Direct Combustionemissions projections 2014–15
August 2015
Published by the Department of the Environment.
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Executive summary
Key points
•Direct combustion emissions occur when fuels are combusted for stationary energy purposes to generate heat, steam or pressure (excluding electricity generation). Direct combustion emissions are produced from almost all sectors of the economy including energy, mining, manufacturing, buildings and primary industries.
•In 2013–14, direct combustion surpassed transport to become the second largest emissions sector in Australia after electricity.
•In 2013–14, emissions from the direct combustion of fuels were 93MtCO2-e, equating to 17percent of Australia’s total domestic emissions.
•Direct combustion emissions are projected to rise throughout the projections period, primarily due to growth in LNG production and coal mining in response to export demand for Australia’s energy resources.
–Emissions are projected to reach 115MtCO2-e in 2019–20; a 54percent increase on 1999–2000 levels.
–Emissions are projected to reach in 129MtCO2-e in 2029–30; a 73percent increase on 1999–2000 levels.
–Emissions are projected to reach 130MtCO2-e in 2034–35; a 74percent increase on 1999–2000 levels.
•The 2014–15 direct combustion projection is 4percent lower than the 2013 projection in 2019–20 and 2029–30 due to industrial closures, an improvement in energy sector modelling and the recalculation of emissions factors.
Throughout this report:
1.Totals may not sum due to rounding.
2.Percentages have been calculated prior to rounding.
3.Years in charts and tables are financial years ending in the stated year.
Baseline projections
•Between 1989–90 and 2013–14, direct combustion emissions have been rising at an average annual rate of 1.5percent per year. From 2013–14[1] to 2034–35, direct combustion emissions are expected to continue to grow at an annual average rate of 1.6percent.
•The increase in projected direct combustion emissions is largely driven by the expansion of Australia’s liquefied natural gas (LNG) industry and increased coal production.
•The direct combustion sector is broken down into five subsectors: energy, mining, manufacturing, buildings and primary industries. Emissions growth is projected to be highest in energy and mining:
–From 2013–14 to 2019–20, direct combustion emissions from the energy subsector are projected to more than double to 31million tonnes of carbon dioxide equivalent (MtCO2-e) in 2019–20. This increase in emissions is almost entirely due to the expected commencement of seven new Australian LNG projects from 2014–15 to 2019–20.
–From 2019–20 to 2034–35, growth in direct combustion emissions from the LNG industry is expected to moderate. After an initial surge in emissions in the early to mid 2020s, direct combustion LNG emissions stabilise as some mature projects wind down. Emissions growth over this period is dominated by the mining subsector. Mining emissions are projected to grow at 31percent from 2019–20 to 2034–35. The subsectors other than mining are projected to be relatively stable during this period.
–Direct combustion emissions from mining are projected to increase from 17MtCO2-e in 2013–14 to 22MtCO2-e in 2019–20; an increase of 31percent, due to activity increases in the coal mining and non-energy mining subsectors.
Figure 1Direct combustion emissions 1989–90 to 2034–35
Sources: Department of the Environment (DoE) 2015, DoE analysis.
Table1Direct combustion emissions, key years
2000 / 2014 / 2020 / 2030 / 2035Mt CO2-e / Mt CO2-e / Mt CO2-e / Increase on 2000 / Mt CO2-e / Increase on 2000 / Mt CO2-e / Increase on 2000
Energy / 15 / 15 / 31 / 104% / 36 / 134% / 33 / 118%
Mining / 6 / 17 / 22 / 281% / 27 / 376% / 29 / 400%
Manufacturing / 33 / 38 / 37 / 12% / 39 / 19% / 40 / 21%
Buildings / 16 / 18 / 18 / 7% / 18 / 11% / 18 / 13%
Primary industries / 4 / 7 / 8 / 70% / 9 / 99% / 10 / 115%
Total / 75 / 93 / 115 / 54% / 129 / 73% / 130 / 74%
Sources: Department of the Environment (DoE) 2015, DoE analysis.
Impact of measures
•There are no measures in the 2014–15 direct combustion projections. Projections of abatement from the Emissions Reduction Fund are not included to avoid disclosing potentially market sensitive information, and because the safeguard element of the Fund has yet to be decided.
•The Government will consider including estimates of abatement in future projections if it is possible to do so without reducing the effectiveness of the Emissions Reduction Fund auctions.
