

Part C sets out the Authority’s draft recommendations for Australia’s emissions reduction goals (Chapter 11). Part C considers:

  • the timeframe, form and scope of Australia’s emissions reduction goals (Chapter 8);
  • an equitable 2050 budget for Australia, including equity between countries and generations (Chapter 9); and
  • economic implications of Australia’s emissions reduction goals (Chapter 10).
Part D: Reducing Australia’s emissions – opportunities and challenges

Part D examines emissions reduction opportunities across different sectors of the Australian economy and challenges to realising those opportunities (Chapter 12). It also examines international emissions reduction activities and considers the risks and benefits of supporting mitigation overseas as a way of meeting Australia’s emissions reduction goals (Chapter 13).

Part E: Implementation issues under the carbon pricing mechanism

Part E sets out the Authority’s recommendations associated with achieving Australia’s emissions reduction goals under the carbon pricing mechanism, including recommendations for carbon pollution caps (Chapter 14).