Chapter 8 Timeframe, Form and Scope of Australia’s emissions reduction goals
The Authority recommends a set of emissions reduction goals that provide a degree of certainty in the short term and some predictability over the medium and long term, to support a smooth transition to a low-emissions economy. The future is not certain, and Australia needs to be able to change course to respond to changing circumstances. For this reason, the degree of flexibility – coupled with principles to guide the use of this flexibility – increases with time in the Authority’s recommendations.
In its Final Report, the Authority will recommend a single 2020 target, and a corresponding budget and indicative national trajectory to this target. For longer term guidance, the Authority will recommend a 2050 emissions budget to provide a direct, transparent link between Australia’s emission reduction goals and its overarching objective to limit warming to below 2 degrees. The Authority will also recommend a trajectory range to 2030 to improve policy predictability, increase clarity about effort over time and inform Australia’s participation in international negotiations.
The scope of these recommended goals must be clearly defined. Chapter 8 sets out which emissions count towards the Authority’s recommended goals, and how government purchases of international emissions reductions, voluntary action and Australia’s performance against its first commitment period target under the Kyoto Protocol are taken into account. Australia’s emissions were less than its target in the 2008–2012 Kyoto Protocol period, and the Authority is disposed to the view that Australia should use the surplus emissions rights to strengthen the 2020 emissions reduction target.
Chapter 8 sets out the Authority’s draft conclusions on the timeframes, form and scope for emissions reduction goals, including:
- the case for the Authority recommending goals for 2020 and beyond 2020;
- the Authority’s preferred form for medium and long term goals;
- how these goals should be reviewed and updated over time;
- the emissions included in Australia’s goals;
- how voluntary action to reduce emissions should be taken into account; and
- how Australia should use its surplus emissions rights from the 2008–2012 Kyoto Protocol period.
8.1 A coordinated set of goals for Australia
To recommend emissions reduction goals to 2020 consistent with its principles and Australia’s national interest, the Authority’s view is that it needs to consider Australia’s overall emissions reduction goals to at least 2050.
The Clean Energy Act 2011 (Cth) requires the Authority to recommend an indicative national emissions trajectory, a national emissions budget and caps for the carbon pricing mechanism to 2019–20. Apart from the caps (see Chapter 14), the legislation gives the Authority discretion over the nature and timeframe for its recommended emission reduction goals.
The Authority has considered the appropriate timeframes for its recommendations carefully. In particular, it has considered which timeframes and types of goals are important, both for recommending near term goals consistent with the Authority’s principles and governing legislation, and providing timely advice to the Government on Australia’s international commitments and undertakings.
There is little point in recommending near term goals that are inconsistent with long term objectives. Positioning 2020 within a longer timeframe helps ensure that recommended 2020 goals represent a credible step towards these objectives rather than too little or too much action towards the below 2 degrees goal.
The Authority’s recommendations are timely, as they can help inform the Government’s upcoming decisions about Australia’s international emissions reduction commitments, including:
- in 2014, the Government must review its 2020 target commitment and decide whether to strengthan this from 5 per cent; and
- in 2014 or 2015 Australia is likely to be required to indicate some form of post-2020 goal.
The Authority is therefore recommending a consistent set of emissions reduction goals that provide a degree of certainty in the short term, and some predictability and flexibility over the medium and longer term. The Authority will recommend (Figure 8.1):
- Clear short term goals that plot a sensible near term path consistent with Australia’s national interest and inform Australia’s international undertakings relating to a 2020 target. The Authority will recommend an emissions budget to 2020, a 2020 target and an indicative trajectory to 2020.
- A medium term trajectory range for 2020–2030, within which future targets and trajectories should be set, to increase policy predictability for business and other stakeholders. Options for short and medium term goals are discussed in Chapter 11.
- A long term emissions budget for 2013–2050, to anchor Australia’s emission reduction pathway in its national interest in limiting warming to below 2 degrees. A long term emissions budget for Australia is recommended in Chapter 9.
