Every year, the federal government releases a Climate Change Statement, which documents progress towards Australia’s climate targets. This year’s statement shows Australia’s emissions have fallen and that we are on track to meet the 2030 emissions reduction target of 43 per cent. But hitting this number depends on implementing several policies, including the Capacity Investment Scheme, the Future Made in Australia plan, and The New Vehicle Emissions Standard.
In this Grattan podcast, host Kat Clay and energy expert Alison Reeve discuss what the statement means for Australia, and what the government can do over the next five years to ensure Australia hits the targets.
Further reading
- Annual Climate Change Statement 2024
- Climate Change Authority Annual Progress Report 2024
- Grattan’s Towards Net-Zero report series
Transcript
Kat Clay: The federal government has released their annual climate change statement for 2024. It’s an important document as it shows if the government is on track with its climate commitments. I’m Kat Clay and I have energy expert Alison Reeve with me to talk about what this report means for Australia, whether we’re on track to meet our climate goals and what we could be doing better in the next five years.
Alison, I’m really interested in your initial impressions of this statement, and I’ll put a link to the statement in our show notes for anyone who’d like to have a look at it themselves. I mean, apart from the glossy stock images of whales leaping from the ocean, and I’m not making this up, this is in the report,
Alison Reeve: There are rather a lot of glossy photos in there. These climate change statements came out of the Climate Change Act, which was a piece of legislation the government passed in 2022. What that requires is for the government to make an annual statement to Parliament about how we’re going on progress towards Australia’s climate targets. And then also like what needs to be done next to keep us on track. When you look past those glossy photos at this year’s statement, you mostly see that, while yes, you could make a case that we are on track, there’s a lot of things that need to go right in order to stay on that track.
And also, that there’s a lot of policies that the government are showcasing in this, in this statement that are going to have a large effect over time but are yet to have actually done very much at all. So, an example of that is the vehicle emission standards for cars. This takes effect from 1 January 2025, and that’s going to be a real slow burn of a policy.
It’s going to take a very long time for that to have an impact on emissions, but over time, the cumulative impact will be very important. The safeguard mechanism is similar. You know, very small impact in this year, really hard to see whether it’s working or not yet because it’s really only been running for about a year.
But over time, if it goes well, it should actually have a very large effect.
Kat Clay: Yes. So, a lot of these are kind of future policies that are going to be implemented, and we’ll see the effects of them in years to come. But at the moment we’re in 2024. We have this statement and the big news in the statement is that Australia’s emissions have decreased and we’re on track to meet our 2030 emissions reduction target of 43%. So, when I read this in the, the statement, my first question was kind of by what standard are they measuring this? And is it an accurate assessment?
Um, because there’s a lot of talk with this kind of baseline versus with additional measures in, in the reporting here.
Alison Reeve: So, we measure the emissions target against our 2005 emissions, which was probably when emissions peaked in Australia. The government’s current target is a 43 percent reduction against 2005 levels by 2030. Now, where we are today is that emissions have reduced 28 percent against 2005 levels. By coincidence, this was actually the previous government’s target for 2030.
So, we’ve actually met the previous government’s target six years early, but I think that actually says a lot more about that target not being particularly ambitious than it does about the fact that we’ve had a huge amount of policy in order to do that. The other thing is that, while emissions have come down 28%, they’ve also been on a plateau for about the last four years.
And if you read the report from the Climate Change Authority, which was released alongside the climate statement, they make the point that a lot of this is because, as I was saying before, It’s a bunch of policies that haven’t really had time to take effect. And also, because policy always takes time and there’s always a little bit of inertia, in the economy, some of that plateau is also going to be because a couple of years ago we weren’t doing very much, to encourage emissions to change.
And so, surprise, surprise, they haven’t changed. The question about whether we’re on track to get to 43 percent very much depends how much you want to believe the assumptions that the government has made. A big part of what makes us on track comes from the electricity sector. The government’s assumption is that a policy called the Capacity Investment Scheme, which underwrites new generation in the electricity sector, particularly wind and solar, is going to bring about a lot of wind and solar installations in a very short period of time and push the share of renewable electricity from where it is today, which is around 40 percent to around 82 percent by 2030.
Now what you see when you look at the charts in the report is that all of that has to happen within a space of about three to four years. If any of it goes off track, then the emissions trajectory will go off track as well, because that’s where most of the action is coming from.
You mentioned another scenario that they talk about, which is the initial um, additional measures scenario. The reason they put that one in is because there’s a couple of policies that they’ve announced that they haven’t done the full design on yet. They can only sort of make a guess at how much that affects emissions.
It doesn’t really show that much of a difference. It’s about 0. 1%. And again, that’s because some of those policies that they’ve announced are going to be very slow burn measures that take a while to have an effect. And also, because some of them, like for example, the critical minerals tax incentive and their green metal strategy could actually result in a short-term increase in emissions because they’re going to involve building new industrial facilities.
