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19 August 2021

Australia’s energy transition steams ahead while prime minister grapples with net zero

Australia's power sector is decarbonising as the country explores alternatives to fossil fuel exports, but without a net-zero goal and policies to drive mass deployment of clean energy technologies, these may falter, experts warn.

Australia’s Prime Minister Scott Morrison has been under pressure to increase his country’s national climate goals since US President Joe Biden’s inauguration in January. This inauguration ended four years of political cover from a climate change-denying administration under former President Donald Trump.

Indeed, US deputy presidential climate change envoy Jonathan Pershing said in mid-August that Australia’s current climate targets are “not sufficient” – criticism which was rejected by finance minister Simon Birmingham.

Morrison, who in 2017 brought a lump of coal into Australia’s parliament and mocked the opposition Labor party for “fearing” the fossil fuel, insists the country is on track to net-zero emissions but is yet to set a firm target.

A mannequin of Prime Minister Scott Morrison holding a lump of coal featured as part of a climate change protest which was held in front of Parliament House on October 15, 2019 in Canberra, Australia. Protesters demanded politicians declare a climate emergency. (Photo by Tracey Nearmy/Getty Images)

Instead, Morrison says Australia will reach that goal “as soon as possible” – a position he is, so far, sticking to following the release of the first instalment of the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report. In his response to the report, which made clear time is running short to act, he called on developing countries to make changes and stressed the role for new technologies – the cornerstone of his climate strategy.

“Unless we can get the change in the developing countries of the world, then what we’re seeing in these IPCC reports will occur,” Morrison said on 11 August. “And, so, we need to take a different approach. We need to focus on the technological breakthroughs that are necessary to change the world and how we operate, and make sure that is done right across the world, not just in advanced countries.”

A net-zero target

Climate change is a tricky political beast in Australia, with the so-called climate wars having contributed to the downfall of several political leaders – including Morrison’s predecessor and party colleague Malcolm Turnbull, twice. Following June’s G7 meeting in Cornwall, Morrison’s perceived softening on a net-zero target led to renewed internal ructions in the ruling coalition and resulted in a change in deputy prime minister, from Michael McCormack to Barnaby Joyce.

The federal government has told us that a long-term emissions reduction strategy will be taken to Glasgow. Emily Gerrard, Comhar Group

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Despite this, there are still expectations Morrison will turn up at COP26 in Glasgow with a net-zero target. “The federal government has told us that a long-term emissions reduction strategy will be taken to Glasgow,” says Emily Gerrard, director and principal lawyer at the legal and policy advisory firm Comhar Group. “Business likes to know where it’s going, which is why targets and long-term plans are helpful.”

Richie Merzian, director of the climate and energy programme at The Australia Institute, a think tank, also expects the government to set a net-zero target, despite the right-wing faction of the coalition government and its links to the fossil fuel industry. “[It has] concerns that it’ll impact Australia’s fossil fuel industry – but it won’t because it’ll likely be an aspirational goal with no near-term plans,” he says. “There is no good faith [in] the federal government.”

While a plan to meet any goal is needed, Gerrard concedes no one can “look into a crystal ball today and see all the [future] opportunities”, such as advancing technologies. “But in terms of the certainty, it’s about the goal and the initiatives to get there,” she says.

Irrespective of the current stalemate over a national net-zero target, Australia’s power sector is steaming ahead with its transition, says Tennant Reed, head of climate, energy and environment policy at the Australian Industry Group (Ai Group). “We are on course to fundamentally transform our electricity sector broadly in line with net zero.”

“A government target makes the transition easier, but it’s going to happen anyway, and is underway,” says EY’s Emma Herd, a Sydney-based partner in its climate change and sustainability services. She points to the country’s 20-year-old Renewable Energy Target (RET) as having kickstarted the growth of the clean energy sector in Australia. The energy sector was the biggest source of emissions and is the biggest source of reduction opportunities.

“The Renewable Energy Target catalysed things and, as technology costs have gone down, deployment has gone up,” says Herd.

Data shows renewables accounted for just shy of 20% of Australia’s electricity in 2019 – in line with the RET’s 2009 revised goal. The scheme was split in 2011 into separate targets for large and small-scale clean power, with the former intended to do most of the heavy lifting towards the 2020 goal.