Figure 8.1: The Authority’s recommended set of emissions reduction goals
Source: Climate Change Authority
The Authority’s advice in this Draft Report is based on the best available evidence and takes account of how circumstances and relevant factors may change over time. More information will become available as new research is conducted and projections are replaced with actual outcomes. New information should be considered in future reviews and goals beyond 2020 revised accordingly. Chapter 8 includes general guidance on how new information would affect future goals to make them more predictable.
The next two sections set out further detail on the potential benefits of post-2020 goals and the recommend form for those goals.
8.2 Extending the timeframe – the case for post-2020 goals
There is a compelling case for increasing the amount of guidance about Australia’s post-2020 emissions reduction goals beyond the current, single-year target for 2050. In the Issues Paper, the Authority committed to assessing Australia’s possible actions beyond 2020, and to consider making recommendations on emissions reduction goals beyond 2020. Recommendations on post-2020 goals were supported by a large number and wide range of stakeholders.
Additional post-2020 goals have five potential benefits:
- improving policy predictability and providing an early indication of future emissions reduction goals, which can assist in lowering risk and costs for business;
- improving environmental effectiveness by linking Australia’s action more directly to a scientifically derived global emissions budget;
- increasing government accountability for achieving long term goals;
- informing international negotiations on the post-2020 framework, as Australia and some other countries are likely to begin indicating post-2020 goals in 2014 or 2015; and
- increasing transparency on the distribution of Australia’s effort over time, and the implications of short term goals for intergenerational equity.
About half the submissions received in response to the Issues Paper provided views on post-2020 goals. Non-government organisations, individuals and most business submissions, including the Business Council of Australia (BCA) and the Australian Industry Greenhouse Network, were supportive of additional post-2020 guidance. The BCA commented that it:
… strongly supports the CCA’s approach to look beyond 2020 to 2030 and 2050 – business needs policy frameworks that look forward at least 20 years, which is the ‘bankable’ timeframe for major low emission and emission abatement investment (Issues Paper submission, p. 6).
Some business and individual submissions expressed concerns with setting goals beyond 2020. A report from Domanski Energy & Economics accompanying the Australian Chamber of Commerce and Industry’s submission argues that ‘setting targets for years beyond 2020 now is too uncertain and risky’ (Issues Paper submission, p. ix). Santos wrote that pre-empting international negotiations was not beneficial.
If Australia set long term goals and did not revisit them, these concerns would have significant force. The Clean Energy Act requires – and the Authority recognises the value of – periodic reviews of medium and long term goals in light of new information. Further, recommendations for post-2020 goals are timely rather than pre-emptive. Australia is likely to have to put forward some form of post-2020 goal by 2015. Another concern was raised by Mr James Wight: ‘Distant targets ignore the urgency and are easily undermined. It is more important to begin, in a single electoral term, systemic decarbonisation of the economy’ (Issues Paper submission, p. 3). The Authority agrees that clear short term goals are necessary, and sees post-2020 goals as a complement to, rather than a substitute for, near term goals.
The Authority concludes that clear but flexible long term guidance on Australia’s emissions reductions can help create a stable, predictable environment for Australia’s transition to a low-emissions future.
8.3 Form of post-2020 goals
The Authority considers a long term national emissions budget to 2050 and a trajectory range from 2020 to 2030 would provide clear long term guidance while maintaining flexibility to respond to new information. Combining a 2050 emissions budget with a medium term trajectory range capitalises on the advantages of each:
- A long term budget to 2050 provides a direct, transparent link between Australia’s emission reduction goals and its overarching objective to limit warming to below 2 degrees. It can also increase government accountability by providing a simple measure of progress. The appropriateness of this 2050 budget should be subject to periodic review.
- A trajectory range balances flexibility and predictability for medium term policy by bounding the scope for future changes. A trajectory range also improves clarity about effort over time, provides guidance for international commitments and signals a willingness to take stronger action under the right conditions.
