Australia's drastically shrinking abatement opportunities

New report finds ongoing policy uncertainty has stifled Australia's options for reducing emissions, suggesting a 15% emission cut by 2030 as the maximum we could realistically achieve.

A new report by energy and emissions market analysts, RepuTex, indicates that Australia's long-term emissions reduction opportunities are much smaller than previously estimated – just 15 per cent by 2030, rather than 60 per cent – with climate policy uncertainty over the last five years leaving the economy with fewer options to cut domestic emissions, and a much higher cost of action.

The report is the first to forecast Australia's marginal cost of abatement through to 2030 since research by McKinsey & Company, undertaken in 2008, and is a significant decrease on the those estimates, which found that Australia could reduce emissions by up to 60 per cent by 2030. They findings are also a significant downgrade on research by Climateworks in 2010.

The report found Australia could achieve a cut of 5 per cent (130 MtCO2e) by 2020 (compared to McKinsey's 37 per cent forecast in 2008).

Notably, removing all carbon abatement opportunities above $100 per tonne, abatement potential in 2020 is further reduced to just a 2 per cent decline, increasing to just 8 per cent by 2030. 

RepuTex executive director Hugh Grossman said the report found that the cost of reaching a 15 per cent decline by 2030 would be $10.6 billion, with the 5 per cent to 2020 to cost $5.3 billion – more than double the $2.55 billion allocated to the Emissions Reduction Fund.

"Without a strong safeguard scheme that is able to work with the Emissions Reduction Fund to drive more emissions cuts, meeting Australia's 2020 emissions target through domestic emission reductions will be both extremely challenging and expensive," he said.

According to RepuTex, by 2030 the forestry, industry and power sectors are likely to provide the largest share of abatement across the Australian economy, contributing approximately 75 per cent of all emissions reductions.

Energy efficiency activities will play the largest role in emissions reductions, contributing over one third of all abatement through to 2030, with many projects to be 'negative cost'- therefore saving money over the life of the project.

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A significant proportion of Australia's abatement potential has been lost due to delayed investment stemming from policy uncertainty, notably with respect to carbon pricing, the Carbon Farming Initiative and the Renewable Energy Target, the report found. 

"In the absence of strong, continual climate policy, investment in clean electricity generation, forest protection, and energy efficiency has not been as strong as it could have been, meaning that existing carbon-intensive assets are able to continue to compete against new technologies rather than being phased out, locking in emissions growth in the near-term," Mr Grossman said.

The report found without policies to preserve carbon stocks in rural areas, or encourage the most efficient buildings in urban areas, remaining abatement options are now both fewer in number and more expensive. 

The report analysed 88 separate opportunities to reduce emissions across six key sectors – power, forestry, industry, buildings, agriculture and transport – identifying actions to reduce emissions, the barriers to their implementation and their relative cost. 

This article is an abridged version of RepuTex's report summary. The report, published yesterday, is titled 'An Updated Marginal Abatement Cost curve for Australia to 2020 and 2030'.

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