Tracking to 2020
An interim update of Australia’s greenhouse gas emissions projections
December 2015
© Commonwealth of Australia, 2015.
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Further information about projections of greenhouse gas emissions is available on the Department of theEnvironment’s website: www.environment.gov.au. To contact the Projections team, please email
Disclaimer
The views and opinions expressed in this publication are those of the authors and do not necessarily reflect those oftheAustralian Government or the Minister for the Environment.
Contents
Introduction 2
Overview 3
Sectoral trends 9
Electricity 9
Direct combustion 10
Transport 11
Fugitives 13
Industrial processes and product use 14
Agriculture 15
Waste 17
Land use, land use change and forestry 17
AppendixA—Methodology and keyassumptions 20
AppendixB—Change from previousprojections 25
Appendix C—Emissions Reduction Fundmethods 27
AppendixD—References 30
In this report:
· totals may not sum due to rounding
· years contained in charts and tables refer to the financial year ending of the year shown
· percentages have been calculated prior to being rounded to the nearest whole number
· figures that are less than 0.1 are written as <0.1.
Introduction
Tracking to 2020 is an interim update of Australia’s domestic emissions projections to 2019–20 and shows how Australia is tracking to meet the abatement task associated with the 2020 emissions target. The projections include an estimate of abatement from the Emissions Reduction Fund for the first time.
These projections are based on:
· historical emissions data from Australia’s National Greenhouse Accounts: National Greenhouse Gas Inventory and Quarterly update of Australia’s National Greenhouse Gas Inventory, June Quarter 2015;
· macroeconomic parameters consistent with the Australian Government’s 2015–16 Budget; and
· commodity forecasts and activity levels from a range of sources, as outlined in AppendixA.
The projections are prepared based on information and analysis available at a point in time. Therefore they do not take account of information that has recently been released, such as the International Energy Agency’s WorldEnergy Outlook (2015), or estimates of abatement from policies and initiatives that are still in the early stages of development. These include:
· the National Energy Productivity Plan, which is being progressed in collaboration with the states and territories through the Council of Australian Governments’ Energy Council;
· a Ministerial forum to commence work on improving the fuel efficiency of Australia’s vehicle fleet; and
· Australia’s announcement that it will work with other countries to phase-down the use of hydrofluorocarbons (HFCs) by 85 per cent by 2036.
It is also the case that the adoption of Intended Nationally Determined Contributions (INDCs) by the large majority of the countries of the world will result in technological innovations and changes in trade flows as countries take action to meet their commitments. Collectively, these factors will likely reduce Australia’s emissions and the effects will be progressively quantified in future projections.
Emissions projections are inherently uncertain, involving judgements about the growth path of future global and domestic economies, policies and measures, technological innovation and human behaviour. This uncertainty increases the further into the future emissions are projected. This report indicates what future emissions could be if the assumptions that underpin the projections continue to occur. The projections do not attempt to account for, or speculate on, the inevitable, but as yet, unknown changes that will occur, for example, in technology, government policy or the international and domestic economy. In short, this report is not a forecast of future emissions.
Calculation of Australia’s cumulative abatement task to 2020
The Australian Government is committed to reducing emissions to fivepercent below 2000levels by 2020, equivalent to 13 per cent below 2005 levels. This target has been reported as a commitment under the United Nations Framework Convention on Climate Change. Australia’s 2020 target trajectory is calculated by taking a linear decrease from 2009–10 to 2019–20, beginning from the mid-point of the Kyoto Protocol first commitment period (CP1, 2008 to 2012) target level and ending at fivepercent below 2000 levels in 2020.
The cumulative abatement task is defined as the difference in cumulative emissions over the Kyoto Protocol second commitment period (CP2, 2013 to 2020) and the target trajectory.