The Authority’s approach incorporates many elements proposed by stakeholders. AGL Energy proposed a long term national emissions budget to 2050 complemented by a medium term trajectory range for potential future caps from 2020 to 2030. Energy Australia considered a trajectory range (also known as a gateway) could be useful to improve investor certainty and that 10 years of gateways from 2020 should be considered. The Energy Supply Association of Australia called for ‘a gateway indicating a possible range of emissions levels out to 2025 or 2030’ (Issues Paper submission, p. 1). Non-government organisations, including Oxfam, Australian Conservation Foundation and Climate Action Network Australia, were broadly aligned in support of a long term budget, interim targets and a longer term trajectory. Some stakeholders proposed medium term targets; for example, to 2030.
Stakeholders had different views about the merits of trajectories. Non-government organisations were broadly supportive, whereas the BCA recommended the Authority refrain from nominating trajectories because they would inhibit Australia making the most efficient distribution of emissions reductions over time. The Authority agrees that goals should provide some flexibility in the timing of emissions reduction effort. The purpose of a trajectory is to define a budget that can be met flexibly over time, not to set binding limits in each year. As a result, the Authority does not believe trajectories inhibit efficiency. That said, having recommended a long term budget to guide overall emissions reductions, the Authority considers a trajectory or range of trajectories that stretched beyond 2030 would be unnecessarily prescriptive at this time.
The Authority sees value in a set of emissions reduction goals that provide some predictability in the medium and long term while maintaining flexibility to respond to new information.
In order that post-2020 goals genuinely provide predictability and flexibility, they must be reviewed regularly and the reviews themselves should respond to changing circumstances in a reasonably predictable way. In particular, the latest information on climate science, international action and economic factors should be considered in periodic reviews, with those goals then updated as appropriate.
C.8 The Authority proposes a set of emissions reduction goals for the long, medium and short term. This will provide a more predictable environment for businesses and others to act, with a degree of certainty in the short term, while maintaining greater flexibility in the longer term.
The Authority’s recommended set of goals for Australia comprises:
- A long term national emissions budget to 2050, connected to Australia’s national interest and subject to regular review, which will provide guidance for longer term planning.
- A medium term trajectory range for emissions reduction to 2030, subject to extension and revision over time, which will offer guidance within bounds, increasing predictability for investment.
- A short term emissions budget and trajectory to 2020 and associated 2020 target that will provide a degree of certainty for near term action.
Post-2020 goals require periodic review in order to fulfil their role in providing both clarity and flexibility to respond to new information.
The next four sections deal with recommendations on post-2020 goals in further detail, covering the shape of recommended trajectories and the trajectory range; the basis for setting the trajectory range; extending and narrowing the trajectory range; and criteria for revising medium and long term goals.
8.4 Shape of the indicative national emissions trajectory and the trajectory range
The Authority recommends straight-line indicative trajectories from 2013 emissions to the 2020 target and from the 2020 target to the either end of the 2030 range. Straight-line trajectories provide simple and predictable pathways to meet emissions reduction targets. They also make it easy to translate the 2020 target into a second commitment period goal for the Kyoto Protocol, should the Government wish to do so. As previously discussed, the trajectories do not set binding limits on emissions in each year, but are the basis for defining a binding budget.
Under the Kyoto Protocol, Australia has adopted an unconditional 2013-2020 budget (in the form of a Quantified Emission Limitation or Reduction Objective – ‘QELRO’). This is based on a straight line from the midpoint of Australia’s first commitment period target (108 per cent of 1990 levels in 2010) to its minimum, unconditional 2020 target of 5 per cent below 2000 levels (Commonwealth of Australia 2012). This gives a QELRO of limiting average annual emissions in the period 2013-2020 to 99.5 per cent of 1990 levels. The QELRO is in the form of a 2013-2020 budget rather than a year-by-year trajectory.
The Authority’s recommended indicative national trajectory for 2013-2020 will follow the same approach; a straight line to its recommended 2020 target (Figure 8.1). Similarly, the Authority’s recommended trajectory range for 2020–2030 will be formed by straight lines between the recommended 2020 target and the top and bottom of the trajectory range in 2030. It is the Authority’s view that a curved trajectory range would create unnecessary complexity for little benefit over this time horizon.
