Australia S Emissions Projections 2016

AUSTRALIA’S EMISSIONSPROJECTIONS 2016

DECEMBER 2016

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Image: View of Tasmanian wilderness from Lyell Highway on the west coast, Tasmania © Leanne Chow, 2015

Executive summary

The 2016 emissions projections show Australia continues to make progress in reducing emissions.

Australia’s 2020 target (5 per cent below 2000 levels)

Australia is on track to over-achieve on its 2020 target by 224 million tonnes of carbon dioxide equivalent (MtCO2-e), inclusive of carryover, or 97 MtCO2-e without carryover.
This is larger than the April 2016 projections update, which estimated Australia would surpass its 2020 target by 78 MtCO2-e.
Emissions in 2020 are projected to be 559 MtCO2-e, a downward revision of 19 MtCO2-e since the April 2016 update.
This change is due to:
the closure of Hazelwood power station
lower electricity demand due to increased energy efficiency
lower-than-forecast emissions from land clearing.
The key drivers of emissions to 2020 are expansions in Australia’s liquefied natural gas industry and growth in transport activity.

Australia’s 2030 target (26–28 per cent below 2005 levels)

Emissions in 2030 are projected to be 592 MtCO2-e.
Taking account of sensitivity analyses, the range for annual emissions in 2030 is 571 to 616 MtCO2-e.
The 2030 target will require:
990–1055MtCO2-e in cumulative emissions reductions between 2021 and 2030 under the baseline projection
842–1202 MtCO2-e when taking account of the sensitivity analyses.
These estimates do not take account of the National Energy Productivity Plan, vehicle efficiency standards, the phase-down of hydrofluorocarbons, or policy changes that might flow from the 2017 review of climate policies or work of the Council of Australian Government’s (COAG) Energy Council.
The key drivers of emissions to 2030 are:
increased electricity demand linked to rising economic activity
increases in transport activity linked to population growth
increased herd numbers in agriculture linked to international demand.

AUSTRALIA’S EMISSIONS PROJECTIONS 2016

Executive summary

Australia’s 2020 target (5 per cent below 2000 levels)

Australia’s 2030 target (26–28 per cent below 2005 levels)

Introduction

Projection results

Australia’s progress towards meeting the 2020 target

Emissions projections to 2030

Changes from the 2014–15 projections

Progress to the 2030 target

Other metrics

Sectoral trends

Electricity

Direct combustion

Transport

Fugitives

Industrial processes and product use

Agriculture

Waste

Land use, land use change and forestry

Sensitivity Analyses

Lower emissions sensitivity

Higher emissions sensitivity

Appendix A—Methodology

Appendix B—Sectoral assumptions

Appendix C—Land classification systems under Kyoto Protocol and UNFCCC

Appendix D—Sensitivity Methodology

Appendix E—References

Australia’s Emissions Projections 2016

Introduction

Emissions projections are estimates of Australia’s future greenhouse gas emissions. They provide an indicative assessment of how Australia is tracking against its emissions reduction targets. They also provide an understanding of the expected drivers of future emissions.

The projections provide an estimate of the abatement task associated with Australia’s emissions reduction targets. This represents the total emissions that must be avoided or offset for Australia to achieve its target. If the abatement task is a negative value, this indicates Australia is on track to over-achieve on its commitments.

The 2016 projections include:

A projection of emissions from 2016 to 2020, which provides an estimate of the abatement task Australia must achieve to meet its 2020 emissions reduction target based on a carbon budget.
A projection of emissions from 2021 to 2030, which provides an estimate of the abatement task Australia must achieve to meet its 2030 emissions reduction target.

These projections update those provided in Tracking to 2020, released in December 2015 (DoE 2015c; see sector chapters for specific comparisons). They also update those provided in the fact sheet Tracking to 2020—April 2016 update (DoE 2016) and, for projections to 2030, Australia’s emissions projections 2014–15 (DoE 2015a).

This report includes a baseline projection as well as sensitivity analyses to illustrate how emissions may differ given variations in key drivers of Australia’s emissions—energy exports and technology change.

Projection results

Australia’s progress towards meeting the 2020 target

Australia’s emissions in 2015 were 527 MtCO2-e. This represents a 12 per cent decline on 2005 levels. This has been driven by:

reductions in electricity emissions, due to increased energy efficiency and flatter growth in demand
ongoing subdued economic conditions resulting in slower overall emissions growth
lower deforestation rates than historical levels.