Changes from the 2013 Projections
•The 2014–15 direct combustion overall projection is lower than that published in 2013. Compared to the 2013 Projections, direct combustion emissions are 4percent lower in 2019–20 and 2029–30. This decline is due to:
–announced industrial closures which reduce activity forecasts in basic non-ferrous metal and non-metallic mineral product manufacturing and refinery output
–a lower emissions forecast in the energy sector due to modelling improvement in the other oil and gas subsector
–a recalculation of emissions from the manufacture of solid fuels over the historical period.
Table of Contents
Executive summary
Key points
Baseline projections
Impact of measures
Changes from the 2013 Projections
1.0 Introduction
1.1 Sources of emissions from direct combustion
1.2 Recent trends—national greenhouse gas inventory
1.3 Projections scenarios
1.4 Outline of methodology
2.0 Projections results
2.1 Trends in the direct combustion projections
2.2 Energy
2.3 Mining
2.4Manufacturing
2.5 Buildings
2.6 Primary industries
3.0 Sensitivity analysis
3.1 Energy
3.2 Mining
3.3 Manufacturing
Appendix A Changes from the 2013 Projections
Appendix B Modelling approach
Appendix C References
Figures
Figure 1Direct combustion emissions 1989–90 to 2034–35
Figure2...... Direct combustion emissions by sector 1989–90 to 2013–14
Figure3...... Direct combustion emissions by sector 2013–14 to 2034–35
Figure4...... Projected annual average change in direct combustion emissions
Figure5...... Direct combustion energy emissions 1989–90 to 2034–35
Figure6...... Direct combustion mining emissions 1989–90 to 2034–35
Figure7...... Direct combustion manufacturing emissions 1989–90 to 2034–35
Figure8...... Direct combustion buildings emissions 1989–90 to 2034–35
Figure9...... Direct combustion primary industries emissions 1989–90 to
2034–35
Figure10...... Direct combustion energy emissions sensitivity analysis
Figure11...... Direct combustion mining sensitivity analysis
Figure12...... Direct combustion manufacturing sensitivity analysis
Tables
Table1...... Direct combustion emissions, key years
Table2...... Sources of direct combustion emissions
Table3...... Projections scenarios
Table4...... Direct combustion energy sensitivity analysis, key years
Table5...... Direct combustion mining sensitivity analysis, key years
Table6...... Direct combustion manufacturing sensitivity analysis, key years
Table7 Differences between the 2014–15 and 2013 direct combustion projections
1.0 Introduction
The 2014–15 direct combustion projections are a full update of the 2013 direct combustion projections. Emissions were projected by economic sector and fuel type using Commonwealth or third party activity information including National Greenhouse and Energy Reporting Scheme (NGERS) data, Monash Multi-Regional Forecasting model growth rates, Bureau of Resource and Energy Economics (BREE) analysis (now Office of the Chief Economist), Wood Mackenzie’s LNG Tool and AME Group’s coal industry analysis (BREE 2014, Wood Mackenzie 2015, AME Group 2014). These data were supplemented by a consultancy report by Core Energy Group to model residential and commercial gas activity levels and to provide advice on potential fuel switching in the industrial sector over the projections period (Core Energy Group 2014).Historical emissions data from 1989–90 to 2013–14 are based on Australia’s National Greenhouse Gas InventorySeptember 2014 Quarterly update and project or facility-specific emissions data reported under the NGERS (DoE 2015).
Detailed results are separately reported for the major direct combustion subsectors: energy, mining, manufacturing, buildings and primary industries.
1.1 Sources of emissions from direct combustion
Greenhouse gas emissions from direct combustion are defined in the national greenhouse gas inventory as emissions from combustion of fuels for energy used directly, in the form of heat, steam or pressure (excluding for electricity generation and transport). Energy used in mobile equipment in mining, manufacturing, construction, agriculture, forestry and fishing is included in direct combustion.
The 2014–15 direct combustion projections are updated for the 2006 IPCCGuidelines for National Greenhouse Gas Inventories, with combustion emissions from pipeline transport being moved to the transport sector since the 2013 Projections.
Emissions arising from the use of electricity in the extraction, production and processing of LNG are included in the 2014–15 electricity generation projections. Fugitive emissions from the extraction, production, and processing of LNG are reported in the 2014–15 fugitive projections.
In line with national greenhouse gas inventory accounting rules, carbon dioxide emissions from wood heating are not included in residential emissions, but methane and nitrous oxide emissions are included in the projection.
