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Critics chide lack of detail as Australia pledges net zero by 2050

26 October 2021 Keiron Greenhalgh

The Australian government finally joined almost all of its industrialized nation peers by committing to net-zero emissions by 2050 on 26 October, but observers say the plan leaves a lot to be desired when it comes to shorter-term targets and the detail offered.

Prime Minister Scott Morrison's commitment in the "Long Term Emissions Reduction Plan" relies on cutting the cost of low-emissions technologies, deploying such technology at scale, and working with other countries on such technologies, the government said.

Morrison is adamant that Australia won't back away from producing commodities such as oil, natural gas (typically in the form of LNG), coal, and iron ore that form the backbone of the country's export-driven economy. He also promised to protect the interests of rural Australians, including farmers, whose output also boosts the country's balance of payments ledger, but yet contribute a significant share of the nation's carbon footprint.

Australia, said Morrison and Minister for Industry, Energy and Emissions Reduction Angus Taylor, would be guided by five principles in shifting to a net-zero economy: technology not taxes; expanding choices not mandates; driving down the cost of a range of new technologies; keeping energy prices down with affordable and reliable power; and, be accountable for progress.

The plan eyes the use of hydrogen and carbon capture plus renewable energy on the road to net zero. It sees a path to ultra-low cost solar in Australia, with a stretch goal of A$15/MWh ($11.25/MWh). The average levelized cost of energy (LCOE) for solar photovoltaic (PV) in Australia in 2020 was $40/MWh, according to IHS Markit, which expects the average LCOE for Australian solar PV in 2030 to be less than $30/MWh.

Solar PV generation could meet as much as 77% of electricity demand in four of the five most-populous mainland Australian states by 2026, according to an outlook released 31 August by the Australian Energy Market Operator.

Technology developments will deliver 85% of the emissions reductions necessary to achieve net zero by 2050, the government said. Australia is the world's 16th-largest GHG emitter nation, according to the Union of Concerned Scientists.

"The plan will deliver results through technology, not taxes. It respects people's choice, and will not force mandates on what people can do or buy. It guarantees that we keep downward pressure on energy prices and secures reliable power," Morrison said in the statement announcing the plan.

Government projections released 26 October show Australia is on track to reduce emissions by up to 35% by 2030, compared with a target of 26% to 28%.

Pledges increase

The announcement is the latest in a series from major oil, gas, and coal exporters over recent weeks.

President Vladimir Putin said 13 October that Russia—one of the world's biggest producers of oil and gas—is aiming for carbon neutrality by 2060, according to wire reports.

"Russia in practice will strive for carbon neutrality of its economy," he said at an energy forum in Moscow.

"And we set a benchmark for this—no later than 2060," he said, according to an AFP report.

Crown Prince Mohammed bin Salman announced a net-zero goal for Saudi Arabia 23 October at the inaugural Saudi Green Initiative forum in Riyadh. On the same day, both Saudi Aramco, the state-owned oil company, and SABIC, the state-owned petrochemicals company, announced net-zero targets for 2050 for their Scope 1 and 2 emissions.

According to the Saudi press agency, the world's largest oil exporter emitted nearly 500 million metric tons (mt) of CO2-equivalent in 2019.

But the new and updated climate commitments fall far short of what is needed to meet the goals of the Paris Agreement, leaving the world on track for a global temperature rise of at least 2.7 degrees Celsius this century, according to the UN Environment Programme's (UNEP) latest Emissions Gap Report 2021: The Heat Is On.

The report, released 26 October, found updated Nationally Determined Contributions (NDCs)—and other commitments made for 2030 but not yet submitted in an updated NDC—only take an additional 7.5% off predicted annual GHG emissions in 2030 compared with the previous round of commitments. Cuts of 30% are needed to stay on the least-cost pathway for 2 degrees C and 55% for 1.5 degrees C, UNEP said.

Not enough?