8.5 Basis for recommending the trajectory range for 2020–2030
The principal advantage of a trajectory range is that it provides more information about future emissions reduction goals, while maintaining a degree of flexibility. As with Australia’s 2020 target, Australia can usefully start with a 2030 trajectory range, and narrow the range over time. This could be particularly helpful for the Government as it considers Australia’s post-2020 international commitments. Under the United Nations Framework Convention on Climate Change (UNFCCC) negotiations, many countries will put forward post-2020 goals in 2014 and 2015 (Section 4.5). Australia may choose to express a range for 2030 now and narrow this over time as the post-2020 international architecture becomes clearer and more countries put forward actions.
The width of the trajectory range is an important factor in achieving these outcomes. A trajectory range that is extremely wide provides little guidance, while an extremely narrow trajectory range provides little flexibility to respond to new information over time.
The Authority proposes a trajectory range that provides a clear link to long term goals, namely the recommended 2050 national emissions budget (see Chapter 9) and the currently legislated 2050 target. The recommended 2050 national emissions budget is based on the Authority’s view of an equitable share of the global budget adopted as a reference for this Review, which is estimated to give a 67 per cent chance of limiting warming to below 2 degrees (see Chapters 3 and 9). The Authority proposes to define the ‘bottom’ or stronger end of its trajectory range as the 2020–2030 portion of a trajectory that meets its recommended 2050 emissions budget. The ‘top’ or weaker end of the trajectory range is based on the legislated long term target of 80 per cent below 2000 levels in 2050. Depending on the 2020 start point, tracking along this top trajectory could see Australia meeting a 2050 national emissions budget consistent with a less than 50 per cent chance of limiting warming to below 2 degrees. This would exceed the Authority’s recommended 2050 emissions budget, but meet the 2050 goal in current legislation. The trajectory range is illustrated in Figure 8.2 and the relationship between the 80 per cent target and limiting warming to below 2 degrees is discussed further in Box 11.1. If adopted by Government, a range constructed in this way could help indicate that Australia is prepared to keep within its share of the global emissions budget. It would also maintain Australia’s flexibility to take into account the latest information on climate science, international action and economic factors prior to making final decisions on medium term goals.
The Authority’s overall approach to the trajectory range is similar to that recommended by the National Emissions Trading Taskforce (2007) and the Prime Ministerial Task Group on Emissions Trading (2007) but is applied to national emissions rather than caps in an emissions trading scheme.
Figure 8.2: How the Authority’s recommended trajectory range is constructed
Source: Climate Change Authority
8.6 Regular future reviews of medium and long term goals
In order that they fulfil their role in providing both clarity and flexibility to respond to new information, the trajectory range and the 2050 emissions budget should be reviewed periodically.
As the Clean Energy Act currently provides, reviews of medium and long term goals should take place every five years, possibly with an extra review in about 2016 to take into account international developments on the post-2020 framework. Reviewing medium and longer time goals more frequently than this risks creating the kind of uncertainty for investors that reviews are designed to reduce. These five yearly reviews should:
- Extend the trajectory range to maintain a similar amount of guidance over time. The recommended 2020 goals and trajectory range to 2030 in the Authority’s Final Report will provide 16 years of initial guidance; similar guidance can be maintained by extending trajectories by five years at each five-yearly review.
- Narrow the existing trajectory range to reduce uncertainty regarding future trajectories as more and better information becomes available. In truly exceptional circumstances, such as a dramatic change in climate science, economic factors or international action, a review could recommend the trajectory range move outside the previously defined range.
- Review the 2050 emissions budget.
If the Government adopts a trajectory range to 2030, it will have to settle on specific points within this range at some stage. This could be to set down a new international commitment, such as a 2030 target or a new QELRO, or for the purposes of domestic policy. The best frequency for selecting specific points within a trajectory range will depend in part on domestic policy design; however, in the Authority’s view it is desirable for business and other stakeholders to have at least five years of certain near term goals. In order to provide a more predictable policy environment, these points should be chosen according to clear, preannounced criteria. These criteria should also be used for extending and narrowing the trajectory range and reviewing the long term national emissions budget. They are discussed in the next Section.
