CLIMATE SPECTATOR: Carbon price won’t halt Australia’s emissions

Even with a carbon price in place, Australia’s domestic emissions are set to lift through 2020. This is driven to a large extent by expansion of LNG and a blip in land use and agriculture emissions.

Climate Spectator

The Department of Climate Change and Energy Efficiency has just released its latest emissions projections out to 2030. In spite of the introduction of a carbon price, Australia’s emissions will continue to rise to 2020 due largely to expansion in liquefied natural gas, as well as a bizarre one-year blip in emissions from land-use activities.

As illustrated in the chart below, it forecasts that even with a carbon price in place, Australia’s domestic emissions will rise by 13.7 per cent between 2010 and 2020, from 560.8 million tonnes of CO2 equivalent to 641 million. The difference to the government’s 2020 emission reduction target (5 per cent below 2000 emission levels) is made up by purchasing international carbon credits and permits.

Notably this is based on Treasury’s 2011 carbon price assumptions, which now appear to be unrealistically high. So it would seem likely that reliance on international abatement would be greater than currently projected.

Australia’s emissions 2013-2030 with and without the carbon price and interntational abatement


Source: Department of Climate Change and Energy Efficiency

In delving into the detail we again see uncertainty around estimates of emissions from land-use change and forestry playing funny-buggers with the numbers. Just two years ago in the government’s communication to the United Nations about our emissions, they said emissions in 2000 (the baseline for emission reduction targets) were 553 million tonnes of CO2-equivalent.

They’ve now revised that upwards to 565.5 million tonnes.

This doesn’t seem like much, but when you consider that total domestic abatement expected from the carbon price is 55 million, a revision upwards in your baseline of 13.5 million makes life a lot easier.

Further adding to concern around these numbers is that 25 per cent of the expected rise in domestic emissions between 2010 and 2020 is expected to occur in just a single year – this one.

According to the projections data, half of this bizarre spike in emissions is due to an expected rise in deforestation and another quarter is due to agricultural emissions. Measurement around both of these emissions sources are subject to high levels of uncertainty.

If this large rise in emissions doesn’t actually eventuate, it will further noticeably reduce the amount of emission reductions required in sectors covered by the carbon price.

In terms of the overall picture, the chart below illustrates expected changes in emissions by sector from 2011 to 2020. Besides agriculture and deforestation, the other two big drivers of emission increases are direct combustion and fugitives (escaped methane from energy extraction). The oil and gas sector, predominantly new LNG projects, is responsible for 84 per cent of the rise in direct combustion emissions, and almost half the rise in fugitive emissions based on DCCEE projections.

Sectoral domestic emissions changes, 2011 to 2020


Source: Department of Climate Change and Energy Efficiency

In light of LNG’s major role in Australia’s emissions growth, it is concerning that the WA environment minister has elected to remove a series of greenhouse gas control conditions on the Browse LNG project that were recommended by the WA EPA and supported by the Appeals Committee.

While the polls have narrowed between Labor and the Coalition at a federal level, there is a reasonable likelihood Australia won’t have a carbon price come 2016. This suggests there is a still an ongoing role for the environmental approvals processes to apply greenhouse gas abatement conditions on new projects expected to emit large amounts of greenhouse gas emissions.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles