In the race, but at the back

12 August 2015

Australia’s 2030 climate target puts us in the race, but at the back of comparable countries, writes Frank Jotzo.

Australia’s new emissions target is not ‘squarely in the middle of comparable economies’ as the PM claimed. Towards the bottom of the pack of comparable countries, on key indicators. But Australia is coming to the party, and that counts for a lot.

It means the target is not obstructing international progress. And it will put the spotlight back on the opportunities for a lower carbon economy, and the policy instruments to get there.

Australia’s emissions target is a 26-28 per cent reduction at 2030 in national emissions compared to 2005 levels. It can be viewed through different prisms and compared across different metrics.

Ratchet up later?

Fundamentals first. Australia’s 2030 target is not compatible with the internationally agreed 2C goal. It falls far short of what would be a commensurate Australian contribution to such an outcome. The Climate Change Authority in its Targets and Progress Review showed a 40-60 per cent reduction at 2030 (relative to 2000 levels) as compatible with a 2C emissions budget.

Modelling done for our Deep Decarbonisation Pathways study, again for a 2C compatible scenario, showed Australia’s emissions cut in half at 2030.

That said, most other developed countries’ targets also fall short of the 2C mark, though generally by less than Australia’s target. The take-home message is that ambition will need to be ratcheted up in the years after the Paris climate conference.

And there is every reason to believe that this is possible. Time and time again, the experience has been that emissions reductions come cheaper than expected. Many emissions savings technologies have developed more rapidly and became cheaper more quickly than expected – just think of solar panels and LED lights.

Most existing emissions trading schemes achieve their targets at prices that are lower than was expected. Some have already lifted ambition in return.

We know that Australia can make the transition to a low carbon economy, by replacing coal in the power system with renewables (and in part nuclear if you wish, or carbon capture and storage if it works), harvesting the potential for energy efficiency across the economy, and modernising industries.

But how to get even a 26-28 per cent reduction?

Australia currently has no credible plan for how the target could be achieved. The Renewable Energy Target has been slashed, and the Emissions Reductions Fund (ERF) in its present form will only have a marginal effect, at a big cost to the taxpayer.

It is far-fetched for the ERF subsidy mechanism to achieve significant absolute emissions reductions, and the discussion of new policy in Australia’s official statement is vague.

And so there is a risk Australia’s latest pledge will be seen as an empty promise because there is precious little to back it up.

This is by contrast to a whole suite of policies in train in China, Obama’s power plan and the EU which has the emissions trading scheme to assure that its target will be met.

To achieve reductions in domestic emissions will require significant and sustained policy effort. For reductions to be achieved cost-effectively, a consistent, broad-based policy effort is needed. And crucially, investors need to regain trust after many years of bruising political fights over climate change and the resulting policy uncertainty.

Then there is always the option of buying international emissions permits or credits, which could be part of a cost-effective solution or a cheap cop-out, depending on the rules and depending on your point of view. At the end of the day though, we need to get a transition underway domestically, and that means domestic action.

Pack position

But back to the first question: where are we in the pack, on the way to Paris?

Australia’s target for reduction in absolute emissions is significantly weaker than that of the United States and the EU, a little weaker than Canada’s, and a little stronger than Japan’s.

The choice of 2005 as a base year results in a larger percentage reduction number than if the year 2000 or (say) 2012 was used. That is because 2005 was near the high-water mark for Australia’s emissions.

A key feature of the target is that the annual rate of emissions reductions to meet the target steps up during the 2020s, to 1.9 per cent per year. This is slightly higher than the other countries in the comparison, except the US which are targeting a reduction of 2.8 per cent per year during the first half of the 2020s.

In per capita terms, Australia’s target implies a halving of per capita emissions over a 25-year timespan, a similar reduction rate as expected in the US and Canada, and a much faster reduction than in the EU and Japan where populations are stable.

But Australia does of course have a long way to come down, from its position of highest emissions levels per capita among all major countries. And per capita emissions would remain higher than the other countries looked at here, assuming population growth continues at the rates observed over the last decade.

A full comparative analysis would include modelling of the economic effects of Australia’s emissions target and different ways of meeting it, in comparison to other countries targets. To date such modelling is not available – and it is a fair assumption that global views of Australia’s target will be formed without reference to any economic modelling.

Expectations and perceptions

The coming weeks and months will tell, but my expectation is that internationally, Australia’s target is likely to be perceived as falling short in its ambition relative to Australia’s opportunities to cut emissions. But at the same time it will not be seen as falling catastrophically short, nor as an active obstruction of the international process.

Indeed, given the widespread perception that the Australian government looks out for the interests of the fossil fuel industry ahead of all else, the target announcement could be seen as step towards meaningful engagement on climate change.

In the eyes of the world we might just have reclaimed our traditional position as laggard in international climate change efforts, moving up a rung or two from presumed recalcitrant. There’s still quite a way to go on that ladder.

A numerical comparison of targets is available here.

This piece was first published on The Conversation

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