8.6.1 Criteria for reviewing emissions reduction goals
Identifying criteria for setting targets and trajectories within the trajectory range and updating medium and long term emissions reduction goals can help to increase policy predictability. The Authority considers three factors of particular importance here – new or changed information on climate science, international action on climate change and economic factors.
A further question is how specific criteria should be. More specific criteria can appear to add clarity, but in practice can become barriers to the very action they were designed to facilitate. For example, specific criteria may place undue importance on the form of an outcome rather than focusing on its substance. General criteria would identify the key factors that influence a decision but would not specify precise requirements. As such, they would be more robust to evolving circumstances. In combination with reviews that include broad consultation and transparent decision-making, general criteria can provide a more robust base for predictable goals.
The Authority’s recommended criteria for setting future targets and trajectories within the trajectory range, extending and narrowing the trajectory range, and reviewing the long term national emissions budget are changes or new information in relation to:
- Climate science. New science that indicates the global budget is smaller than previously estimated could imply stronger action by Australia. Evidence that the global budget is larger than previously estimated could imply less action.
- The level and pace of international action on climate change. Stronger international action could imply stronger Australian action, and less international action could imply less Australian action. This criterion would take into account Australia’s international obligations and undertakings. These act as a ‘floor’ to any future trajectories – allowing strengthening but not weakening.
- Economic factors. Higher than expected costs (for example, because of macroeconomic shocks or because low emissions technologies have not developed as expected) could imply weaker action by Australia, and lower than expected costs (for example, because low-emissions technology is cheaper than expected) could imply stronger action.
The Authority would expect the first two of these (changes or new information in relation to climate science and international action) to be the most relevant for reviews of the long term national emissions budget. The long term budget would be less affected by at least some economic factors such as shorter term fluctuations in the economic cycle. As the recommended long term national budget is also anchored in an approach that achieves eventual equality in emissions rights per person (see Chapter 9), it should also be periodically updated for changes in population projections.
R.1 That the trajectory range and the national budget to 2050 be reviewed at least every five years. There could be an extra review in 2016 to take into account international developments on the post-2020 framework. As part of these reviews, the trajectory range would be extended and narrowed to maintain a similar period of guidance over time, and future targets and trajectories would be set within the range.
R.2 That the periodic reviews of the trajectory range and the national budget to 2050 have regard to the following general criteria – changes in or new information relating to climate science, the level and pace of international action and economic factors.
8.7 Scope of targets, trajectories and budgets
The Authority must define the scope of its recommended targets, trajectories and budgets – which emissions count towards them and what emissions reductions may be used to offset them. This Section sets out:
- the Authority’s intended approach, taking into account the international framework that applies to Australia’s international obligations and undertakings under the Kyoto Protocol and UNFCCC; and
- the quantitative implications for Australia’s emissions reduction goals arising from this approach, in terms of land sector emissions and removals, and the use of units ‘carried over’ from the first commitment period of the Kyoto Protocol.
8.7.1 The Authority’s approach to accounting
The Kyoto Protocol sets clear guidelines on which emissions count towards Kyoto Protocol emissions reduction commitments. Australia must follow these rules in order to meet its unconditional international target under the Kyoto Protocol to limit average annual emissions to 99.5 per cent of 1990 levels from 2013 to 2020. These rules are explained in Box 8.1.
Unlike the Kyoto Protocol, there are no centralised rules for accounting for 2020 targets under the UNFCCC (there are rules for reporting on emissions). Australia recently reported on its 2020 emissions reduction commitment, including the underlying assumptions in its 2013 Sixth National Communication on Climate Change (Commonwealth of Australia).
Discussions about an accounting framework for post-2020 emissions reduction commitments are part of the post-2020 framework negotiations. These discussions are still in their early stages. It is likely that accounting for markets will be more flexible to accommodate greater use of international emissions reductions from domestic and regional emissions reduction schemes and offset programs.
