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Chapter 12 Australia’s emissions outlook

Without emissions reduction incentives, emissions from most sectors of the Australian economy are projected to rise – total domestic emissions are projected to grow to 17 per cent above 2000 levels by 2020, and 37 per cent above 2000 levels by 2030. Strong projected growth in population and the economy places upward pressure on emissions.

Australia has significant emissions reduction opportunities in the domestic economy. A price incentive can drive substantial emissions reductions, particularly in electricity generation, industrial processes and fugitive emissions. Stronger incentives would drive deeper emissions reductions. Stronger targets could be met using a mixture of domestic and international emissions reductions, using higher price incentives or by implementing other policies.

The most important sector for potential domestic emissions reductions is electricity. It has the largest share of Australia’s emissions and the largest emissions reduction potential. Further emissions reductions could be delivered by removing non-price barriers to industrial, commercial, residential and transport energy efficiency.

Even with a strong incentive to reduce emissions, growth in export-oriented activity, such as liquefied natural gas (LNG) production and agriculture, is projected to increase absolute emissions in those sectors, despite emissions intensity improvements.

When considering what Australia’s future emissions reduction goals should be, it is important to consider the outlook for future emissions and the opportunities and challenges in realising domestic emissions reductions.

Chapter 12 highlights the most significant opportunities and challenges, identifying the factors contributing to and driving projected changes in emissions, and assessing how they might change over time. It outlines:

  • an overview of Australia’s emissions outlook; and
  • the opportunities and challenges to reducing domestic emissions at a whole-of-economy and sectoral level.

It also considers the emissions outlook from now to 2030. Appendix D presents a more detailed whole-of-economy and sectoral analysis of Australia’s progress toward its emissions reduction goals.

As outlined in Chapter 7, Australia has made progress in reducing emissions in recent years, despite strong economic and population growth. Most of Australia’s emissions reductions since 1990 have come from the land sector and, more recently, slower growth in electricity demand and a shift to less emissions-intensive electricity generation. Chapter 6 outlined Australia’s existing policies, including the land clearing controls and renewable energy and energy efficiency initiatives that helped drive these outcomes. This provides context for understanding Australia’s future emissions outlook.

Chapter 12 focuses on domestic emissions. Chapter 13 considers the benefits and risks of using international emissions reductions to complement domestic efforts.

12.1 Why analyse Australia’s emissions outlook?

Assessing Australia’s emissions outlook supports effective policy development by identifying opportunities for economically efficient, equitable and environmentally effective emissions reductions, as well as uncertainties, data gaps and challenges to realising those opportunities. Assessing Australia’s emissions outlook also indicates whether Australia is on track to meet its emissions reduction goals and international commitments, and provides an early warning if not.

The Authority is obliged to review Australia’s progress towards its emission reduction goals annually. The analysis of Australia’s emissions outlook in this chapter, together with the analysis in chapters 6, 7 and 13, and Appendix D, relates to the current legislative requirements for reporting on progress.

The following sections explore possible future trends in sectors’ emissions and potential contributions to Australia’s emissions reduction goals. The outlook presented here does not prescribe or endorse specific outcomes, but instead identifies potential paths for future emissions reductions.

12.2 Modelling underpinning the emissions outlook

The Authority has used economic modelling to explore a range of future scenarios for Australia’s economy and emissions. The four core scenarios modelled by The Treasury and DIICCSRTE (2013) and described in Chapter 10 involve different levels of incentives for emissions reductions. The no price scenario includes existing policies such as the Renewable Energy Target (RET), energy efficiency standards and land clearing controls, but excludes the carbon price and the Carbon Farming Initiative (CFI). The other three scenarios assume a low, medium and high carbon price, in addition to other existing policies and the CFI.

While the scenarios are largely based on the current legislative arrangements in the Clean Energy Act 2011 (Cth), the carbon price can be seen as a broad proxy for incentive-based measures. The results show the potential scale and source of emission reductions available in Australia at different marginal costs. Depending on the policy design, the Government’s Direct Action Plan may mobilise many of the same opportunities.

Each scenario sees emission reductions occur up to different marginal costs (Table 12.1), reflecting different carbon price pathways over time.

Box 12.1: Modelled emissions reductions opportunities

The emissions reduction opportunities identified in the modelling reflect projected outcomes under different future carbon prices, relative to projected emissions without a carbon price.

Other policies, including the Direct Action Plan discussed in Chapter 6.3, could create price incentives to reduce emissions. Such policies may mobilise similar emission reductions opportunities to those identified in the modelling. There may also be a number of differences depending on the detailed policy design. In particular:

  • The Treasury and DIICCSRTE modelling reflects outcomes that might arise when entities subject to the carbon price pay for emissions. If carbon prices are passed through to downstream markets, it may prompt a reduction in demand, leading to lower production of emissions-intensive goods and services. This effect is included in the modelled outcomes.
  • The Treasury and DIICCSRTE modelling reflects the coverage of the carbon price under the current legislation. The Direct Action Plan may cover a different set of activities. In the low, medium and high scenarios, a price incentive applies to all emissions sources except fuel use by light vehicles, decommissioned mines, synthetic gases imported prior to July 2012 and facilities below the coverage threshold (generally 25 kt CO2-e per year). Land use, land use change and forestry (LULUCF), agriculture, and waste deposited to landfill before 2012 can access a price incentive for emissions reductions through the CFI. 

As discussed in Chapter 10, the modelling provides a useful benchmark for assessing the cost of achieving different targets, and identifies emissions reduction opportunities in the domestic economy at different prices. The actual emissions reductions realised in Australia in the future, and the associated economic cost, will depend on a range of factors, including the policies in place.

Table 12.1: Marginal emissions reduction cost under different scenarios, 2020 and 2030 ($/t CO2-e)

 

2020

2030

No price scenario

0

Low scenario

6.31

54.48

Medium scenario

26.73

54.44

High scenario

65.15

134.92

 

Note: Real $2012; t CO2-e is tonnes of carbon dioxide equivalent. The marginal cost of emissions reductions in 2020 reflects the weighted average of the Australian Carbon Unit (ACU) and the Kyoto unit prices. In 2030 the marginal cost of emissions reduction is the ACU price.
Source: The Treasury and DIICCSRTE 2013

These four scenarios inform the Authority’s assessment of possible emissions outcomes in the remainder of this Chapter and in Appendix D.

12.3 Outlook for economy-wide emissions

12.3.1 Australia’s total domestic emissions

Australia’s emissions have remained relatively flat since 1990. As discussed in Chapter 7, most of the emissions reductions over that period are attributable to economic factors and policies enacted in the land sector. Electricity sector emissions have been falling by around 0.8 per cent per year since 2008, on average, due to lower demand growth and a shift towards less emissions–intensive generation (such as gas and renewables).