Table2Sources of direct combustion emissions
Source / DescriptionEnergy / Direct combustion emissions from the extraction, production and processing of LNG from natural gas used in direct drive gas compressors (used to export gas from gas fields to processing facilities and for liquefaction). Emissions from other oil and gas extraction from power generation for exploration and diesel vehicle use, including the use of stationary diesel engines which supply power for equipment.
On-site combustion for the generation of electricity and heat for petroleum refining. Combustion emissions from the manufacture of solid fuels from the production of coke and brown coal briquettes. Gas-fuelled compressors used in gas production and distribution to distribute gas from the place of production to the eventual consumer.
Mining / Emissions from diesel-powered vehicles and equipment on mine sites including trucks, graders, excavators, air compressors, pumps and conveyors. A small proportion of emissions also occur from on-site equipment powered directly by natural gas.
Manufacturing / In non-ferrous metal manufacturing, emissions from the manufacture and casting of metals (mostly alumina, for which very high temperatures are required). In non-metallic mineral manufacturing, emissions from the manufacture of industrial products such as cement, where kilns are used.
Emissions from fuel use in chemicals manufacturing, such as the manufacture of ammonia, where high temperatures are required.
Emissions from fuel combustion in iron and steel manufacturing and casting stages, mainly for the pelletisation of iron ore, which requires very high temperatures.
Combustion emissions from the pulp, paper and print industries, food, beverage and tobacco manufacturing and all other manufacturing; mostly a result of heat and steam required for pulp and paper production and food processing.
Buildings / In the residential subsector, fuel combustion in households, primarily gas combustion for space heating, water heating and cooking.
Commercial building emissions from gas combustion for space heating, hot water heating, cooking, industrial chillers and hospital equipment, as well as vehicles and equipment used on-site.
Combustion emissions in the construction subsector from construction vehicles and equipment used on site.
Primary industries / Emissions from fuel combustion in agriculture, forestry and fishing (including fish farms). This is mainly attributable to diesel use to power farm and fishery equipment such as tractors, dozers, harvesters, all-terrain vehicles, generators and pumps. Vehicle emissions within a farm boundary are also recorded as combustion emissions.
1.2 Recent trends—national greenhouse gas inventory
Total direct combustion emissions in 2013–14 are estimated to have been 93MtCO2-e, accounting for an estimated 17percent of Australia’s total emissions (DoE 2015).
From 1999–2000 to 2013–14, direct combustion emissions increased by 19MtCO2-e, or 25percent, at an annual average growth rate of 1.6percent. The majority of this growth was driven by mining emissions, which increased by 11MtCO2-e, or 190percent over the same period. The sharpest increase in mining emissions has occurred post 2009–10, as Australian coal and iron ore exports grew by 28 and 67percent respectively. High coal and iron ore prices around 2009–10 lifted exploration investment in Australia, which has resulted in substantially higher output. A more gradual increase in mining production and emissions is forecast over the projections period where emissions are projected to grow at an annual average rate of 2percent.
Emissions from the energy subsector were 15MtCO2-e and have fluctuated around 15MtCO2-e from 1999–2000 to 2013–14 (Figure2). Emissions growth from the production of natural gas has outpaced the decline in refinery emissions. Recent closures of Australian petroleum refineries (including conversion to import terminals) have contributed to a 10percent decline in energy emissions from 2009–10 to 2013–14. Emissions from the manufacture of solid fuels rose from 1999–2000 to 2009–10 and have declined below 1999–2000 levels due to a steep drop in emissions from coke production closures in the Illawarra.
Mining emissions were 17MtCO2-e or 18percent of overall direct combustion emissions in 2013–14, while manufacturing emissions accounted for the largest share at 38MtCO2-e or 41percent of overall emissions. Buildings emissions accounted for the second largest share at 18MtCO2-e or 19percent of overall direct combustion emissions. Primary industries accounted for the smallest share at 7MtCO2-e or 7percent of overall direct combustion emissions.
Figure2Direct combustion emissions by sector 1989–90 to 2013–14
Source: DoE 2015
1.3 Projections scenarios
The baseline projection has been developed on the basis of current policies in place in the direct combustion sector (Table3). The baseline scenario does not include the expected impact of the Emissions Reduction Fund because there is insufficient information to account for it at this time.
High and low sensitivity scenarios are also provided to indicate the level of uncertainty around key assumptions for the major growth sectors of energy, mining and manufacturing. Further details are presented in Chapter3.
Table3Projections scenarios
Scenario / DescriptionBaseline / Best estimates of emissions based on current information.
Energy production / LNG production is assumed to be: i) 8percent higher, and ii) 12percent lower than in the baseline scenario.
