In less than ten years, Australia has to cut its emissions 62–75% below 2005 levels. Given reductions in emissions over the past 20 years, that translates to cutting emissions 47–65% below current levels. As of last year, that’s about 440 million tonnes (Mt) of carbon dioxide equivalent.
Under current climate policies, official projections indicate annual emissions will fall 32% by 2035, leaving a sizeable 70–150Mt gap. That’s big. Australia’s cars, trucks and other road vehicles emitted a total of 82Mt last year, for instance.
In a new report, we show Australia will need new policies that provide clearer signals and stronger incentives to stand a chance of reaching its goal.
Policies strong and weak
Economists have long seen a broad-based price on carbon as the most efficient way to drive down emissions.
But Australia’s decades-long climate wars and the repeal of the so-called carbon tax in 2014 has effectively taken this option off the table.
Instead, we have a suite of different policy approaches in three broad groups:
Strong policies
Around 64% of Australia’s net emissions are covered by strong regulation and incentives. In electricity (34% of emissions), clear policy direction coupled with investor momentum is replacing coal and gas generation with renewables and storage. This is already driving lower prices. Emissions are projected to fall 86% by 2035. In industry (30% of emissions), the Safeguard Mechanism covering the 200 largest industrial emitters is projected to cut emissions around 40% by 2035.
Weak or missing incentives
Policies for transport (19% of emissions) and smaller industrial facilities (13%) are falling short. Compared with most advanced nations, the vast majority of transport emissions in Australia are unregulated. The government’s New Vehicle Efficiency Standard gives car buyers more low- or zero-emission options, but lacks incentives to reduce day-to-day emissions. Industrial emissions for smaller facilities are not subject to incentives or constraints.
Opt-in opportunities
The remaining 4% of net emissions come from agriculture, waste and land use. Here, carbon stored in growing vegetation (74Mt) effectively offsets most of the emissions from agriculture (82Mt) and waste (14Mt). Most agricultural operations are export-oriented and have few low-cost ways to cut emissions. The immediate goal is to work towards a future where importers of emissions-intensive food bear the costs of quality credits used to offset these emissions.
Clear policies have driven change in Australia’s electricity sector.
Steve Tritton/Shutterstock
Bridging the emissions gap
Here are six new ways to accelerate emissions cuts.
1: Fix electricity
Despite progress, there’s unfinished business in electricity policy. Current policies guide new investment but not how power generators are operated. As a result, coal and gas plant operators don’t have incentives to cut emissions.
The solution, as Grattan Institute experts have argued, is to expand the Safeguard Mechanism to cover electricity by creating a limit for total electricity sector emissions which would reduce over time.