Under the no price scenario, Australia’s emissions are projected to rise steadily, to 17 per cent above 2000 levels in 2020 and 37 per cent above 2000 levels in 2030. Figure 12.1 presents results of this and the low, medium and high scenarios, showing that the stronger the incentive, the greater the emissions reductions.

Figure 12.1 shows that it is only under the high scenario that Australia’s projected emissions fall and then stay below 2000 levels. The high scenario gets closest to cumulative emissions reductions consistent with Australia’s minimum 5 per cent emissions reduction commitment.

12.3.2 Emissions intensity

Figure 12.2 shows that the historical trend of falling emissions intensity of the economy is projected to continue under all scenarios. Emissions per person are also projected to fall in the low, medium and high scenarios, but rise slightly relative to current levels in the no price scenario (Figure 12.3). Emissions per person are approximately half 2000 levels by 2030 in the high scenario.

Box 12.2: Projected low, medium and high scenario emissions reductions

Relative to the no price scenario:

  • The low scenario projects 201 million tonnes of carbon dioxide equivalent (Mt CO2-e) cumulative domestic emissions reductions between 2013 and 2020 and an additional 809 Mt CO2-e over the period to 2030. Australia’s emissions in 2030 are projected to be 672 Mt CO2-e, or around 15 per cent above 2000 levels.
  • The medium scenario projects 294 Mt CO2-e cumulative emissions reductions to 2020 and an additional 1 150 Mt CO2-e to 2030. Emissions in 2030 are projected to be 644 Mt CO2-e, about 10 per cent above 2000 levels.
  • The high scenario projects 494 Mt CO2-e cumulative emissions reductions to 2020 and an additional 2 490 Mt CO2-e to 2030. Emissions in 2030 are projected to be 465 Mt CO2-e, about 21 per cent below 2000 levels.

Figure 12.1: Australia’s projected emissions under different scenarios, 1990–2030

Figure 12.1 shows Australia’s historical and projected domestic emissions between 1990 and 2030. Australia’s domestic emissions increased between 1990 and 2012, from 580 megatonnes of carbon dioxide equivalent to 600 megatonnes of carbon dioxide equivalent. Between 2012 and 2030, projected emissions are 801 megatonnes of carbon dioxide equivalent in the no price scenario, 672 megatonnes of carbon dioxide equivalent in the low scenario, 644 megatonnes of carbon dioxide equivalent in the medium scenario and 465 megatonnes of carbon dioxide equivalent in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Figure 12.2: Australia’s projected emissions per unit GDP, 2000–2030

Figure 12.2 shows the historical and projected emissions intensity of Australia’s economy per unit of GDP between 2000 and 2030. The emissions intensity of the Australian economy fell between 2000 and 2012, from 0.57 to 0.41 kilograms of carbon dioxide equivalent per unit of GDP. The projected emissions intensity of the Australian economy will continue to fall between 2012 and 2030, to 0.32 kilograms of carbon dioxide equivalent per unit of GDP in the no price scenario, 0.27 in the low scenario, 0.26 in the medium scenario and 0.19 in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Figure 12.3: Australia’s projected emissions per person, 2000–2030

Figure 12.3 shows Australia’s historical and projected emissions per person between 2000 and 2030. Emissions per person fell between 2000 and 2012, from 31 to 26 tonnes of carbon dioxide equivalent. In 2030, Australia’s projected emissions per person are 26 tonnes of carbon dioxide equivalent in the no price scenario, 22 tonnes in the low scenario, 21 tonnes in the medium scenario and 15 tonnes in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

12.3.3 Factors influencing the emissions outlook

Several factors will drive Australia’s future emissions. Across all scenarios, irrespective of the choice of Australia’s emissions reduction goals or the level of a price incentive, emissions will be influenced by:

  • broad trends in the macro-economy, such as exchange rates, commodity prices, interest rates, income levels, renewal of building stock and equipment, and population growth. Australia’s population and economy are projected to grow and to place upwards pressure on emissions as a result; and
  • international demand for emissions-intensive commodities and resources, such as beef, liquefied natural gas (LNG) and coal. Projected growth in global demand is likely to increase Australian activity in these sectors and the associated emissions.

The outlook shows that government policy could have a substantial influence on emissions. Incentives for emissions reductions could be established at different levels of government, using a wide range of policy tools. The type of emissions reductions and the rate at which they are realised will be affected by the relative costs of low-emissions technologies.

12.3.4 Overview of sectoral outlook

Emissions reduction opportunities vary considerably by sector, depending on each sector’s proportion of Australia’s total emissions and its responsiveness to incentives. Figure 12.4 shows the range in projected sectoral emissions outcomes across the modelled scenarios. Specific sectoral emissions reduction opportunities are discussed further in Section 12.4 and Appendix D.

Figure 12.5 provides an insight into the emissions reductions that a price incentive (or equivalent) could drive. The major projected trends under the four scenarios are:

  • Electricity remains the greatest single sectoral emitter under all scenarios until around 2030, accounting for about a third of national emissions. In a no price scenario, electricity emissions are projected to rise from current levels, despite the Renewable Energy Target (RET). With incentives, the electricity sector is projected to reduce its emissions. In the high scenario, electricity emissions could be reduced by 59 Mt CO2-e in 2020 and by 174 Mt CO2-e in 2030, relative to the no price scenario. This would be driven by a shift toward low-emissions electricity generation and a slowing of growth in electricity demand.
  • Transport emissions are projected to rise marginally in the no price and low scenarios. While the majority of road transport does not face a price incentive under any of the modelled scenarios, emissions fall between 2020 and 2030 in the medium and high scenarios because of more fuel-efficient new vehicles and a switch toward lower emission fuels.
  • Foreign demand for Australian resources, particularly LNG and coal, is projected to continue under all scenarios, even with strong global action on climate change. The projected five-fold increase in net exports of LNG from 2011 to 2020 (BREE 2013) is estimated to drive much of the projected growth in domestic emissions to 2030 through increases in direct combustion and fugitive emissions.
  • Rising demand for beef and dairy products is likely to drive emissions growth from agriculture, under all scenarios, in the period to 2030. Greater reforestation and avoided deforestation, particularly under the high scenario, could deliver significant emissions reductions from the land sector.
  • Industrial process emissions grow to about 39 per cent above current levels by 2030 under the no price scenario. Under the low and medium scenarios, emissions in 2030 are projected to be at least 25 per cent below 2012 levels. Under the high scenario, emissions in 2030 are about a third of 2012 levels.
  • Waste emissions remain relatively stable in the period to 2030 in a no price scenario, as increased activity is being offset by emissions intensity reductions from new technologies. In the high scenario, emissions from waste fall significantly.