Institutional arrangements and quality assurance
The projections are prepared by the Department of the Environment using the best available data and independent expertise to analyse Australia’s future emissions abatement task. The Department engages with a technical working group comprising of representatives from Commonwealth agencies to test the methodologies, assumptions and projections results. Australia makes formal submissions on its emissions projections to the United Nations and these are periodically subject to UN expert review.
Overview
This interim update provides revised emissions projections for Australia to the year 2019–20, updating Australia’s emissions projections 2014–15, released in March 2015. The updated projections indicate that Australia will meet, in cumulative abatement terms, the Government’s target of a five per cent reduction in emissions on year 2000 levels by 2020.
Cumulative abatement task to 2020
On current estimates the cumulative abatement task to 2020 is -28 MtCO2-e[1] (million tonnes of carbon dioxide equivalent). This compares with the cumulative abatement task of 236 MtCO2-e reported in Australia’s emissions projections 2014–15 (Department of the Environment 2015a). Figure 1 shows the change in the cumulative abatement task.
Australia’s cumulative abatement task has steadily fallen as the Australian economy has become less emissions intensive; international carbon accounting rules have been revised to improve the measurement and recording ofemissions; and the emissions outlook at the sectoral level have been updated with the latest data.
Figure 1 Cumulative abatement task over time
Note: The cumulative abatement task has been derived for the period 2013 to 2020 using the information available in each publication. Itisimportant to note that year to year figures are not directly comparable as the underlying assumptions and policy measures differ. Emissionsaccounting approaches to comply with international reporting standards and target trajectories are also different between projections.
In the period 2013 to 2020, Australia is below the target trajectory in some years and the area below the trajectory (blue area) counts as a reduction to the cumulative abatement task (Figure 2). The cumulative abatement task is -28MtCO2-e (calculated as the grey area minus the blue area, minus the orange area, which represents the carryover from the Kyoto Protocol first commitment period), taking account of voluntary international units under the Waste Industry Protocol.
Figure 2 Cumulative abatement task, 2013 to 2020
This update incorporates the changes in the Large-scale Renewable Energy Target which is now 33,000 GWh (gigawatt hours), legislated in June 2015, compared to the 2014–15 projections which reflected the difference between a ‘real 20 per cent’ Renewable Energy Target, implying a 27,000 GWh Large‑scale Renewable EnergyTarget.
Projections for emission levels across all sectors in the period 2013 to 2020 are now lower with major revisions in:
· the electricity sector where, in addition to the adjustment for the Large-scale Renewable Energy Target, emissions in the electricity sector are lower as a result of announced closures of high emitting coal-fired powerstations and as a result of gas generation largely maintaining its share of generation after 30 June 2014;
· the land use, land use change and forestry sector, with lower forecast rates of harvesting in the Australian forests products industry; and
· the fugitives sector where slower growth is expected in the coal mining sector.
Estimates of abatement from the Emissions Reduction Fund have been incorporated in the projections for
the first time and contribute 92 Mt CO2-e to the cumulative abatement task. This takes into account the
first two Emissions Reduction Fund auctions held in 2015 and estimates of abatement to be purchased with
the $1.3 billion available for future auctions. The Emission Reduction Fund auctions and the Renewable Energy Target are the key Australian Government policies for reducing emissions to ensure the 2020 emissions reduction target is met.
International units of 22 MtCO2-e have been voluntarily transferred to the Commonwealth under the WasteIndustry Protocol.
Figure 3 Change in the cumulative abatement task, 2013 to 2020
Revised annual projections
The updated projections show less growth in emissions compared with the 2014–15 projections. Emissions are rising from 560 Mt CO2-e in 2014–15 to 593 Mt CO2-e in 2019–20, which is 63MtCO2-e lower than the 2014–15 projections’ estimate for 2019–20 of 656MtCO2-e (Figure 4). It is expected that estimated emissions in 2019–20 will be revised down in future projections once emissions reductions from additional policies and initiatives2[2] are included.
Figure 4 Projected 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.
