The federal government’s 2030 emissions reduction target is under serious threat. Under the International Paris Agreement, Australia has committed to reduce its emissions to 43 per cent below 2005 levels by 2030.
But the government is not currently on track to meet these levels. It’s led some members of the Opposition to call for Australia to abandon the Paris Agreement.
In this podcast, Kat Clay and energy expert Tony Wood discuss why Australia is not on track to meet their emissions reduction targets, whether we should abandon the Paris Agreement, and the policies that can help close this emissions gap in the coming years.
​
Transcript
Kat Clay: The federal government’s 2030 emissions reduction target is under serious threat. Under the International Paris Agreement, Australia has committed to reduce its emissions to 43 per cent below 2005 levels by 2030. But the government is not currently on track to meet these levels. It’s led some members of the Opposition to call for Australia to abandon the Paris Agreement.
But even if Australia can’t meet these ambitious targets it has set, is abandoning the agreement essentially throwing the baby out with the bathwater? In this podcast, we’re going to discuss why Australia is not on track to meet their emissions reduction targets, whether we should abandon the Paris Agreement and the policies that can help close this emissions gap in the coming years.
I’m Kat Clay, and today joining me to discuss all these topics is our energy expert, Tony Wood. So Tony, there’s been a lot in the media about the federal government not meeting the 2030 emissions reduction target. Why has this suddenly blown up in the news?
Tony Wood: Well, it’s suddenly blown up most primarily for political reasons that the opposition, as we move towards a federal election sometime within the next 12 months, the opposition is looking for weak spots. And one of them is the commitment that is the government, the Labor government made under the commitment that you mentioned, Kat.
And they see that as an opportunity to criticize the government and they’re going hell for leather on doing that. So, I think that’s what’s opened up this debate around the fundamentals of the target itself, whether we’re on track and what’s going to happen if we meet it or don’t meet it. All that stuff is being driven by that.
Unfortunately, it means that anyone who thought the climate war was over was very optimistic indeed because it’s clearly not.
Kat Clay: Here I was thinking we were having a quiet peaceful end to the climate wars and, and they’re back on again. So, Australia is a signatory to the Paris Agreement, which is a legally binding treaty on climate change. I’m curious what happens internationally if we don’t meet these targets?
Tony Wood: Interestingly, we’ve got the Australian government internationally and domestically, has made the same commitment in two places. Firstly, let’s talk about the one you just mentioned, Kat, and that is the international agreement. We signed up to the Paris Agreement back in 2015.
In that year, Malcolm Turnbull and Tony Abbott were involved in setting the then 2030 target. And under the Paris Agreement, we are required under a legally binding commitment to make those commitments and then every, from now on, every five years to update that commitment. So that means we’ve got a 2030 target by early next year, maybe February, March, we have to set the target for 2035 and so on and so forth until we get to net zero by 2050.
Now, it’s true to say that the strength of this arrangement is that every country gets to make their own commitments. The problem, of course, the weakness is that what happens if they don’t add up? What if we don’t meet our targets? Now it is legally binding. But there are no legal consequences. It doesn’t mean that someone’s taken to court.
It doesn’t mean that the prime minister goes to jail, nothing like that. Basically, you suffer the approbation of your fellow countries who are also struggling to meet their own targets. But the idea here is to be we’re all in the same, on the same planet. We’re heading in the same direction, we hope, and to be working together with our own individual commitments to do so.
And if one of us falls behind, the pressure comes from the others to catch up and try and get ahead. That’s the way these international treaties work. they work by agreement. Even though the agreements can involve what appear to be legally binding commitments, there’s nothing that emerges as serious penalties such as jail terms or financial consequences.
It really is about those sorts of international pressures, which could include things like action from our trading partners. If they see that we’re free riding on their attempts to meet their targets, that’s when international penalties can be imposed through trade agreements or trade restrictions or what are called carbon border adjustment mechanisms.
There are things that could be done by countries who feel that they’re doing their job and we’re not. Now we’ll see how that plays out because we don’t really know how this is all going until well into 2025.
Kat Clay: I think too, I want to do a little bit of fact checking here because there’s claims from both sides about whether we’re actually meeting our targets or not. I’m wondering whether you could confirm for us, I mean, is Australia on track or not on track to meet these, these targets. And that’s according to who?