Figure 12.4: Projected average annual change in emissions, by sector, 2012–2030

Figure 12.4 shows the projected average annual change in Australia’s emissions by sector between 2012 and 2030. The figure shows that between 2013 and 2020, emissions in all sectors except waste are projected to increase in the no price scenario and emissions in three of eight sectors (industrial processes, LULUCF and waste) are projected to fall in the high scenario. Between 2021 and 2030, emissions in all sectors except waste are projected to increase in the no price scenario and emissions in all sectors are projected to decrease in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Figure 12.5: Projected emissions reductions relative to the no price scenario, 2020 and 2030

Figure 12.5 shows projected emissions reductions by sector relative to the no price scenario in 2020 and 2030. Compared to the no price scenario in 2020, projected emissions reductions are 35 megatonnes of carbon dioxide equivalent under the low scenario, 65 megatonnes of carbon dioxide equivalent in the medium scenario and 134 megatonnes of carbon dioxide equivalent in the high scenario. Compared to the no price scenario in 2030, projected emissions reductions are 129 megatonnes of carbon dioxide equivalent in the low scenario, 156 megatonnes of carbon dioxide equivalent in the medium scenario and 335 megatonnes of carbon dioxide equivalent in the high scenario. In each scenario in 2020 and 2030, the largest emissions reductions are found mainly in the electricity sector, but also the land, fugitive and industrial process sectors.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Table 12.2: Sectoral shares of emissions reductions relative to the no price scenario, 2020 and 2030

 

 

Electricity

Transport 

Direct combustion

Fugitives

Industrial processes 

Agriculture 

LULUCF

Waste 

2020

Low scenario

25.3%

6.3%

3.4%

24.2%

13.2%

4.0%

17.5%

6.0%

Medium scenario

24.1%

6.9%

5.5%

21.3%

14.7%

4.0%

18.9%

4.8%

High scenario

43.7%

4.8%

5.2%

15.6%

11.8%

2.5%

13.3%

3.1%

2030

Low scenario

28.3%

5.4%

6.8%

24.4%

16.2%

3.2%

11.0%

4.7%

Medium scenario

32.7%

9.4%

6.0%

21.1%

14.5%

3.0%

9.1%

4.1%

High scenario

51.9%

6.9%

5.0%

15.2%

10.1%

1.9%

6.7%

2.4%

 

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013. Rows may not total 100% due to rounding.

12.4 Sectoral emissions reductions

12.4.1 Overview of major opportunities and barriers

There are major opportunities to reduce Australia’s emissions, at relatively low costs. The electricity sector, which is the largest contributor to Australia’s emissions now and likely to remain so in the future, is emissions-intensive compared with much of the rest of the world, and can potentially deliver substantial emissions reductions. The modelling suggests that about half of the least-cost domestic opportunities to reach Australia’s minimum 5 per cent emissions reduction target could be found in the electricity sector. Policies are needed to realise these potential emissions reductions. Section 12.4.3 describes non-price barriers that, if removed, could result in even greater emissions reductions in electricity emissions by improving energy efficiency and reducing electricity demand.

Australia’s transport sector has not, to date, been subject to many of the measures used internationally to reduce light vehicle emissions. Substantial emissions reduction opportunities could be readily realised through available vehicle technologies. Regulation and standards could be particularly effective in improving the fuel efficiency of light vehicles, reducing emissions from transport.

Other sectors face greater challenges to reliably deliver large emissions reductions. Some export-driven sectors are projected to have rising emissions due to strong global demand. This includes emissions from direct combustion, fugitives, agriculture and industrial processes. In these sectors, improvements in emissions intensity are unlikely to be sufficient to offset the impact of greater activity. One exception is the substantial emissions reduction opportunities in industrial processes that could be mobilised if incentives are in place. The strong projected growth in direct combustion emissions to 2020 from rising global demand for energy resources is only slightly offset by the uptake of existing low-emissions technologies and practices, even if incentives are in place.

12.4.2 Emissions reduction opportunities beyond modelling

The modelling identifies emissions reduction opportunities up to a certain marginal cost, but does not identify the best policy to realise those opportunities. Policy instruments need to be matched to specific emissions reduction tasks and specific sectoral challenges. For example, a price incentive could be accompanied by policies to overcome non-price barriers.

The remainder of Chapter 12 outlines, for each sector, changes that contribute to the estimated emissions reductions in the scenarios modelled, and further opportunities beyond what is modelled. It also sets out key barriers to realising those opportunities.

12.4.3 Electricity

Emissions in the electricity sector are released when fossil fuels, such as coal, natural gas and liquid fuels, are combusted to generate electricity. This sector includes generation that is connected to electricity grids such as the National Electricity Market (NEM) and generation for use on-site (‘off grid’). The electricity sector accounted for 33 per cent of national emissions in 2012 (The Treasury and DIICCSRTE 2013).

Emissions from electricity are projected to rise steadily in a no price scenario, underpinned by economic and population growth. Electricity emissions could stabilise and then fall significantly after 2030 (low and medium scenarios) or, with sufficient incentive, could begin to fall in the near term (Figure 12.6).

The emissions reductions projected in the low, medium and high scenarios, relative to the no price scenario, reflect a shift towards less emissions-intensive sources of generation and lower electricity demand. The relative costs of generating technologies and fuels, and mitigation policies that affect these costs, will largely determine the timing and magnitude of the shift towards low emissions generation (ACIL Allen Consulting 2013, BREE 2012a, IEA 2012b).

Figure 12.6: Electricity emissions, historical and projected, 1990–2030

Figure 12.6 shows Australia’s historical and projected electricity emissions between 1990 and 2030. Australia’s electricity emissions increased between 1990 and 2009 and then fell to 2012. Australia’s electricity emissions are projected to increase 39 per cent above 2000 levels by 2030 in the no price scenario and decrease to 18 per cent below 2000 levels in the low scenario, 10 per cent below 2000 levels in the medium scenario and 60 per cent below 2000 levels in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013 and ACIL Allen Consulting 2013

Opportunities for emissions reductions from the electricity sector

Modelling and other analyses suggest that, with incentives in place, the electricity sector could be the single largest source of domestic emissions reductions. Compared to the no price scenario, modelling suggests the electricity sector could reduce emissions by between 9 and 59 Mt CO2-e in 2020 (in low and high scenarios, respectively) and by between 36 and 174 Mt CO2-e in 2030 (low and high scenarios). This is additional to the emissions reductions due to the RET, at its current legislated level.