Figure 5 and Table 1 show domestic emissions by sector. The key changes expected in emissions by sector to2019–20 are:
· expected growth in Liquefied Natural Gas (LNG) production will result in emissions from this industry increasing by over 27 MtCO2-e. This represents around three quarters of the expected increase in Australia’s emissions to 2019–20, with the increase projected in the electricity, direct combustion and fugitives sectors. LNG exported from Australia is generally used for gas-fired power generation which isconsidered an important fuel for many countries looking to reduce their energy-related emissions;
· emissions related to transport are expected to increase by around 10 MtCO2-e due to growth in passenger vehicle and the continuation of low oil prices. The finalisation of fuel efficiency standards will likely lead toasignificant downward revision in the emissions outlook for this sector;
· emissions associated with growth in coal exports are expected to rise by over 4MtCO2-e by 2019–20. Thisestimate will be reviewed in future projections as the impact of low international coal prices is further assessed; and
· emissions associated with HFCs and other synthetic gases are expected to rise by around 2MtCO2-e andmeasures to phase-down HFCs would see this trend reverse.
Partially offsetting these increases are expected falls in emissions in the waste and land use, land use change andforestry sectors. Emissions in the electricity and agriculture sectors are expected to be relatively stable.
Figure 5 Domestic emissions, 2000 to 2020
Table 1 Emissions by sector
/ 1999–2000Mt CO2-e / 2014–15
Mt CO2-e / 2019–20
Mt CO2-e /
Electricity / 175 / 186 / 187
Direct combustion / 75 / 94 / 112
Transport / 74 / 93 / 103
Fugitives / 39 / 38 / 46
Agriculture / 90 / 81 / 80
Industrial processes and product use / 27 / 32 / 34
Waste / 17 / 13 / 10
Land use, land use change and forestry / 64 / 23 / 21
Total / 560 / 560 / 593
Indicators of the emissions intensity per unit of production in the economy (Figure 6) have declined and it is expected that the emissions intensity of GDP will have fallen by 42 per cent by 2019–20 compared to 1999–2000. Emissions per person (Figure 7) is also expected to continue to fall steadily by 22 per cent in 2019–20 compared to 1999–2000.
Figure 6 Emissions intensity of GDP, 2000 to 2020
Figure 7 Emissions per capita, 2000 to 2020
Sectoral trends
Electricity
Emissions from electricity generation are the result of fuel combustion for the production of electricity on‑grid and off-grid. Electricity generation represents the largest share of emissions in the national greenhouse gas inventory, accounting for 33percent of emissions in 2014–15.
Figure 8 shows that electricity emissions have increased slightly by 11 MtCO2-e since 1999–2000, or 6 per cent in 2014–15. Growth in electricity emissions to 2020 is relatively flat, increasing by 1percent from 186MtCO2-e in 2014–15 to 187MtCO2-e in 2020. This is approximately 32percent of Australia’s emissions in 2019–20.
Electricity demand from general business and large industry, for example manufacturing and mining facilities, is expected to increase in line with economic growth, while residential energy demand is expected to rise with population growth. To 2019–20 electricity demand in Australia is expected to grow, largely from electricity demand from new LNG projects.
Figure 8 Electricity generation emissions, 2000 to 2020
Source: Department of the Environment 2015b; Department of the Environment analysis
Since 2008–09 there has been a significant decrease (12 per cent) in emissions from electricity generation, driven by both demand and supply side factors, with electricity emissions reaching its lowest point in 2013–14. A number of drivers contributed to the drop in demand including a consumer response to an increase in retail electricity prices; energy efficiency improvements in buildings and technology; and structural change in the economy, including a reduction in output from some manufacturing sectors. On the supply side there was a shift towards less emission intensive sources like gas and wind power. Hydro electricity output was also above long term average levels over the period 1 July 2012 to 30 June 2014. Electricity generation from renewables and black and brown coal has increased over 2014–15, while generation from gas and hydro fell.