Tony Wood: There are actually two targets which makes it a bit more complicated. There’s the simple target, which is 43% below 2005 levels by 2030. Which means in 2005, our emissions were about 620 million tonnes. You don’t have to worry about what that number even feels like.
That’s a number, 620 million tons of greenhouse gases. We have to be 43 per cent below that in 2030. That’s our target, right? That’s where we are heading, broadly speaking. And the reason for that 43 per cent target is that the Labor government did some analysis that suggested that that’s more or less where we need to be to be on track to the broader objective, which does have bipartisan support, which is net zero by 2050.
Now, it doesn’t have to be a straight line to 2050, but if it is a straight line, that’s where we’d have to be. That’s where the 43 per cent comes from. And all the projections that the Labor government then did said, there are two or three big things that we need to do to get there. Now their projections this time last year, or a little bit later in 2023, I think said that we’re on track to be about 37%, but they then said there’s three things we can do, which would get us to 42%.
And that’s where it gets interesting, because the three things were firstly a relatively small component coming from the introduction of new vehicle emission standards or efficiency standards. The government’s got that through parliament, it’s been legislated, but it will make a modest contribution by 2030.
The second one is this is what’s called the safeguard mechanism, which was a policy that Labor’s used was introduced by the Coalition government some years ago, and it imposes a firm cap on industrial emissions. Industrial emissions means things like steel plants, concrete plants, coal mines, those sorts of very big emitters.
Anybody emitting more than 100, 000 tons a year is caught up in that. That looks to be a very robust policy. We’ll see, and it will contribute probably about 50 or 60 million tons by 2030. That one looks okay.
The third big one is that we would achieve a 43 per cent emissions reduction target. By getting 82 per cent of our electricity coming from renewable energy.
Now, that’s the one that’s looking hard because whilst electricity has been going gangbusters, in terms of reducing emissions over the last 20 years. It’s becoming harder because what we have to do to keep the momentum up is becoming more difficult. And this is true of lots of things in life, right?
The first bits are easy, the last bits get really hard and that’s where we’re in the middle now where we’re finding it to be more challenging than I think everyone estimated. There are a lot of issues to do with things that have happened in the meantime. And now the difficulties are giving rise to concerns.
Well, this is too expensive. It’s too hard. We shouldn’t do it. But broadly speaking it looks like we’re building renewable energy at a rate, which is probably about a third of what it needs to be to meet the 80 per cent target. It doesn’t mean we’re not going to be, we’re only going to be a third of the 82%, but it means that the rate of construction is not going as fast as it needs to be.
Can it be picked up? Yes, but it won’t be easy.
Kat Clay: Yeah. And I do want to really dig into this question of the renewables cause that’s the big one when we’re talking about meeting those targets. But I just want to track back a little bit about this, because I think this is an interesting question. With the Paris Agreement, obviously the, the aim was ambitious. It was the 43 per cent number. Is this a case of setting unrealistic KPIs or is it important that there is ambition in addressing climate change?
Tony Wood: In the world of climate politics, which is very different from the world most of us live in, governments tend to set targets and the question is whether those targets are serious and binding or whether they’re ambitious and aspirational. Now you can see why you might want to have a bit of both. Let’s aim for something and maybe we could do better than that.
But this target was set and, it’s called a commitment. Now the word commitment would suggest more than just, wouldn’t it be nice? It’s just, we are really seriously intending to do this. And one of the reasons we have to do this is because the second part of our target isn’t just that point in time thing.
To get there, our total carbon budget, that is all the carbon emissions we can produce in the current decade from 2021 to 2030 have to be consistent with net zero by 2050, because climate change is a cumulative problem. It’s not a point in time problem. So, every ton of emissions we put into the atmosphere now, will still be there in 2030, and will be a problem if we don’t do something about it.
So, you can’t just put it all off until 2030.
So I think the idea of having interim targets makes a lot of sense, not just because they create some direction in the shorter term that people can focus on, and that’s important, but it’s also because where we get to with interim targets also adds up to whether we are achieving the fundamental objective, that is to be putting less greenhouse gases into the atmosphere.
And so, both of those are reasons why having interim targets, which we achieve is important. Whether or not we precisely met exactly or slightly above 2030 target of 43%, isn’t quite so important as the momentum. Now, you don’t want to be too far short of it. And so, the fact that the government is within spitting distance is important because it means that wherever we get to in 2030, we’re creating real momentum to keep going.