ClimateWorks Australia (2010) estimates that the electricity sector has ‘realistic reduction’ potential of up to 77 Mt CO2-e in 2020, compared to business as usual, by reducing emissions intensity of supply.

A variety of sources highlight the importance of price incentives in driving changes in the emissions intensity of supply and in reducing demand (ClimateWorks 2013b, Garnaut 2008, IEA 2012a). Pitt & Sherry (2013a) estimates that about 40 per cent of the reduction in emissions from the NEM in the year to 2013 was due to lower electricity demand, and 60 per cent due to the uptake of lower emissions electricity generation. AEMO’s (2013a) forecasts note the effect of the RET in lowering the emissions intensity of electricity supply.

In the near term, emissions reductions from reducing electricity demand through energy efficiency measures could be significant; The Treasury (2011) projected that over 40 per cent of the cumulative sectoral emissions reductions to 2020 could come from reducing electricity demand. The analysis presented in Appendix D reinforces these estimates for significant emissions reductions to be delivered by reducing electricity demand. In the longer term, improvements in supply intensity are likely to be increasingly important. If barriers to energy efficiency (described below) are overcome, there could be even greater emissions reduction opportunities.

Reducing emissions through lowering electricity demand

Australia’s per person electricity consumption is well above the OECD average, and it lags on energy efficiency, highlighting the potential to reduce emissions through reducing electricity demand (IEA 2012b). Improving the efficiency of Australia’s buildings and electrical appliances could provide emissions reductions in 2020 of about 12 and 20 Mt CO2-e, respectively, under a scenario with a moderate price incentive in place (George Wilkenfeld & Associates 2009). AEMO reports that continuing the existing and planned building-related energy efficiency measures and minimum energy performance standards for electricity appliances could reduce electricity demand, in 2030, to a level that is about 20 per cent below demand in The Treasury and DIICCSRTE’s no price scenario (AEMO 2013b).

Several sources suggest that reducing electricity demand can reduce emissions at low cost, or even at a positive net present value (Prime Minister’s Task Group on Energy Efficiency 2010, Productivity Commission 2005, The Climate Institute 2013). Changing the profile or level of energy demand could reduce consumers’ electricity bills and offer economic benefits; for example, the AEMC (2012) estimates that system expenditure could be cut by at least $4.3 billion over the next decade through reducing peak demand growth.

Reducing emissions intensity of electricity supply

At present, Australia’s electricity supply is among the most emissions-intensive in the developed world and, since 2007, has exceeded China’s electricity emissions intensity (IEA 2013a).

To at least 2020, existing and committed electricity supply is expected to be adequate to meet demand in the NEM (AEMO 2013c). Low demand growth suggests there will be little new investment in new electricity generation, except in response to policy drivers. In the near term, the RET is supporting some deployment of low-emissions technologies, including wind and solar.

Existing fossil fuel generators can also reduce emissions by upgrading turbines, modifying boiler operations, retrofitting plants with new coal-drying technologies and co-firing with low-emissions fuels. Several Australian generators plan to do so (DRET 2013). As the costs of low-emissions technologies fall, it is likely they will increase their share of generation. Depending on the level of incentive, by the 2030s the growing share of low-emissions generation could include emerging technologies such as geothermal and carbon capture and storage (CCS), which are currently relatively costly and facing other challenges to deployment (see below).

Challenges to reducing electricity sector emissions

Challenges to reducing electricity demand

There are several non-price barriers to reducing electricity demand, identified by the Productivity Commission (2005, 2013), Garnaut (2008), the AEMC (2012) and others. There is also considerable consensus about solutions, including:

  • electricity consumption information and prices that better reflect actual costs of supply can help consumers understand their electricity use and manage spending; and
  • standards for electrical appliances and buildings that lower electricity consumption. Standards help combat split or perverse incentives for investing in energy efficiency while still allowing consumers the same appliance functionality.

The Authority considers it important to determine how energy efficiency opportunities can be cost-effectively pursued in the new policy environment, including the most sensible mix of responsibilities across state and Commonwealth jurisdictions. Particular initiatives that have been identified in previous reviews are discussed in Appendix D.

Challenges to reducing emissions intensity of electricity supply

Several sources of low-emissions electricity generation have already been deployed, including wind and solar PV. The costs of low-emission generation generally remain higher than the costs of conventional sources. At present, new investments in low-emissions generation are not cost-competitive with the costs of existing generation (whose large upfront capital costs are now sunk). This, combined with an overcapacity of supply in the NEM, means that existing generators could operate economically for some time, and there will be little incentive for new investment in lower emissions (or any other) electricity generation. This suggests policy will be needed to reduce the emissions intensity of supply. The RET is accelerating deployment of renewable electricity generation; deployment could be further accelerated by policies that create a demand for low-emissions electricity investments and lower their relative cost. It is important that policies and incentives are stable, given the long life of electricity generation assets.

The deployment of emerging low-emissions technologies, such as geothermal and CCS, is high-risk and capital-intensive. Technical, price and logistical challenges have slowed progress on these particular technologies in recent years. As a result, electricity sector experts predict their deployment could occur later than was thought a few years ago and generally do not expect these technologies to contribute substantial emissions reductions in Australia until the 2030s, even if policy drivers exist to promote investments in lower emissions generation (ACIL Allen Consulting 2013, BREE 2012b).

A detailed analysis of progress in reducing electricity sector emissions is presented in Appendix D3.

12.4.4 Transport

Transport emissions are from vehicles combusting fuels to move people and freight, reported across four modes – road, rail, domestic aviation and domestic shipping. International aviation and shipping emissions are excluded from Australia’s emissions. Emissions associated with producing and refining liquid and gaseous fuels, as well as generating electricity, are attributed to stationary energy sectors. The transport sector accounted for approximately 15 per cent of Australia’s emissions in 2012.

Figure 12.7: Transport emissions, historical and projected, 1990–2030

Figure 12.7 shows Australia’s historical and projected transport emissions between 1990 and 2030. Australia’s transport emissions increased between 1990 and 2012. Australia’s transport emissions are projected to increase to 41 per cent above 2000 levels by 2030 in the no price scenario, 31 per cent above 2000 levels in the low scenario, 21 per cent above 2000 levels in the medium scenario and 10 per cent above 2000 levels in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013 and CSIRO 2013

Transport sector emissions have increased by 29 Mt CO2-e (46 per cent) since 1990. The Treasury and DIICCSRTE modelling projects that, under all scenarios, transport demand will continue to grow and, without sufficient policy drivers, this will lead to continued emissions growth. Under the low, medium and high scenarios, emissions dip or level out to the mid-2030s, due to reduced emissions intensity of passenger and road freight transport (Figure 12.7).