Mining production / Coal production is assumed to be: i) 6percent higher, and ii) 16percent lower than in the baseline scenario. Iron ore is assumed to be: i) 2percent higher, and ii) 10percent lower than in the baseline scenario.
Manufacturing production / Iron and steel production is assumed to be: i) <1 percent higher, and ii) 9percent lower. Ammonia production is assumed to be: i) the same, and ii) 30percent lower than the baseline. Cement and lime production is assumed to be: i)13percent higher, and ii) 16percent lower. Fuel switching is assumed to: i) reduce gas use by around 650PJ and increase coal use by 650 PJ, and ii) be unchanged.
1.4 Outline of methodology
The 2014–15 direct combustion projections are based on projections of activity in sectors of the Australian economy and estimates of the emissions per unit of production (emissions intensity).
The modelling was prepared for numerous commodities or industries, based on the 2006IPCC Guidelines for National Greenhouse Gas Inventories. A consistent modelling approach was taken whereby the activity forecast and emissions intensity forecast were used to generate a projection for each national greenhouse gas inventory subsector. The LNG industry, within the energy sector, was modelled at an individual project level owing to the variation in process and project design between Australian projects.
For many sectors, the emissions intensity forecasts were prepared by fuel type (solid, liquid, gaseous) in order to achieve a projection of fuel use, from which emissions were derived. Many direct combustion sectors use significant amounts of natural gas for fuel. Quality assurance was undertaken to ensure that the natural gas fuel balance was consistent across the 2014–15Projections. The check on the fuel balance involved reconciling the projected domestic gas use from the direct combustion, electricity, transport and industrial processes and product use projections, with the amount of natural gas expected to be extracted and processed for use in Australia in the fugitive emissions projections.
Activity forecasts were prepared in consultation with other Commonwealth agencies and third parties. Where activity levels influenced multiple areas of the projection (for example, emissions from LNG production also arise in the electricity generation and fugitive sectors) common activity data were used for each sector. During the first half of 2014–15 international commodities (particularly oil and iron ore) experienced a phase of significant price volatility. Forecasts for the Australian dollar foreign exchange rate and terms of trade were revised down, along with international oil and gas prices. The activity forecasts within the 2014–15 Projections have taken account of these international developments.
2.0 Projections results
Direct combustion emissions were 93MtCO2-e in 2013–14. Emissions are projected to increase by 23percent to 115MtCO2-e in 2019–20, and by 39percent to 130MtCO2-e in 2034–35. In 2013–14 direct combustion surpassed transport to become the second largest emissions sector in Australia. Over the projections period, the projected increase in direct combustion emissions is the second highest of any sector in absolute terms (second to electricity) and the third fastest growing (behind the land use, land use change, forestry sector and the fugitive sector).
2.1 Trends in the direct combustion projections
The projected increase in direct combustion emissions is driven by significant changes in activity levels in the energy and mining sectors (Figure3). In recent years (2009–10 to 2013–14), direct combustion mining emissions increased by 87percent. In the near future (2013–14 to 2019–20), the change in direct combustion emissions will be dominated by the energy sector which is projected to increase by 111percent (Figure4). Emissions increases of this magnitude are unusual and reflect the structural shift currently occurring in the Australian economy away from traditional manufacturing sectors to energy and resource exports.
Figure3Direct combustion emissions by sector 2013–14 to 2034–35
Source: DoE analysis
Anticipated activity changes in the energy sector are the major driver of emissions growth in direct combustion over the projections period. The recent decline in energy emissions from 2010–11 to 2013–14 is expected to be reversed. From 2014–15, the Australian LNG industry is expected to undergo a rapid expansion and Australia is expected to become the world’s largest exporter of LNG by 2018–19. A second wave of Australian LNG production is projected to commence during the early–mid 2020s. After this second expansion phase, direct combustion energy emissions are expected to become relatively stable.
The second largest growth area is direct combustion mining emissions, which are expected to grow by 72percent between 2013–14 and 2034–35. However the rate of growth in mining emissions is expected to be highest in the period to 2019–20, during which time Australia iron ore and coal production are expected to experience the largest increase in output.
Direct combustion manufacturing emissions are projected to increase over the projections period as economic conditions improve and export demand for Australian products increases. There is an initial period of contraction between 2013–14 and 2017–18 due to a decline in activity levels driven by the recent high Australian dollar and labour costs.
Emissions in the buildings subsector are expected to be relatively stable over the projections period with growth of 5percent between 2013–14 and 2034–35, which is concentrated in the commercial building sector.