Kat Clay: Yeah, and I think it’s important to be constructive here that you know, we don’t want to lose the work that we’ve already done and devalue that. One of the delays in reaching the target, obviously we’ve just talked about renewables. I want to dig into that a little bit more. We seem to make a lot of progress in Australia with rooftop solar, but now this target is in trouble. What’s happened here?
Tony Wood: When this, the, the renewable energy target was introduced by John Howard in 2001, two, something like that. It was pretty modest, and it was supported by a very firm regulation on energy retailers and also subsidized rooftop solar. And that was unusual in the world. Not many countries subsidize rooftop solar.
They subsidized commercial roof solar, and I’m talking about domestic rooftops I mean. And we did that, and we subsidized it quite generously, the cost of rooftop solar came down dramatically around the world. So, it became less expensive, but we achieved huge take up. And the end result was that, you know, we’re almost a third of houses now putting on rooftop solar.
That is a globally leading position in that, in that sense. The need to continue to provide strong subsidies is falling away because the cost of rooftop solar has come down so much in that interim period. Now, the second part of this journey was that large scale wind and solar, which are the other, you know, fundamentally wind and solar are the big renewables that matter.
They are based around building large, facilities. And the grid that we have in electricity was built to support big, centralized coal and gas fired power stations. And distribute that electricity to consumers in our cities, in our towns, in our regions.
That transmission grid had plenty of capacity for new wind farms and solar farms to be connected, not just in the Hunter Valley or the La Trobe Valley, but right throughout the grid. Now, what’s happened in the last 10 or 15 years is most of that capacity has been used up. So, we demand a lot of, a lot of momentum.
Emissions have been falling and renewables have been growing in electricity in Australia since about 2014. But while the rooftop solar continues to go very well, needed to build more transmission to be able to connect all those renewables I’ve just been talking about, and that’s where things run into trouble because of three major reasons.
One is that the cost of doing everything has gone up. The world economies, the cost of capital, the cost of finance, everything has gone become more expensive. Secondly, the regulatory processes by which wind farms and solar farms get their approvals.
Has actually slowed down because consumers and people in local areas have objected to things more frequently.
And that means that the whole process of getting approval for building a new wind farm or solar farm has gone from two or three years to seven or eight years. That makes a big difference when you’re trying to do a huge amount of stuff in a short period of time. And the third big reason is associated with the second one is that this term called social license.
We did an appallingly bad job doing something which is almost bleedingly obvious. If you’re going to go into regional and rural communities and build not just wind farms and solar farms, but transmission lines to connect those things, anyone who thinks a transmission line is an attractive animal is kidding themselves.
They are not. No one’s ever built a good-looking transmission tower. It’s just not that in regional communities are fundamentally against what has to be done, but we didn’t lay out the full story. What are we going to be doing? How are we going to be doing it? How are we going to engage with you in your community?
How are we going to listen to you and understand your concerns? What can we do to help understand those concerns? It was badly done. And as a result, the whole thing has slowed down. And we’ve only been building those renewables at about a third of the rate that’s necessary to achieve the 82 per cent target.
Now, can we catch up? Yes, but that’s the reasons why things are going more slowly than they should be why there’s some work to be done.
Kat Clay: Tony, you’ve mentioned that transmission also is a complicated process that requires community consultation and hasn’t necessarily been done well in the past. How can we do this better? What should governments be doing here?
Tony Wood: I think there’s three things governments can do. Obviously the first point is to make it very clear before the companies are out there hassling landowners what this is all about. What’s the narrative here? What’s fundamentally what are we trying to achieve and how are we going to do this?
And how are we going to engage with local communities? How are we going to work with them? And then make sure we do. So, we, first thing is to listen to their concerns and in some cases when we understand those concerns, we go, okay, well look, we can do something a bit different. We don’t have to run this transmission line down that particular route.
We can change the route of the transmission line, and that can address a lot of concerns. And you find that when you engage that way, not surprisingly, when people are treated with respect, and they’re listened to, they actually are more likely to be supportive. The second thing they can do is provide financial support in various ways to communities.
Now, I’m not talking about bribing communities, like, we’ll give you a whole lot of money if you just give up. I’m saying that there are ways you can engage with communities. For example, in regional Australia, they don’t want to just have to be surrounded by wind farms and solar farms to produce electricity for the cities.
They would like to be part of the story when some of the benefit comes to them via industries that, or local industries that use that renewable energy in a very cost-effective way. How do you provide financial and economic support to those local communities without imposing it upon them, work with them to identify what those opportunities would be.
Now, the third thing is probably the most unpleasant or most difficult. And that is that when you’re talking about major pieces of infrastructure, that require access to land or easements to be able to drive a transmission line through a particular area of Australia. And people who live in the cities see the same thing with highways and so on.
The concept of compulsorily acquiring an easement becomes the last step in the process. It should always be the last step, but ultimately, we may have to also be prepared to use that more aggressively than we have in the past because the scale and pace of what has to be that is serious. We are behind where we need to be, and we need to pick up the pace, if we’re going to achieve the scale.
And so, the combination of incentives and support and communication and after this necessary compulsory acquisition form the package that we’re going to have to really follow very hard if we are going to pick up the pace.
Kat Clay: Tony, this is probably a good time to talk about the capacity investment scheme. The scheme’s meant to drive investment in renewables and clean energy capacity like batteries. How do governments expedite these investments so we can meet those targets?
Tony Wood: It became very clear to the Commonwealth government that last year that we were falling behind where we needed to be, and something needed to change. Both the energy minister and the treasurer said as much. So, what should we do about that? They could have extended the renewable energy target itself.
But because it’s not just about renewable energy, we also have to make sure that as we put more renewables into the system and close down coal, we have the capacity to be there when the wind isn’t blowing, and the sun isn’t shining. So, what do you do about this? Well, the government had already been working on something called the capacity investment scheme, which was designed to incentivize the investment in new capacity to balance wind and solar. They said, well, why don’t we just extend that fairly significantly and the Commonwealth government will underwrite investment in new renewable energy and storage.
Mostly, it’ll most probably mostly be batteries to make that 82 per cent target. And the way they do that is they would run a series of options every six months from now until about 2027 28 because they’ve got to get a lot of capacity built so that it’ll be there to meet the 82 per cent target in 2030.
So, you can’t muck around now. This is really becoming quite serious. The federal government always is the body that brings the money to the table. And that’s what they’re doing through this mechanism. They’ll lead you into contracts with people to build more renewable energy, and they will underwrite those contracts, in a financial sense.
Now that has to be matched up with the other point, we’ve just been discussing with this, transmission grid. And that’s where the role of the states becomes far more important. And in addition to better engagement with communities, we’re also going to have to think about do we improve the time scale it takes to get approvals?
And what can we do about social license? There may be limits to how far we can accommodate people who are not really supporting building out transmission and renewables in their sector. So, the two go together, the capacity investment scheme provides a big, big lick of finance to underwrite the investment in the renewables.
And the other side of it is to expedite the transmission which we’ll all pay for eventually. But to expedite that so it can be built in time. So that this builds up to meeting that that 2030 target.
Kat Clay: These things don’t and can’t happen overnight, building projects require a lot of planning, a lot of thought, a lot of investment. So, if we’re actually going to get them on target, it actually has to happen sooner rather than later. And we’ve talked about that at length in a lot of your reports. One thing I wanted to talk to you about as well, Tony, it’s important to note that reaching net zero is a holistic process. It’s not just the responsibility of the electricity market to shoulder the burden.
Tony Wood: The major progress that Australia has made in reducing our emissions has been electricity. One reason it’s been one of the cheapest ways to reduce emissions, that is to convert from fossil fuels to renewables. And we’ve done it as we’ve talked about in this podcast already, I think pretty well.
But as we continue that direction in electricity, doing the things we’ve just been talking about to get to 82 per cent renewables, the other sectors of the economy have to start pulling their weight as well. That means transport. It means heavy industry like coal mining, LNG processing, cement production, aluminium production, all those sorts of things.
It also means agriculture, which is a very tricky one because about half the emissions in agriculture are run on farm practices to do with running machinery and so forth, the other half is coming from burping and farting cows and sheep. The technologies or the ways to address that are not simple and the way it happened overnight, but if they don’t, then net zero by 2050 becomes a challenge.
So, all the sectors of the economy have to be addressed and the government is doing some work to try and bring those together. Looking at sector pathways towards that future. But whilst a lot of the talk’s going to be about electricity. And, you know, we’ve, we’ve talked to other, we’ve talked to other places about the role of nuclear in that story.