After 2030, emissions are projected to increase again as road transport activity continues to grow.

The modelled scenarios do not include a carbon price on light vehicle emissions, which currently account for approximately 63 per cent of transport emissions. Significant emission reductions are available for light vehicles at modest cost.

The Treasury and DIICCSRTE modelling suggests that price incentives may be effective in reducing emissions in the medium to long term, with emissions lower by 23 Mt CO2-e in 2030 and 30 Mt CO2-e in 2050 under the high scenario relative to the no price scenario. Most of the projected transport emissions reductions result from heavy vehicle efficiency and biofuels.

Opportunities for emissions reductions in transport

Road transport, particularly light passenger vehicles, accounts for most transport emissions. Australia has a higher average emissions intensity of the passenger vehicle fleet than many other developed countries. Few policy drivers have targeted the sector’s emissions; international evidence suggests that there is a substantial opportunity for emissions reductions. Some policy measures in the transport sector will, however, need to have regard to the specific characteristics of Australia, such as its relatively dispersed population across a large geographical area.

There is potential to reduce transport emissions through use of sustainable biofuels, vehicle electrification and mode shift; for example, from private vehicle transport to more rail and bus transport in urban areas.

Fleet-average fuel economy or carbon dioxide emissions standards for light vehicles have been adopted in many major markets, including the European Union, the United States, Canada, China, Japan and South Korea. Such standards warrant further investigation for Australia.

Challenges to reducing emissions in the transport sector

Even if new policies are introduced in the transport sector, emissions reductions might be slowed or prevented by:

  • Supply constraints in biofuel production, such as lack of available land and competing food uses for the biofuel crops. Oil prices and other factors that influence competition with fossil fuels may lead to a fluctuation in consumption rates of biofuels.
  • The cost of electric vehicle technology and the emissions intensity of electricity supply. The current high purchase price (and limited driving range) of electric vehicles relative to internal combustion engine vehicles is a hurdle to widespread adoption. If the emissions intensity of Australia’s electricity supply remains high, it is possible that vehicle electrification could result in a net emissions increase compared with continued use of conventional light vehicles.
  • The low population density of Australia’s cities (relative to European and Asian standards). This presents a challenge to the investment in and use of alternatives to light vehicles for urban passenger movement.

A detailed analysis of progress in reducing transport emissions is presented in Appendix D4.

12.4.5 Direct Combustion

Direct combustion emissions are released when fuels are combusted for stationary energy purposes, such as generating heat, steam or pressure (excluding electricity generation). These emissions are released by large industrial users, and by small, dispersed residential and commercial consumers. Emissions from direct combustion accounted for 16 per cent of national emissions in 2012 (The Treasury and DIICCSRTE 2013).

In each modelled scenario, direct combustion emissions are projected to rise strongly from current levels through to 2030 (Figure 12.8). In absolute terms, under all but the no price scenario, direct combustion emissions increase more than any sector of the Australian economy. This increase is driven by growth in energy extraction industries, including for LNG production at seven major new projects to come online by 2020. Price incentives could slow growth to some extent by encouraging greater uptake of low-emissions technologies.

Opportunities for direct combustion emissions reductions

With strong growth projected in energy resources extraction, emissions intensity improvements are unlikely to be enough to reduce overall emissions from the sector. The Treasury and DIICCSRTE modelling suggests price incentives will have a relatively limited effect on direct combustion emissions. Even under the high scenario, the sector is expected to reduce emissions by only about 6 per cent (7 Mt CO2-e) in 2020 and 12 per cent (17 Mt CO2-e) in 2030, compared with a no price scenario. Reduced diesel use is expected to account for much of the emissions reduction.

The manufacturing and mining industries produce around three-quarters of direct combustion emissions. Activity in these industries; in particular, mining, is projected to grow, even with strong global action on climate change. Emissions reductions could come from improvements in emissions intensity, such as improving the efficiency of gas turbines and machinery, or capturing and using heat from gas turbine exhaust. With a price incentive, new investments could increasingly incorporate low emissions technologies that could deliver greater emissions reductions in the longer term (The Treasury and DIICCSRTE 2013).

The growth in residential and commercial direct combustion emissions, mainly from gas use, could be constrained through more efficient water and space heating appliances and more thermally efficient buildings. George Wilkenfeld & Associates (2009) suggest that ongoing and expanded mandatory efficiency standards for buildings and gas appliances, such as water heaters, could reduce cumulative emissions from residential gas use by 4.5 Mt CO2-e between 2000 and 2020, though household churn from electric to gas appliances may offset these emission reductions.

Beyond efficiency improvements, the main opportunity to reduce direct combustion emissions could be to substitute alternative lower emission energy sources, such as biofuels. If the emissions intensity of electricity generation falls, as projected, with incentives in place, then moving from direct fuel combustion to electricity could, in the medium to longer term, significantly reduce emissions from residential, commercial and industrial consumers.

Figure 12.8: Direct combustion emissions, historical and projected, 1990–2030

Figure 12.8 shows Australia’s historical and projected direct combustion emissions between 1990 and 2030. Australia’s direct combustion emissions increased between 1990 and 2012. Australia’s direct combustion emissions are projected to increase to 79 per cent above 2000 levels in 2030 in the no price scenario, 67 per cent above 2000 levels in the low scenario, 66 per cent above 2000 levels in the medium scenario and 57 per cent above 2000 levels in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Challenges to reducing emissions in the direct combustion sector

The challenges to reducing emissions from direct combustion include:

  • locked-in, long term energy supply contracts in the LNG industry;
  • investments in long-lived, high-value assets; and
  • barriers to the take-up of energy efficiency, including lack of information on energy consumption and split or perverse incentives for investing in energy efficiency. Standards for gas appliances and buildings, and information provision, have been used to help overcome these non-price barriers.

A detailed analysis of progress in reducing direct combustion emissions is presented in Appendix D5.

12.4.6 Fugitives

Fugitive emissions are greenhouse gases emitted during the extraction, production, processing, storage, transmission and distribution of fossil fuels such as coal, oil and gas. Fugitive emissions accounted for 8 per cent of national emissions in 2012 (The Treasury and DIICCSRTE 2013).