In the additional measures scenario, some things are pushing emissions down, some things pushing them up, and it ends up pretty much a margin of error question by the time you get to 2030 on the current projection.
Kat Clay: Yeah, that’s interesting that they’ve chosen to include that as well. And I think notably reading through it, I mean, quick to promote the electricity, reductions and the reductions that can be made in that area. But then on the really difficult areas like agriculture and land use, you know, there’s not a lot in this area in this statement about those, because it’s, incredibly hard to shift the dial on those. I guess it’s featuring that kind of, I wouldn’t say that they’re easy wins, but easier won items versus things that are really difficult to reduce emissions in.
so, we’ve talked a little bit about how these are forward planning measures that will reduce emissions in the years to come. I mean, is there anything in this statement that’s working to reduce emissions now, or is it simply these policies that have been put in place this year?
Alison Reeve: The two things that have really gotten us that 28 percent emissions reduction since 2005 have been the change in the electricity sector.
So just the rise of renewable generation from being a very small percentage to being quite large and potentially going to be larger. And then also, changes in, what’s called land use and land use change. Whether we leave trees in place or whether we cut them down, whether we undertake different types of cropping in different areas, all of that also has an impact on emissions.
And one of the things that’s happened since 2005 is there’s been big changes to land clearing laws in some of the states. And what that has done is basically we’re just cutting down fewer trees and clearing less land than we used to. And that’s actually given us a big dividend in terms of reduced emissions.
The thing is that that’s kind of got a natural limit to it, right? There’s only so many trees that you could not cut down. And that stuff is also dependent on what happens with the climate. So really, we’ve done the two things that were pretty easy. And now we’re starting to get into the stuff that’s a bit harder.
And that is, getting to very high levels of renewable penetration in the electricity market while still keeping the lights on, as we’ve talked on podcasts. And then also starting to get emissions down in the industrial sector because those are harder to change.
Kat Clay: The report is quick to point out that EV purchases are up four times from 2021, and homes are installing solar and heat pumps.
How much are individual households responsible for the reductions in emissions versus government policy?
Alison Reeve: Electric vehicles and heat pumps are growing off a very low base. So, at the moment you know four times as many purchases sounds like a lot, but it’s, it’s four times a small number. So those aren’t going to be having a huge impact on emissions right now. The thing is, because there are so many cars and there are so many households, all of those things start to add up over time and they start to accelerate over time as well.
And where we’ve seen that is in rooftop solar. If we’d been making this podcast 20 years ago, I would have said the same thing about, rooftop solar. It’s four times larger than it was last year, but it’s still a really small number. The thing is that we’re now 4 million households.
That’s 40 percent of homes who have rooftop solar, and that is big enough to make a difference. With things that are to do with homes, and to do with sort of small individual sources of emissions like cars, what’s important is that you start early, so that you can get that big cumulative effect over time.
Kat Clay: The future made in Australia plan is a big part of this statement as well. And it’s pitched as a large part of the government’s response to climate and includes investment in renewable hydrogen, green metals, critical minerals, tax incentives.
You’ve mentioned those already and clean energy manufacturing, alongside getting women into male dominated industries. And, and funnily enough, these are all topics we’ve covered in previous Grattan reports.
I know you’ve written about this in the news recently, but what is your take on the future made in Australia plans role in emissions reduction?
Alison Reeve: So, future made in Australia at the moment is a slightly nebulous concept, um, in terms of being a policy. And it’s really a way of structuring industry assistance in order to restructure the Australian economy away from carbon intensive industries and towards those ones where we can use the natural endowments we’ve got in things like renewable energy and, and, minerals and so on to value add and to make sure the economy thrives when the global economy goes to net zero as well. Now, at the moment, it’s having, I would say, absolutely zero effect on our emissions because the legislation literally only passed Parliament, yesterday as we record this. What it is about really is that restructuring story, which will take place over time.
So, it’s more about how we build new industries and make them, low or zero emissions than it is about reducing emissions from existing facilities. Those emissions reductions that give us that new structure in our economy will really come from when we see the end of coal mining and LNG exports.
Kat Clay: The Report is also kind of quick to espouse emissions reductions in the electricity and transport sectors, but we did talk about emissions from agriculture essentially staying the same.
Agriculture makes up about a fifth of Australia’s emissions, so it’s important to look at the reductions in this area. But I’m wondering here, has agriculture been put in the too hard basket?
Alison Reeve: I mean, look, a lot of the reason for that is because agriculture is hard. You know, those emissions come from things which are basically natural processes. the fact that cows burp. the crops grow in the way that crops grow and that sort of thing. So, you know, those are actually very difficult processes to influence.
One of the things the government is doing, is a series of what are called sector plans. the purpose of these is for each sector to actually map out how it can get to net zero. And that should give us much more sense of where we could make progress in agriculture.
