The biggest climate-change challenges lie ahead - Grattan Institute

The physical evidence of climate change is all around us. This decade is critical for the global, national and state challenges of tackling climate change and transforming our economy to net zero emissions. At the same time, Australia is unusually well-placed to be successful if we get it right. Yet, neither side of the election debate in Victoria has a compelling story on this most important of issues.

In 2020, Victoria’s greenhouse gas emissions were 83 million tonnes, a 30 per cent reduction on the level in 2005, which is the base year against which our targets are now compared. Changes in the mix of electricity generation and in land use delivered most of the good news story. The biggest contributor was electricity generation with about half of the total reduction, significantly larger than the national average of about one-third because of Victoria’s historical reliance on brown coal.

The biggest challenges lie ahead.

Both major parties have committed to 50 per cent by 2030, while Labor wants net zero by 2045 instead of 2050. Hitting these targets will require big changes: the closure of coal generation, the end of gas use in homes and businesses, moving all transport to zero-emission technologies, and dramatic changes in agricultural practices. Net zero would still need technologies that remove greenhouse gases from the atmosphere because absolute zero is likely to be unachievable.

On electricity emissions, we have done the easy bit – lots of rooftop solar panels, and solar and wind farms constructed where the transmission grid had capacity. The next decade will require new transmission and storage infrastructure to balance a system with very high levels of wind and solar. At the same time, all the remaining coal-fired power stations will need to be closed while maintaining reliable and affordable electricity supply.

The major parties have recognised this challenge, although primarily in the form of targets for renewables, storage, or transmission rather than as comprehensive policy. Labor’s headline proposal to reincarnate the State Electricity Commission has captured a lot of attention, even though it is unclear how it would be structured or operate in an environment very different to the one that existed during its previous incarnation. Possibly more important is how the next Victorian government – whether Labor or Coalition – will work with the federal and other state governments on transforming the national electricity market to be fit for the new purpose.

Emissions from industrial processes and gas combustion contribute 25 per cent of the total. State Labor has published a Gas Substitution Roadmap that recognises what needs to be done but lacks a plan to do it, while the Victorian Coalition has focused on a form of gas reservation policy that is unlikely to do much of any real substance.

Transport emissions make up a further 25 per cent. Labor has a target of 50 per cent of new vehicle sales being electric, while the Coalition would remove the road-user charge on electric vehicles. A vehicle emissions ceiling imposed by the federal government is more likely
to seriously reduce road transport emissions, although the state government could play a valuable role in delivering related infrastructure.

The other material sector is agriculture, contributing a further 19 per cent of emissions. The total is rounded out by the fact that the category of “land use, changes in land use, and forestry” is a net absorber of CO2. Neither side has seriously addressed either of these areas in their policy platforms to date.

There are many challenges, but there are also opportunities in Victoria’s climate change transformation. The Latrobe Valley Authority is an example of an on-the-ground initiative working with a local community to plan and implement a successful transition from the carbon-intensive industries that underpinned the local economy for decades. As with politicians around the country, Victorian politicians are finding that it is no easy task to map out a vision and pathway for delivering on the economic opportunities that could emerge from Australia’s minerals and renewable energy resources. This will be another priority for the next state government.

No sector of Victoria’s economy will be unaffected by the changing climate or policies that address climate change. The scale and pace of the challenge is unprecedented outside wartime. Targets are valuable, but actions are needed on emissions reduction that deal with the issues across the economy.

The good news since the previous Victorian election is the current federal government is engaged with climate change, as is industry, and the federal minister seems to have created a far more constructive and co-operative environment with his state colleagues, both Labor and Coalition.

The next Victorian government has a huge opportunity to create real momentum, but every arm of government must be engaged. Many of the pieces are there. They must be assembled.

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