Without price incentives, fugitive emissions could rise rapidly, driven largely by strong export demand for LNG and coal. Substantial emissions reduction opportunities exist, however. In the modelled scenarios, the fugitive sector is projected to be the second largest source of emissions reductions over the period to 2030, providing 15 to 24 per cent of total expected emissions reductions, relative to the no price scenario (The Treasury and DIICCSRTE 2013).

Opportunities for fugitive emissions reductions

Fugitive emissions could more than double to 2030, from 48 Mt CO2-e in 2012 to 79 Mt CO2-e in 2020 and 100 Mt CO2-e in 2030, in a no price scenario. In low and high scenarios, the modelling shows that the fugitives sector could reduce emissions by 8 and 21 Mt CO2-e in 2020, respectively, compared to the no price scenario. In 2030, the fugitives sector could contribute between 31 and 51 Mt CO2-e emissions reductions.

Despite increased coal and gas production, improvements in emissions intensity can lower total fugitive emissions compared with the no price scenario. Coal mines are responsible for about three-quarters of fugitive emissions; a number of technologies are available to reduce emissions, including predraining to capture methane (which is a mature technology) and the oxidisation of ventilation air methane (which is at an early stage of development). With incentives, these technologies may be increasingly deployed after 2020 (ClimateWorks 2013a). In the short term, a price incentive to reduce emissions could encourage the relative expansion of lower emission mines. It could also drive the deployment of additional pre- and post-mine drainage, where gas could either be flared or used to generate electricity. These technologies could play a significant role in reducing fugitive emissions to 2020 and beyond.

Figure 12.9: Fugitive emissions, historical and projected, 1990–2030

Figure 12.9 shows Australia’s historical and projected fugitive emissions between 1990 and 2030. Australia’s fugitive emissions increased between 1990 and 2012. The figure shows Australia’s fugitive emissions are projected to increase to 144 per cent above 2000 levels by 2030 in the no price scenario, 68 per cent above 2000 levels in the low scenario, 64 per cent above 2000 levels in the medium scenario and 21 per cent above 2000 levels in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Carbon capture and storage (CCS) in the oil and gas sectors could significantly reduce fugitive emissions, though it is not widespread today. The IEA highlights this potential at a global scale (IEA 2013b). The Gorgon LNG project in Western Australia is expected to capture and inject at least three million tonnes of carbon dioxide annually by 2015 (Chevron 2013). Incentives may encourage deployment of CCS technologies in new projects near geologically suitable injection sites. Recently announced Queensland LNG projects appear not to have access to suitable injection sites, and are not expected to use CCS.

Other opportunities to reduce fugitive emissions in the natural gas industry may include equipment changes and upgrades, changes in operational practices and direct inspection and maintenance (US EPA 2006).

Challenges to reducing fugitive sector emissions

The main challenge to reducing fugitive sector emissions is strong growth in LNG and coal production, which could outstrip improvements in emissions intensity. Australia’s LNG production is projected to increase rapidly over the next decade, with seven major new projects identified as coming on line. Coal exports are also projected to grow (BREE 2012b).

Technologies to reduce emissions remain an additional cost for coal, oil and gas producers, compared to conventional production. Their uptake can be accelerated by policies or price incentives.

A detailed analysis of progress in reducing fugitive emissions is presented in Appendix D6.

12.4.7 Industrial processes

The main sources of industrial process emissions are:

  • metal production, such as iron, steel and aluminium;
  • synthetic greenhouse gases, such as those used for refrigeration and as propellants;
  • chemical processes in fertiliser and explosives manufacturing; and
  • mineral production, particularly cement and lime products.

Industrial process emissions exclude energy-related emissions such as those from burning of fossil fuels for heat, steam or pressure. Emissions from industrial processes accounted for 5 per cent of national emissions in 2012 (The Treasury and DIICCSRTE 2013).

In the no price scenario, industrial process emissions are projected to rise. With price incentives, emissions stabilise or fall from current levels. In scenarios with price incentive, industrial processes contribute a proportionally large share of domestic emissions reductions through the adoption of readily available and relatively low-cost, low-emission substitutes, technologies and process improvements.

Opportunities for emissions reductions in industrial processes

The industrial processes sector could reduce 2020 emissions by between 5 Mt CO2-e and 16 Mt CO2-e, compared with the no price scenario (The Treasury and DIICCSRTE 2013). Emissions reductions opportunities are projected to be even greater in 2030, with 34 Mt CO2-e under the high scenario (75 per cent lower than the no price scenario).

Figure 12.10: Industrial process emissions, historical and projected, 1990–2030

Figure 12.10 shows Australia’s historical and projected industrial process emissions between 1990 and 2030. Australia’s industrial process emissions increased between 1990 and 2012. Australia’s industrial process emissions are projected to increase to 73 per cent above 2000 levels in 2030 in the no price scenario and fall to 7 per cent below 2000 levels in the low scenario, 14 per cent below 2000 levels in the medium scenario and 58 per cent below 2000 levels in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Almost half of the estimated emissions reductions in the industrial processes sector in 2020 and 2030 could be delivered by nitrous oxide conversion catalysts for nitric acid production. This technology has already been deployed by Orica and is being trialled by Wesfarmers; they report that the technology could reduce emissions by 65 to 85 per cent (Orica 2012, Wesfarmers 2013). ClimateWorks (2013a) estimates that if this technology is taken up more widely it could reduce the emissions from nitric acid production by 44 per cent in 2020 compared with today, even with the expected increase in production. The regulation of nitric acid plants, including state-based environmental guidelines, is helping to reduce emissions in this sector.

The other significant emissions reduction opportunity is the destruction and replacement of synthetic greenhouse gases. These gases are used mainly in refrigeration, and account for about 27 per cent of industrial process emissions in 2012. Synthetic greenhouse gases may be superseded by alternative gases that have low to zero global warming potential. The rate of recovery and destruction of these gases, and the associated emissions reduction, will depend largely on incentives in place.

In the longer term, CCS could significantly reduce industrial process emissions. The International Energy Agency (IEA) suggests that by mid-century, around half of the global emissions reductions that it attributes to CCS could be from industries such as cement, hydrogen production, iron and steel (IEA 2013b).

Challenges to reducing emissions in the industrial processes sector

The challenges to reducing industrial process emissions include:

  • the cost of emissions reduction technologies. Financial incentives and other policies can accelerate uptake, as has occurred in recent years. These incentives could also apply to CCS for industrial applications where the technology is proven but still relatively expensive (IEA and Global CCS Institute 2012); and
  • rising production – particularly in the chemicals sector – that could outstrip improvements in emissions intensity.

A detailed analysis of progress in reducing industrial process emissions is presented in Appendix D7.