Electricity isn’t the only game in town. As electricity is already getting a bit harder, there’ll be easier things to do in other sectors and getting the balance right is necessary if we’re going to get to net zero by 2050.
Kat Clay: Yeah, it takes a multi-pronged approach here. One of the arguments that has been coming up in, in the week past is the question of money and the burden on the Australian economy at a time where, you know, there’s high inflation, there’s high cost of living for a lot of people. Is trying to meet these net zero targets, putting too much burden on already stretched taxpayers?
Tony Wood: Look, this is a really central question, because in some ways, even the asking the question implies that there’s an alternative. The difficulty with that is the alternative is much worse. If you accept the science of climate change, and I think increasingly most Australians do, because they see the physical reality of the changing climate now in their lives, and increasingly we’re going to see that, you know, with more floods and more bushfires and that sort of stuff, right?
I don’t want to over catastrophize or underestimate the impact those things will have. So, the alternative is to ignore climate change and try and adapt to it if we think it’s going to happen, or even continue to use things like coal fired power. Now, very few people take that alternative seriously. And so, the question is not whether we proceed with the objective of achieving net zero by 2050, it’s how well we do it.
And what we’re talking about, Kat, I think is how well we do that. Because if we do it badly, it will be more expensive than it should be. There will be problems with blackouts if we don’t do it well, but we can do it well and we should. And what this is about is doing so. And if we do so, the cost of doing that will be lower than the cost of not doing it.
It’s not against what electricity prices are today. Now, right now we are seeing some improvement in electricity prices because the very nasty price increases, we saw a couple of years ago, driven to some extent by global factors, including the Ukraine war, have mitigated somewhat. But that may, they may come back, but right now we should see, we’re seeing right now from 1st of July this year, most consumers in Australia will see small but real reductions in their electricity bills beyond the rebate that the Commonwealth government has offered in the budget.
We should see a bit more of that in the next year or two, but I wouldn’t like to suggest or promise that electricity bills are going to come down dramatically. I don’t think they are, but I also think for quite some while I get, there’s no real threat to electricity prices either. We should be able to accommodate the changes we’re talking about, the transformation of our system we’re talking about without major economic weight on consumers, because this next election will be very heavily focused, not just on climate change, but also on cost of living. And that’s going to be a tricky one, because the government will try and defend its position and the opposition will try and attack them as they should. That’s their job. But cost of living will be important, and the way we position the argument to say, well, we can’t just keep things the way they were. We’ve got two choices. Do it well or do it badly. Personally, I’d rather do it well.
Kat Clay: So, the big question of this podcast, Tony, should Australia abandon the Paris Agreement?
Tony Wood: In some ways, this reminds me of a, I forget the name of the singer now, but the whole concept of we’ll all burn together when we burn reminds me of a, of a song of the 1960s. I think that I listened to as a young, very young person I was in those days. To be fair to the opposition here, they are not saying that we should abandon the net zero by 2050 target. What they’re worried about and what they’re trying to take a political advantage of is the suggestion that we’re going too fast now. And there’s two reasons why I think they’re wrong. It does not have to be a straight line to net zero by 2050, but there are two reasons why delaying this and abandoning our 2030 target would be problematic even if we did it and could do that within the Paris agreement, which is not even itself easy to do.
Firstly, it’s bad because we fail to maintain momentum and if we don’t create and maintain momentum in making those changes, it’s going to get really hard and putting things off is never a good strategy. And now under the Paris Agreement, you can’t reduce your targets below the one you’ve already got. The second reason why it’s important to maintain momentum is because that thing we discussed earlier, Kat, and that is the cumulative effect of greenhouse gas emissions.
You can’t just wait until 2040 to start reducing emissions because all the emissions you put into the atmosphere between now and 2040 will still be there. And getting rid of those greenhouse gases in the atmosphere is really expensive. The cheapest way to avoid that is don’t put them there in the first place.
So that’s why there are two major reasons to build and maintain momentum. Now, it doesn’t have to be religiously stuck to precisely 43 per cent by 2030, but it has to be pretty damn close.
Kat Clay: Thank you so much, Tony for tackling what has been a hot topic issue this week, and obviously in the months to come before the next federal election, whenever that may be.
If you’d like to donate to Grattan, we are in the middle of our end of year financial campaign. Please give generously at grattan.edu.au/donate. As always, please do take care and thanks so much for listening.