You might remember the report that Grattan published in 2021. One of the things that we talked about in that report was the fact that there’s a huge amount of research and development that needs to be done on things like how you stop cows from burping, for example. And you know, we really need to get going on that so that we can get those emissions reductions coming through in like 2040 and 2050.
Kat Clay: the other thing you, you, did mention, I mean, because there is the climate change authorities statement as well that runs alongside statement. They’ve included a number of recommendations for government going forwards, which does include the continued development of the capacity investment scheme.
Do you agree with their recommendations here?
Alison Reeve: Yeah, so the Climate Change Authority has to give independent advice to the minister ahead of each one of these climate change statements. That advice then gets tabled alongside the minister’s statement. So, you get the glossy brochure with all of the lovely pictures of whales in it, and then you also get the independent advice that should have informed it.
About half of the recommendations from the Climate Change Authority this year were very focused on the electricity sector. How we get all of those renewables in there to get the emissions reductions and also keep the lights on at the same time. They were quite specific about some, a couple of technical issues.
Kat Clay: Yeah, I did have to ask myself what a combined synchronous condenser functionality is.
Alison Reeve: Just very quickly a synchronous condenser is basically a large spinning motor, and it’s used to stabilize voltage and current in the grid and that’s very helpful when you’ve got lots of renewable energy. So that’s the short version of what it does. But the point that they were making there is the need to make sure that we’ve got the right rules in the energy market and the right settings so that we can use technologies like that to keep the grid stable and also to underwrite new capacity as it comes in, to make those projects effectively bankable so that people will lend you money to build a wind farm.
There’s been a review that was announced this week for the national energy market that’s going to go exactly to you know, dealing with those problems. I’m not sure whether it’s going to say, keep the capacity investment scheme going or do something else. But the point is that we are now back in the space where governments have gone. Yep. We do need to change the rules. We do need to change the market settings so that we can, keep getting the emissions reductions in the energy market.
There was just one other, or actually two other recommendations from the Climate Change Authority that I wanted to mention because I thought they were important.
One of them was about the need for governments to get policy settings right for upgrading existing buildings. A lot of our climate and energy policy around buildings is about how we build new buildings. So, it’s making sure that when new buildings are built, they use less energy than old buildings.
They’ve got insulation in the ceiling, they’ve got double glazed windows, that sort of thing. The thing is that buildings have an awful long life, and we have an awful lot of buildings that already exist. And those buildings are going to continue existing to exist right through to, you know, 2040 and 2050 and so on.
And so, there’s a very long lead time and a lot of work that needs to be done to upgrade those buildings and make them more pleasant to live in as the climate changes. in the week we’re recording this, there’s been a heat wave in New South Wales and a lot of people, particularly in Western Sydney, where I think I think you’re from Kat a lot of people would have had a very uncomfortable week.
Because our housing is not built to cope with those sorts of heat waves. It’s really important the Climate Change Authority has made that recommendation and will keep beating the drum on this because that is a big piece of work the governments do need to get onto.
And then the last one really is a little bit about that as well is about, helping to implement the National Adaptation Plan. Regardless of how well we do on reducing our emissions targets, there’s a certain amount of climate change that is already baked in.
There’s a certain amount of temperature rise that we are going to have to cope with, and the associated impacts that that has on weather, on storms, and so on. The recommendation the Climate Change Authority has put forward is about resourcing them to help to implement that plan, which is going to be a very important part of this space going forward.
Kat Clay: Yeah, and that’s one that’s going to affect a lot of people. You know, I did grow up in Western Sydney and I still remember recent years where, you know, Penrith was the hottest place on earth. It wasn’t the Sahara Desert. It wasn’t all the places you think are going to be the hottest place on earth. It was Penrith. And having grown up in that kind of heat bowl and seeing that temperature increase over time is just, you know, it has really ramped home. How much climate change is happening. I want to know what you think government should be prioritizing in the next 12 months to reduce emissions. Obviously apart from what the Climate Change Authority have done. recommended here.
Alison Reeve: I think that electricity sector stuff is very important. But I think the other thing that they need to do is to start thinking about how they are going to deal with, some of that stuff around buildings, particularly getting gas out of households, and also thinking about how they are going to restructure the gas market through that process.
Both sides of politics will say, oh, gas is going to have an important role but that is actually not enough certainty around exactly where and how and for how long we’re going to use gas. And if we don’t get that sorted out, it’s going to make not just the decarbonisation pathway very difficult, it’s also going to make just running a functioning energy market very difficult as well.
I think that’s the thing where they really need to focus is to start thinking about how we get a lot of our existing markets, not just our electricity market, but our gas market as well to restructure so that they are fit for purpose for where we need to go.
Kat Clay: Thank you, Alison. If you would like to read any of those statements for yourself, I’ll put those links in the show notes for you. It is coming into Christmas Time, and we do rely on donations from our listeners like you. If you’d like to support our work, please visit our website grattan.edu.au. As always, do take care and thanks so much for listening.