Local observers in Australia are of the same opinion. The Australian Conservation Foundation (ACF) welcomed the commitment to reach net zero by 2050, but said it fell far short.

"Net zero by 2050 is welcome but the mid-century goal is only meaningful with deep cuts to climate pollution this decade," said ACF Chief Executive Kelly O'Shanassy, adding that Morrison "has so far announced a plan to have a plan. It is short-changing Australians by refusing to join other nations in at least halving emissions by 2030."

"There are practical solutions ready now to fast track emissions cuts and they will create jobs and prosperity," said O'Shanassy. "Australia cannot keep relying on coal and gas exports because these industries are on the way out and if those workers are not helped with the transition, they will be left high and dry. We have abundant clean energy, tools and talent."

Renewable energy advocates echoed that stance, with the Clean Energy Council saying the past month "has been another disappointing chapter in the politics of climate change in Australia."

The announcement does little more than echo the commitments and action already underway by state governments, businesses, and households, it said. A stronger 2030 target is needed to provide clarity and positive investment signals to accelerate the decarbonization of Australia, it added.

Further clarity was also sought by carbon market players.

"While the 2050 net-zero emissions target is welcome, it appears the plan is a missed opportunity to use existing policies as a springboard to a technology and market investment approach that would have business not the taxpayer as the main driver of the plan," said Carbon Market Institute CEO John Connor.

"Net zero by 2050 is the minimum entry ticket to the climate policy credibility and alone won't fend off potential carbon tariffs and higher capital costs increasingly facing carbon intensive companies and countries. That will require stronger 2030 commitments, not just projections, and policies that enable business to take greater responsibility and guide future decarbonization investments," the trade group chief said, adding: "Australia should be supporting 2030 emission reductions of at least 50%."

However, the wider business community saw the announcement in a slightly more positive light, with the Australian Chamber of Commerce and Industry commending the creation of the plan, particularly the emphasis on affordable energy—an especially sensitive topic around the globe after recent volatility in commodity prices.

The plan gives confidence to business, to workers, and to regional communities that Australia is taking credible action on climate change, while ensuring energy remains reliable and affordable, said Andrew McKellar, the trade association's chief executive.

He warned, however, that "businesses and industry must have access to the modelling behind the government's plan to ensure the effective implementation of transitional measures."

Trading, not taxes

Those transitional measures are likely to include carbon offset trading, which found support from the Minerals Council of Australia as it welcomed the government's net-zero plan.

Demand for credits is already hot, local experts say, noting that more companies in the country are purchasing Australian Carbon Credit Units (ACCUs) in the spot and forward markets due to pressure from civil society, overseas trading partners, and potentially more stringent environmental regulations in the future.

"The demand increase comes from both voluntary and compliance buyers, as well as investors and speculators," said Bret Harper, research director at Melbourne-based energy consultancy RepuTex, told Net-Zero Business Daily at the end of September.

The ACCU spot price rose to a new record high of A$26 ($18.89) per metric ton (mt) in recent trading, up 57% from the level seen at the beginning of 2021. And "all signs are that the ACCU market remains bullish in both the short- and long-term, and we forecast long-term prices to go up," said Harper, who predicted a spot price of A$50/mt by 2030.

Australian leaders have been hot for trading rather than taxes for a while, lambasting those who pick the alternate route. In August, Taylor called the EU's proposal to implement a Carbon Border Adjustment Mechanism (CBAM) "discriminatory."

From the perspective of EU trading partners, the CBAM runs directly counter to the idea of open markets, Taylor said in an open letter on 4 August.

The border adjustment is one of nearly a dozen major EU policy measures proposed as part of the Fit for 55 package announced in July and will be written into law over the next two years. Fit for 55 is a comprehensive and interlocking set of proposals that would enable the 27-nation EU to meet a goal of reducing CO2 emissions by 55% by 2030 from a 2005 baseline.

Posted 26 October 2021 by Keiron Greenhalgh, Senior Editor

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