12.4.8 Agriculture

Agriculture emissions result from livestock digestive processes (enteric fermentation), manure management, nitrous oxide emissions from cropping and pastureland soils, prescribed burning of savannahs and burning of agricultural residues. The agriculture sector accounted for approximately 17 per cent of Australia’s emissions in 2012.

Agriculture emissions have increased by 1 per cent since 1990. Under all modelled scenarios, agricultural emissions are projected to increase strongly in the longer term. These increases are driven by strong international demand for agricultural commodities, primarily from emerging Asian economies.

Figure 12.11: Agriculture emissions, historical and projected, 1990–2030

Figure 12.11 shows Australia’s historical and projected agriculture emissions between 1990 and 2030. Australia’s agriculture emissions were about the same in 1990 as in 2012. Australia’s agriculture emissions are projected to increase to 17 per cent above 2000 levels by 2030 in the no price scenario, 13 per cent above 2000 levels in the low and medium scenarios and 11 per cent above 2000 levels in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

 

While price incentives may reduce agriculture emissions intensity, the strong projected activity growth means total agriculture emissions could still grow.

Opportunities for emissions reductions in agriculture

The Treasury and DIICCSRTE estimate emissions would be about 1 and 3 Mt CO2-e lower in 2020 under the low and high scenarios, respectively, relative to the no price scenario. Most of these emission reductions are from livestock.

ClimateWorks (2010) assessed the emissions reduction potential of agriculture and found greater opportunities – reductions of over 4 Mt CO2-e in 2020 from livestock at a societal cost of $17/t CO2-e or less. Further, ABARES analysis suggests that about 7 Mt CO2-e of emissions reductions, at a cost of $73/t CO2-e or less, might be available from livestock in 2020. Apart from manure management, however, most of the projected technologies and practices for reducing livestock emissions are still being developed and are not ready for commercial use. It should be noted, however, that the studies referred to have significant differences in assumptions relating to available technologies, level of uptake and associated costs.

Productivity improvements may also reduce the sector’s emissions intensity. Australia has historically achieved production efficiency improvements of about 2 per cent annually in broadacre cropping.

Challenges to emissions reductions in agriculture

One of the major challenges for the agriculture sector is the development and implementation of emissions reduction technologies. Greenhouse gas emissions from the digestion of livestock were responsible for about two-thirds of emissions from the agriculture sector in 2012, for which there are currently limited emissions reduction technologies and practices available. Measurement of emission reductions is also an issue. Livestock and cropping emissions involve complex interactions within biological systems that are very difficult to measure with precision. A practice that reduces emissions on one farm may have a different effect at another, due to different local conditions such as pasture type and weather.

Continued research and technology development is important to support both development and uptake of emission reduction opportunities and general emissions intensity improvements.

Other challenges include limited access to capital. Small farms may be unable to achieve economies of scale and have limited access to information about emission reduction projects. These challenges are exacerbated by the presence of many small and dispersed participants in the sector.

A range of approaches could be taken to combat these barriers and challenges, such as providing information through rural networks, simplifying methodologies for projects, facilitating access to capital and facilitating the use of project providers to consolidate projects across multiple small farms. A trend in recent decades toward increasing farm sizes and the concentration of production in larger farms may also help reduce some of these challenges.

A detailed analysis of progress in reducing agriculture emissions is presented in Appendix D8.

Figure 12.12: LULUCF emissions, historical and projected, 1990–2030

Figure 12.12 shows Australia’s historical and projected land-use, land-use change and forestry (LULUCF) emissions between 1990 and 2030. Australia’s LULUCF emissions decreased between 1990 and 2012. Australia’s LULUCF emissions are projected to fall to 53 per cent below 2000 levels by 2030 in the no price scenario, 73 per cent below 2000 levels in the low and medium scenarios and 85 per cent below 2000 levels in the high scenario. 

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

12.4.9 Land Use, Land Use Change and Forestry (LULUCF)

Land use, and the biomass the land supports, forms part of the carbon cycle and affects atmospheric CO2 levels. Reporting on land use, land use change and forestry sector includes emissions and sequestration due to the clearance of forested land for new purposes (deforestation), new forests on land that was unforested on 1 January 1990 (afforestation and reforestation), and the implementation of practices that change emissions and sequestration on other lands (forest management, cropland management and grazing land management). Combustion of fossil fuels from forestry and land management activities, such as diesel used in logging machinery, is covered in the direct combustion sector. LULUCF accounted for approximately 4 per cent of Australia’s emissions in 2012.

LULUCF has been the biggest sectoral contributor to emissions reductions in Australia since 1990. Net emissions from the sector have declined by 85 per cent from 140 Mt CO2-e in 1990 to 22 Mt CO2-e in 2012.

Macroeconomic factors, such as farmers’ terms of trade and prices of wood commodities, have been the main determinant of emissions from LULUCF. Land clearing restrictions in Queensland and New South Wales have also played a significant role in the last decade. The Queensland restrictions have recently been relaxed, with legislation in 2013 returning aspects of Queensland’s land clearing framework to the conditions that applied prior to 2009. Policy incentives (such as Managed Investment Schemes) boosted forest plantations in the 1990s; however, it is unlikely all of these forests will be replanted once harvested. Over the medium to longer term, a combination of subdued forestry demand, reduced land clearing restrictions and upward pressure on deforestation due to increased cattle herd numbers after 2020 are all factors contributing to projected emissions trends.

The Treasury and DIICCSRTE (2013) and others suggest incentives can bring forward significant emission reductions in the sector.

Opportunities for emissions reductions in LULUCF

Price incentives could play an important role in LULUCF emissions reduction. Relative to the no price scenario, 12 Mt CO2-e and 14 Mt CO2-e of emissions reductions could be delivered by 2020 and 2030, respectively, under the medium scenario. Under the high scenario, emissions reductions may be 18 Mt CO2-e in 2020 and 23 Mt CO2-e in 2030.

ClimateWorks (2010) estimates much greater LULUCF emissions reductions potential – about 100 Mt CO2-e in 2020 with price incentives consistent with the medium scenario. ClimateWorks found that forest planting, reduced deforestation, and pasture and grassland management are significant potential sources of emissions reductions (ClimateWorks 2010). These estimates also incorporate emission reductions from savanna burning, normally reported as agriculture emissions. If this potential was realised, 100 Mt CO2-e of emissions reduction in 2020 would represent the largest single sectoral contribution to domestic emissions reductions, at about 17 per cent of 2000 levels.

Regulatory measures such as land clearing restrictions in Queensland and New South Wales have been one of the main drivers of significant emission reductions since 2005. Regulatory measures have also been very successful in reducing emissions in other countries; for instance Brazil has reduced deforestation by 82 per cent since the early 2000s, which has been credited to a combination of regulatory measures and lower agricultural prices (Climate Policy Initiative 2013).

Many of the LULUCF emission reduction opportunities could create other substantial environmental benefits such as reduced erosion, protection of biodiversity and improved water quality.

Challenges to LULUCF emissions reductions

LULUCF emissions reductions face many barriers similar to those of agriculture. Effective methodologies to ensure that emissions reductions are measurable and robust are critical. Substantial research is likely to be required to design effective incentive measures that allow accurate measurement of emission reductions from changed land and forest management practices, and ensure that attributed emission reductions are robust and permanent.

For smaller scale operations, available returns may be insufficient to make adoption of emissions reductions technologies or practices worthwhile, and limited access to capital may also be a barrier. Requirements for ‘permanence’ in carbon sequestration projects, such as forestry, may also fix land uses for periods of a century or more. For activities such as forestry plantings on pasture lands, landowners will need to consider the value of alternative uses. Projected increased demand for agricultural commodities may make forestry investments less attractive, relative to investing in agriculture.

A detailed analysis of progress in reducing land use, land use change and forestry emissions is presented in Appendix D9.

12.4.10 Waste

Waste includes solid waste and wastewater from residential, commercial and industrial activity. Waste emissions are mainly methane and nitrous oxide, which arise as organic waste decomposes in the absence of oxygen. The waste sector accounted for 3 per cent of Australia’s emissions in 2012.

Waste sector emissions have decreased by 26 per cent since 1990 despite population growth and increased waste volumes. Under all modelled scenarios, waste emissions will continue falling. In the absence of a carbon price or any new policy measures, waste emissions are projected to fall marginally to around 15 Mt CO2-e in 2030. Further emission reductions of between 6 Mt CO2-e and 8 Mt CO2-e (compared to the no price scenario) could be expected under the scenarios with a price incentive.

Historically, both regulatory and market-based measures have been successfully used to reduce emissions in the waste sector. Direct regulation of landfills for health and safety purposes has played a major role in driving implementation of gas capture technologies. Market incentives such as the New South Wales Greenhouse Gas Abatement Scheme and the Renewable Energy Target have also played a strong role in encouraging emissions reduction.

Opportunities for emissions reductions in waste

The major emission reduction opportunity for waste is the expansion of alternative waste treatment facilities to reduce waste volumes being sent to landfill. This relies on development of new facilities and installation of new technologies, such as food waste treatment and other thermal energy recovery technologies. Further emission reductions could be generated by improving gas capture technology efficiency rates at landfill and wastewater facilities, and extending coverage of these technologies to smaller facilities. A price incentive would increase uptake of both gas collection and destruction and alternative waste treatment technologies. The CFI already provides incentives for destruction of methane emissions from ‘legacy’ waste (deposited at landfills before July 2012).

There is some evidence that increasing the cost of landfill disposal makes alternative waste treatment a more attractive option to pursue, driving waste streams away from landfill. This has been addressed via increased landfill levies in some Australian states and in the United Kingdom.

Figure 12.13: Waste emissions, historical and projected, 1990–2030

Figure 12.13 shows Australia’s historical and projected waste emissions between 1990 and 2030. Australia’s waste emissions decreased between 1990 and 2000. Australia’s waste emissions are projected to decrease to 13 per cent below 2000 levels by 2030 in the no price scenario, 49 per cent below 2000 levels in the low scenario, 51 per cent below 2000 levels in the medium scenario and 60 per cent below 2000 levels in the high scenario.

Source: Climate Change Authority calculations using results from The Treasury and DIICCSRTE 2013

Challenges to emissions reductions in the waste sector

Australia has high levels of adoption of conventional emission reduction technologies such as gas capture and alternative waste treatment relative to other countries.

There are several barriers to the implementation of emission reductions in the waste sector:

  • The installation of new technologies involves large capital costs that may take an extended operating period to recover. This suggests that a strong and stable price incentive, or a clear and enforceable regulatory requirement, would be needed to promote investment in these technologies.
  • New waste treatment technologies and processes such as food waste treatment and thermal treatment plants may face hurdles of community acceptance, availability of suitable land, meeting local planning requirements and gaining sufficient funding.
  • Alternative waste treatment and other emissions reduction technologies require a minimum scale to be cost-effective. Smaller towns in rural and regional areas often do not generate enough waste for local councils to justify the investment.

A detailed analysis of progress in reducing waste emissions is presented in Appendix D10.

Draft Conclusions

C.12 Economy-wide emissions are projected to rise to 17 per cent above 2000 levels in 2020, and 37 per cent above 2000 levels in 2030, without a price incentive or other policy mechanism.

C.13 There are extensive opportunities to reduce Australia’s emissions, at relatively low costs. Policies are needed to realise these potential emissions reductions.

C.14 Electricity sector emissions are projected to grow strongly without a price incentive or other policy mechanism. With price incentives, the electricity sector could be the single largest source of domestic emissions reductions, through a mix of demand reduction and decreased generation emissions intensity.

C.15 Rapid growth in demand for road transport and domestic air travel is projected to drive increasing transport emissions, without a price incentive. With appropriate policies, fuel efficiency, biofuels and vehicle electrification could deliver significant transport emissions reductions.

C.16 Direct combustion and fugitive emissions are projected to rise strongly from current levels, driven by demand for Australian energy resources. Price incentives could slow emissions growth.

C.17 Industrial process emissions are projected to grow without a price incentive. The sector, however, is expected to be highly responsive to targeted policy and could deliver significant emissions reductions.

C.18 Agriculture emissions are projected to grow in the period to 2030 in all scenarios modelled, driven primarily by strong growth in demand for Australia’s agricultural exports. Projected emissions reduction opportunities are relatively limited.

C.19 Regulatory measures such as land clearing restrictions in Queensland and New South Wales have been one of the main drivers of significant historical land sector emission reductions. There remains significant potential for emissions reductions in the land sector.

C.20 Waste emissions are generally expected to fall over time. Projected emissions reductions depend upon the level of price incentive.

Chapter 12 surveyed possible outlooks for Australia’s domestic emissions. It showed there is great potential to reduce emissions, and that each sector has different challenges and opportunities. Emissions from some sectors are likely to be highly responsive to price incentives, while others may be less responsive.

It also identified where, when and how emissions reductions might occur in Australia. Chapter 13 considers the benefits and risks of using international emissions reductions to help meet Australia’s emissions reduction goals.