Over the period 2015 to 2020, Australia’s emissions are projected to grow. This is primarily driven by the development of new Liquefied Natural Gas (LNG) facilities in Western Australia, Queensland and the Northern Territory. This expansion of the LNG industry results in increases in emissions for the direct combustion and fugitives sectors. The Renewable Energy Target, flat electricity demand, and the announced closure of Hazelwood power station sees emissions in the electricity sector projected to decline slightly, offsetting some of the overall growth in emissions to 2020.

Emissions in 2020 are projected to be 559 MtCO2-e, around 3 per cent lower than projected in the April update (Figure 1).

Figure 1Projected emissions in 2020 over time

Note: Projected emissions in 2020 have been calculated using the information available in each publication. It is important to note that year to year figures are not directly comparable as the underlying assumptions and policy measures differ. Emissions accounting approaches to comply with international reporting standards and target trajectories are also different between projections.

Australia is expected to surpass the emissions reductions required to meet its 2020 target by 97MtCO2-e. This is in addition to Australia’s carryover of 128 Mt CO2-e. Taken together the overachievement is 224MtCO2-e. These estimates are calculated using the following steps:

Over the period 2013 to 2020, Australia’s cumulative emissions are projected to be 4353MtCO2-e, once the effect of policies such as the Emissions Reductions Fund and the Renewable Energy Target have been taken into account.
The carbon budget associated with the target of 5 per cent below 2000 levels equates to a maximum of 4432 MtCO2-e over the period 2013 to 2020.
The difference between the projection and the budget is -79 MtCO2-e.
The cumulative abatement task is then adjusted for estimates of voluntary action[1] by households and businesses, which is considered additional to national targets.
The cumulative abatement task is further adjusted to take account of 25 MtCO2-e of international units voluntarily transferred to the Commonwealth under the Waste Industry Protocol[2].
The result of these calculations is outlined in Table 1.
Australia also holds 128 MtCO2-e of surplus units from the Kyoto Protocol first commitment period (our ‘carryover’). The sum of these units and our projected overachievement for the 2013 to 2020 period is 224MtCO2-e.

Table 1Cumulative abatement task, 2013 to 2020

Calculation of 2020 abatement task: / 5 per cent below 2000 levels in 2020
(MtCO2-e)
Cumulative emissions 2013–2020 / 4353
Target trajectory 2013–2020 / 4432
Unadjusted abatement task / -79
Voluntary action / +8
Waste Protocol units / -25
Abatement task / -97
Carryover from 2008–2012 / -128
Abatement task with carryover / -224

Note: totals may not sum due to rounding.

Changes since the April 2016 projections update

The changes since the April 2016 projection reflect lower than previously projected emissions growth across the economy, particularly due to:

the announcement in November 2016 of the forthcoming closure of Hazelwood power station in Victoria due to occur in April 2017
lower projected electricity demand due to improved energy efficiency
lower expected emissions in the land sector, as new data confirms that emissions from land clearing are been lower than previously estimated
improvements in the national greenhouse gas inventory, which have revised historical estimates of land sector emissions
lower deforestation rates and higher sparse vegetation gains have contributed to a revised estimate of 527 MtCO2-e in 2015.

Figure 2Change in the cumulative abatement task, 2013 to 2020

Emissions projections to 2030

Emissions in 2030 are projected to be 592 MtCO2-e, which is 0.5 per cent below 2005 levels (595 MtCO2-e). This is a reduction of 132 MtCO2-e, or 18 per cent, from the estimate of 724 MtCO2-e given in the 2014–15 projections.

Emissions projections are inherently uncertain, and this uncertainty increases the further into the future emissions are projected. Taking account of sensitivity analyses prepared for this report suggests Australia’s emissions in 2030 could range from 571 Mt CO2-e and to 616 Mt CO2-e.

Figure 3Australia’s emissions trends, 1990 to 2030

Source:Department of the Environment and Energy 2016; Department of the Environment and Energy analysis

Note: The historical emissions from 1990 to 2015 have been revised since the release of Australia’s emissions projections 2014–15, published in March 2015. It is important to note that year to year figures are different in these publications and not directly comparable as the underlying assumptions, accounting systems and policy measures differ.