As the Kyoto Protocol rules are the most definitive and binding set of accounting rules, the Authority will assume these rules apply for gases, sectors and sources and markets when recommending emissions reduction goals. In submissions to the Issues Paper, stakeholders generally supported this approach.
Box 8.1: Kyoto Protocol accounting framework
The Kyoto Protocol provides guidance about the emissions countries must count towards their Kyoto emissions reduction commitments and the units that can be used to meet a commitment. For the second commitment period, Kyoto Protocol rules count emissions:
- of seven greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexfluoride and nitrogen trifluoride);
- from the sectors and sources of energy, industrial processes, solvent and other produce use, agriculture and waste;
- from the land sector, including afforestation, reforestation and deforestation and forest management; and countries have the option to elect cropland management, grazing land management and revegetation activities.
The Kyoto Protocol only allows units created under the UNFCCC and the Protocol to be used to meet Protocol emissions reduction commitments. This includes units generated from emissions reduction projects in developing countries under the Clean Development Mechanism. It does not, for example, include units generated from reducing deforestation in developing countries.
The Government could choose to count a broader range of international emissions reductions towards a stronger 2020 target under the UNFCCC, or towards its post-2020 budget than allowed under the Kyoto Protocol accounting rules. For example, the Government could choose to count emissions reductions generated from funding projects to preserve forests in developing countries (reducing emissions from deforestation or forest degradation in developing countries), which do not generate units under the Kyoto Protocol rules. Such emissions reductions could be sourced either by the Government or by businesses or individuals to offset their emissions. Should the Government choose to take this approach, the Authority’s recommended targets and budgets could be adjusted to take account of the additional emissions reductions.
There are two further issues that need to be addressed in more detail – the first is emissions from international aviation and shipping; the second is voluntary action.
Emissions from international aviation and shipping
Some stakeholders specifically noted emissions from international aviation and shipping. For example, the Climate Institute noted that emissions from these sectors were growing and suggested the Authority ‘identify and articulate a clear timeline and process for possible inclusion of these sectors under Australia’s domestic emission cap as part of the [Authority’s] 2016 review’ (Issues Paper submission, p. 19).
Emissions from international aviation and shipping are growing, but are not included in national commitments under the UNFCCC. Instead, they are addressed through the International Civil Aviation Organization and the International Maritime Organization, respectively (see Appendix A for further information). The Authority therefore proposes excluding these emissions from Australia’s national targets, trajectories and budgets. To ensure they are accounted for at a global level, the Authority has deducted an allowance for emissions from international aviation and shipping from the global emissions budget before considering Australia’s share of that budget (Section 9.4). This issue should continue to be monitored over time to take account of further information and international developments.
Most emissions reduction activities within Australia help us meet national targets and international obligations and undertakings. Voluntary action, such as individuals and companies offsetting their emissions to become ‘carbon neutral’, and households buying GreenPower (a Government-accredited program for energy retailers to purchase renewable energy on behalf of customers), achieve emissions reductions additional to – that is, above and beyond – national targets.
Under the first commitment period of the Kyoto Protocol, Australia calculated the emissions reductions flowing from approved voluntary action, and cancelled an equivalent number of Kyoto units. This ensured voluntary action resulted in emissions reductions beyond the minimum required by Australia’s target.
The Authority recommends that the Government continue this practice. This can be done by tracking the emissions reductions from recognised voluntary actions and, at the end of the second commitment period, cancelling an equivalent number of Kyoto units. The Authority has, in consultation with stakeholders, identified three forms of voluntary action that should be recognised – GreenPower purchases, voluntary cancellation of domestic units (for example, Australian carbon credit units generated under the Carbon Farming Initiative) and voluntary cancellation of renewable energy certificates generated under the Renewable Energy Target.
This approach will ensure voluntary action continues to deliver emissions reductions additional to Australia’s national target. Voluntary action and GreenPower are discussed further in Appendix E.
R.3 That the Government recognise voluntary action by cancelling one Kyoto Protocol unit for each tonne of emissions reductions achieved in the period 2013 to 2020 through:
- the voluntary cancellation of domestic units;
- the voluntary cancellation of renewable energy certificates; and
- GreenPower purchases.