To support the expansion of renewables, the government in 2012 – then led by Labor’s Julia Gillard – passed legislation to establish the Australian Renewable Energy Agency and green investment bank, the Clean Energy Finance Corporation. Merzian credits these agencies with driving investment to early-stage renewables. Combined with “generous state incentives”, he says, this support has led to a big uptake of rooftop solar – an estimated one in every four households has installed rooftop solar panels, according to the country’s science agency CSIRO.

“The focus is obviously on the energy sector, and we do need to manage the transition from the fixed infrastructure of our fossil fuel-based system,” says John Connor, CEO of industry group the Carbon Market Institute. State governments “are pushing harder, and faster”, he says, “but we still need better direction for the energy sector from the federal government”.

He points to proposed renewable hubs and industrial zones as additional examples of how Australia’s states are driving the transition, such as the Western Australia Green Energy Hub (WGEH). If approved, the $70bn WGEH would see 50 gigawatts of wind and solar power installed and used for hydrogen production, which in turn would be converted into ammonia for export. A press release from the consortium behind the project notes that green hydrogen is predicted to be a $2.5trn market by 2050.

Replacing fossil fuels

Part of the challenge is Australia’s position as a fossil fuel exporter – the world’s third largest overall, and the largest for coal and LNG. Coal mining jobs were more than double those in renewables in 2019, and Morrison has repeatedly said natural gas is key to Australia’s prosperity.

“If you look at the emissions embedded in those exports, which will be burned, they’re double what Australia burns at home,” says Merzian. “Australia has no transition – we’re expanding our LNG; our gas has tripled in the last decade. We’re expanding our coal.”

Reed from the AI Group says managing and reducing emissions associated with Australia’s fossil fuel exports “is a complex story … but what happens to the demand for them is more complex”. Net-zero targets in key export markets such as Japan, South Korea and China will presumably lessen demand for Australian coal and gas, which will lead to lower emissions in the island nation as extraction slows.

We are on course to fundamentally transform our electricity sector broadly in line with net zero. Tennant Reed, Australian Industry Group

Morrison has bet big on technology to address Australia’s climate challenges, and the government’s Technology Investment Roadmap has flagged carbon capture and storage as a priority, which would benefit the fossil fuel industry. Other priority technologies set to receive government investment include clean hydrogen, energy storage, soil carbon and low-carbon steel and aluminium.

“The technology investments that we know solve hard problems, have been solving hard problems for humans for a long, long time,” Angus Taylor, Minister for Energy and Emissions Reduction, told journalists in response to the IPCC report. “That means commercial, competitive technology that developing countries can adopt, just as Australia is adopting at a rapid pace, to bring down their emissions and strengthen their economies at the same time.”

“The electricity sector, now it’s much more obvious how it gets to net zero than others,” says Reed. For other sectors, such as steel and cement, it is less clear which technology will be best, he continues. “Australia is both a technology taker and giver – it’s hard to know where best we can move the needle.”

Herd agrees that the hard-to-abate sectors are the challenge, saying these are “the areas where the technologies are not there yet at cost, and at scale.”

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“Hydrogen is a legitimate opportunity, not just for the export potential but also for the potential to decarbonise hard-to-abate sectors,” she says. “It’s also a commodity Australia has the skills and expertise to develop.”

Another area where Australia could succeed is in battery manufacturing, says Merzian. “Australia is rich in the minerals you need to manufacture batteries,” he says. At present, batteries are predominantly made in China. “The US and EU could put pressure on Australia to manufacture them,” he suggests.

Morrison’s A$20bn gamble on five priority technologies will benefit sectors responsible for around 90% of global emissions, Taylor said on 10 August. He flagged partnerships with the UK, Singapore, Germany and Japan to develop and deploy these technologies “in ways that allow us to strengthen our economies, create jobs, drive investment and bring down emissions at the same time. That’s the Australian way.”

“The federal government emphasises the importance of new technologies to get to net zero, which is great, but you can only go so far with labs and pilot plants,” cautions Reed. “Ultimately, the cost reductions and emissions reductions come from mass deployment, and the policies for mass deployment are the gap in Australia at the moment.”

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