Most of the projected growth in emissions to 2030 is in the electricity, transport and agriculture sectors. This is driven by increased electricity demand linked to economic activity, increases in transport activity linked to population, and increased stocking numbers in agriculture driven by overseas demand. Emissions in other sectors are projected to stabilise and grow only slightly after 2020 (Figure 4).

Figure 4Domestic emissions, 1990 to 2030

Table 2Sectoral breakdown of 2016 projections results to 2030

Emissions by sector (Mt CO2-e) / 2000 / 2005 / 2015 / 2020 / 2030
National Greenhouse Gas Inventory / Projection
Electricity / 175 / 197 / 187 / 176 / 186
Direct combustion / 75 / 82 / 95 / 108 / 110
Transport / 74 / 82 / 93 / 101 / 111
Fugitives / 39 / 37 / 41 / 45 / 47
Industrial processes and product use / 27 / 32 / 33 / 35 / 36
Agriculture / 79 / 76 / 70 / 73 / 78
Waste / 15 / 14 / 12 / 10 / 11
Land use, land use change and forestry / 67 / 76 / -4 / 11 / 13
Total / 550 / 595 / 527 / 559 / 592

Changes from the 2014–15 projections

Factors which have contributed to the revision are:

the inclusion of abatement over the period 2021 to 2030 from existing contracts under the $2.55 billion Emissions Reduction Fund and estimated abatement from the remaining $440 million
the Government’s commitment to a Large-scale Renewable Energy Target of 33,000GWh. The 2014–15 Projections reflected government policy at the time to change the target to around 26,000 GWh, which represented 20 per cent of projected electricity demand in 2020
the announcement of the forthcoming closure of Hazelwood power station in Victoria in April 2017
flatter electricity demand than previously forecast due to improving energy efficiency
revised expectations for growth in renewable generation as costs decline, particularly for solar
lower than previously projected production in the non-ferrous metal manufacturing, coal and LNG industries
revised expectations for the uptake of electric vehicles and improvements in vehicle efficiency in the transport sector.

Figure 5Emissions in 2030 over time

Note: Projected emissions in 2030 have been calculated using the information available in each publication. It is important to note that year to year figures are not directly comparable as the underlying assumptions and policy measures differ. Emissions accounting approaches to comply with international reporting standards and target trajectories are also different between projections.

Progress to the 2030 target

The current estimate is that cumulative emissions reductions of 990 Mt CO2-e (26 per cent reduction) to 1055 Mt CO2-e (28 per cent reduction) will be needed over the period 2021–2030 to meet Australia’s 2030 target. Taking into account uncertainty as tested through sensitivities, the 2030 target may require cumulative reductions in the range of 842 Mt CO2-e to 1202 Mt CO2-e over 2021–2030. Further information on sensitivities can be found in the sensitivities chapter.

These results reflect the fact that the Government’s policies are primarily geared towards the 2020 target at this stage. Policy settings that the Government might agree to as part of its 2017 review of climate change policies are not included in these projections.

These projections do not take account of abatement from:

the National Energy Productivity Plan, as detailed measures under the Plan are still at an early stage of implementation
the ongoing work of the Ministerial Forum on Vehicles, which is considering potential measures to improve the fuel efficiency of light vehicles
the Government’s commitment to the phase-down of hydrofluorocarbons (HFCs), the details of which are still being developed
proposed state renewable energy measures
other processes, for example, the work of the COAG Energy Council.

Other metrics

The emissions intensity of the economy (Figure 6) has declined and is projected to fall by 50per cent in 2030 when compared to 2005. Emissions per person are also expected to fall steadily by 32 per cent in 2030 when compared to 2005.

Figure 6Emissions intensity of GDP relative to 2005 levels, 2005 to 2030

Sectoral trends

This chapter sets out the emissions projections associated with each sector in the overall projections results. This breakdown into sectors is consistent with the international guidelines for reporting under UNFCCC. These sectors are described in Table 3 below:

Table 3Projections sector coverage

Sector / Coverage
Electricity / Emissions from combustion of fuels to generate electricity on and off-grid
Includes emissions from electricity used to power electric vehicles
Direct combustion / Emissions from combustion of fuels to generate steam, heat or pressure, other than electricity generation and transport
Transport / Emissions from combustion of fuels for transport
Fugitives / Emissions released during the extraction, processing and delivery of fossil fuels
Industrial processes and product use / Emissions from non-energy related industrial production and processes
Includes emissions from hydrofluorocarbons (used in refrigerants and air conditioning)
Agriculture / Emissions from livestock and manure management
Emissions from rice cultivation, application of nitrogen to soils, and burning of agricultural residues
Waste / Emissions from disposal of material to landfill and wastewater
Land use, land use change and forestry / Emissions from deforestation, reforestation, revegetation, forest management and savanna burning
Emissions from cropland and grazing land management

Electricity

Emissions from electricity generation are the result of fuel combustion for the production of electricity both on-grid and off-grid. Electricity generation represents the largest share of emissions in the national greenhouse gas inventory.

Emissions in the electricity sector have grown by 44 per cent since 1990 to be 187 MtCO2-e in 2015. Emissions are projected to fall to 2020 to be 176 Mt CO2-e before growing, albeit more slowly than historic rates, to be 186 Mt CO2-e in 2030. Electricity emissions are not expected to reach the peak levels seen in 2009 due to a combination of relatively flat electricity demand and a gradual decrease in the emissions intensity of the electricity sector.

The results presented below are inclusive of abatement from the Emissions Reduction Fund and the Renewable Energy Target. The results do not include the impact of the National Energy Productivity Plan.

Figure 7 Electricity emissions, 1990 to 2030

Source: Department of the Environment and Energy 2016; Department of the Environment and Energy analysis

Electricity emissions to 2020

Electricity emissions are projected to decrease by 6 per cent from 2015 levels to be 176MtCO2-e in 2020. Electricity demand, influenced by population growth and the economy, is a key driver of electricity emissions. Improvements in energy efficiency have led to forecasts of continued flat growth in electricity demand. This contributes to the projected decline in emissions to 2020.

Increases in renewable generation to meet the Large-scale Renewable Energy Target of 33,000GWh in 2020 is also expected to drive electricity emissions down to 2020. The Large-scale Renewable Energy Target is projected to encourage new builds of wind capacity, and wind generation will double to 2020 on 2015 levels. Small scale and utility scale solar capacity is also expected to grow, driven by declining costs of rooftop solar photo voltaic (PV) and funding from the Australian Renewable Energy Agency (ARENA) for large-scale solar projects.

The closure of Hazelwood brown coal power station sees electricity generation that would otherwise have been met by Hazelwood being taken up by less emissions-intensive black coal generators. Demand-driven increases in the domestic gas price, principally from LNG facilities ramping up to full production, also boosts black coal generation to 2020. Black coal holds the largest share of the electricity supply mix at 45 per cent in 2020. Nevertheless, due to the Renewable Energy Target and the closure of Hazelwood, from 2016 to 2020 the electricity supply becomes less emissions intensive by 12 per cent.

Electricity emissions to 2030

After 2020 emissions are projected to grow steadily to reach 186 Mt CO2-e in 2030, roughly equivalent to 2015 levels. Electricity demand continues to grow slowly driving the flat growth in emissions from electricity generation. There are gradual changes to the electricity supply mix. By 2030 non-renewable generation from coal and gas accounts for 53 per cent and 19 per cent of the supply mix respectively. This is a decline of around 2 per cent in non-renewable generation when compared to the supply mix in 2020. Renewable generation makes up 26percent of the sent out electricity generation.

More than 2,000 MW of coal capacity is assumed to retire after 2020. Oversupply in the electricity market sees this generation being taken up by existing coal and some gas. It is projected that there will be little change in emission levels as a result of these closures. Over the period from 2020 to 2030 there are small improvements in the emissions intensity of electricity, driven by growth in small scale renewable generation and increases in gas generation as new gas capacity is built from the mid-2020s onwards.

The costs of small scale solar technology are expected to continue to fall. The installation of rooftop solar PV grows strongly in the residential and commercial sectors across the projections period. Rooftop solar PV generation almost doubles from 2020 to 2030. By 2030, electricity from total solar generation accounts for 8 per cent of the supply mix.

Electricity sector emissions take into account electricity demand from electric vehicles. Some of the growth in electricity demand through the 2020s can be attributed to increased electric vehicle activity. By 2030, electric vehicles are expected to make up 15 per cent of new vehicle sales, consuming around 5,200 GWh of electricity.

Australia S Emissions Projections 2016