8.7.2 How the Authority’s approach to accounting affects its recommendations
This section considers the quantitative implications of adopting the Kyoto Protocol accounting framework to the emissions reduction recommendations.
Land sector accounting
In 2012, Kyoto Protocol Parties agreed to rules for accounting for land sector emissions for second commitment period emissions reduction commitments. These rules make it mandatory for Parties to account for emissions and removals from forest management, and optional to account for emissions and removals from cropland management, grazing land management and revegetation. Australia has elected to count emissions from the optional land use activities, so the Authority will apply the same coverage for its recommended goals.
These accounting changes are expected to lead to net emission reductions of approximately 12 million tonnes of carbon dioxide equivalent (Mt CO2-e) in 2020. The Government projects that forest management activities will be a net sink for Australia, reducing emissions by approximately 9 Mt CO2-e in 2020. The election of optional land use activities is likely to result in a net reduction of approximately 3 Mt CO2-e in 2020 as farming practices continue to improve (Department of Innovation, Industry, Climate Change, Science, Research and Tertiary Education 2013). Overall, the changes are expected to provide emissions reductions equivalent to around an additional 3 percentage points for the 2020 target (see Appendix C5).
Carryover from the first commitment period of the Kyoto Protocol
Australia’s cumulative emissions over the first commitment period (2008–2012) were below its Kyoto Protocol commitment to limit annual average emissions to 108 per cent of 1990 levels. As a result, Australia has surplus units to ‘carry over’, currently estimated to be equivalent to 91 Mt CO2-e.
The Authority has considered three options for using the carryover:
- using the carryover to strengthen Australia’s 2020 target;
- voluntarily cancelling the extra units; and
- holding the extra units as insurance to help ensure Australia meets its second Kyoto target.
Each of these options has different implications for environmental effectiveness, Australia’s international influence, government revenue and economic impacts.
A range of stakeholders indicated support for voluntarily cancelling the carryover, including the Australian Conservation Foundation (Issues Paper submission, p. 11). Others suggested the Government hold the carryover as insurance for unexpected events. On balance, however, the Authority is disposed to favour the carryover being used to strengthen Australia’s target for the following reasons:
- the Authority carefully considered the risks of Australia exceeding its second Kyoto target and determined there is no need to hold the carryover as insurance (see Section 14.4 for more detail); and
- strengthening the target has the same environmental benefit as cancelling the carryover, but is more visible to other countries, so is more likely to influence other countries to increase their ambition for future emission reductions.
As a result, using the carryover to strengthen Australia’s emission reduction goals maximises the potential environmental benefits through positive international influence. The carryover of 91 Mt CO2-e represents a potential 3 percentage point contribution that might form part of a more ambitious 2020 target (that is, add 3 percentage points to what would otherwise have been the 2020 target) (Figure 8.3).
In terms of Australia’s Kyoto Protocol unconditional second commitment QELRO (99.5 per cent reduction from 1990 levels over the period 2013 to 2020), the carryover of 91 Mt is equivalent to strengthening the QELRO by 2 percentage points (to 97.5 per cent) (Figure 8.4).
C.9 Australia’s carryover from the first Kyoto Protocol commitment period would be best used as a 3 percentage point contribution to a more ambitious 2020 emissions reduction target to be recommended by the Authority in its Final Report.
Having concluded what kinds of goals the Authority should recommend, Chapter 9 begins the task of considering the level of the goals by recommending a 2013–2050 emissions budget for Australia.
Figure 8.3: Carryover relative to the 2013–2020 budget and 2020 target
Note: As discussed in Section 8.4, the indicative national trajectory begins at 108 per cent of 1990 emissions in 2010 to be consistent with Australia’s commitments under the Kyoto Protocol.
Source: Climate Change Authority
Figure 8.4: Carryover relative to Australia’s second commitment period target
Note: QELRO is a Quantified Emission Limitation or Reduction Objective.
Source: Climate Change Authority