General Views Of Hazelwood Power Station

On June 23, the new Australian Government lead by Prime Minister Tony Abbott reintroduced a package of bills to repeal the Australian carbon tax. Dismantling the predecessor government’s carbon laws – including the Climate Change Authority and the mining tax – is regarded a top priority by PM Abbott and, therefore, has been placed on the agenda of the new Senate in one of its first debates. In his speech, PM Abbott called on the Federal Parliament of Australia – Senate and House of Representatives – to “scrap this toxic tax” as soon as possible, as reported by The Sydney Morning Herald.

The introduction of the respective laws – effectively putting a ‘price on carbon pollution’ – by the former Labor government under PM Julia Gillard led to embedded carbon price components in fees and charges throughout the economy to customers demanding goods and services. Now, any unwinding of this carbon price promises to become an already tremendously complex task even if repealed in a best-case scenario before or by July 18 in order to allow the ‘carbon benchmark addendum’ to be set to zero and backdated to July 1, according to reports by News Corp. Australia. Otherwise, the same article goes on to explain that the carbon price – recently raised from AUS$24.15 per tonne to AUS$25.40 per tonne – is “added to wholesale electricity derivatives contracts through a ‘carbon benchmark addendum’”.

The developments above may be perceived as an unsettling backdrop for the findings of the Deep Decarbonization Pathways Project (DDPP) released on Tuesday. The project’s goal is to “understand and show how individual countries can transition to a low-carbon economy [“deep decarbonization”] and how the world can meet the internationally agreed target of limiting the increase in global mean surface temperature to less than 2 degrees Celsius (°C) [compared with the pre-industrial average].“ Back in 2010 at the 16th COP held in Cancun (Mexico), the international community committed to this clear target. This interim 2014 report has been issued to UN Secretary-General Ban Ki-moon in support of the upcoming Climate Leaders’ Summit at the United Nations on September 23, 2014.

Note, the interim DDPP report’s preliminary findings focus on the analysis of the technically feasible decarbonization potential and do not address “the costs and benefits of mitigation actions, nor [is] the question of who should pay for these costs [considered at this time].” The interim 2014 report makes clear that in order to achieve “the 2°C limit (…) global net emissions of greenhouse gases (GHG) [need to] approach zero by the second half of the century [by means of] steep declines in carbon intensity in all sectors of the economy. (…) December 2015 is our last chance [to reach an agreement to implement the 2°C limit and enable the world to just barely maintain the chance to keep the temperature rise within the 2°C limit.”

Energy-Related CO2 Emissions Reduction Trajectories

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Source: Pathways to Deep Decarbonization: Interim 2014 Report


Let’s take a closer look at the land ‘down under’.

Not only do impending Australian carbon regulation changes make Australia among the countries analyzed a very interesting case by itself, but also the fact that Australia is a mid-sized developed economy and, above all, a major global energy/commodities exporter with among the highest per capita greenhouse gas emissions in the world. The interim report notes that Australia is the world’s largest exporter of metallurgical coal and the second largest thermal coal exporter by volume.

Moreover, domestic coal production is projected to continue to increase in the future. Australia is also destined to overtake Qatar as the leading exporter of LNG. Meanwhile, Australia’s economy is highly emissions-intensive – as measured in CO2 emissions from electricity production per kWh – due to the extensive use of coal in power generation.

In this context, the report asserts:

“Australia’s economic circumstances are somewhat unique in the global context insofar as emissions from mining and manufacturing contribute a relatively large share (over one third) of Australia’s total greenhouse gas emissions, of which about one third are process and fugitive emissions. (…) In 2012, Australia’s energy related emissions were approximately 17 tCO2 per capita and for Australia to contribute to the objective of limiting global temperature to <2°C, this would need to decrease by an order of magnitude by 2050. (…) Within the modelling parameters of the illustrative pathway (…) deeper decarbonization of Australia’s energy-related emissions would likely require technological advances that increase the viability and/or reduce the cost of decarbonization options. (…) Government has a vital role to play in providing predictability of policy settings in order to minimize investment hold-ups and to reduce the risk of suboptimal investment decisions.”

Consequently, Australia is arguably at the front lines of climate change and policy, where the impacts of global warming may locally rear its ugly head in a very costly manner for future generations. “Global deep decarbonization would significantly change demand for Australian exports while domestic decarbonization would require fundamental changes in Australia’s energy system over the coming decades,” the report suggests.

What is currently clear is that the world – even before Australia’s upcoming potential carbon policy change – is not on a trajectory to stay within the 2°C limit. Most importantly, more and more scientific evidence seems to suggest that “a rise in temperature of 2°C or more threatens many positive feedback loops that could push the global climate system into runaway and irreversible disruptions.” The graphics below give an idea of the potential severe repercussions on human and physical systems in Australia:

Likely Risks and Impacts of Climate Change in Australia

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Source: The Climate Institute (Australia)