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Australia focuses on market-based programs, emissions trading

28 April 2021 Kevin Adler

Australia is gearing up to commit A$60 million ($47 million) to expand a high-integrity carbon offset exchange in the Indo-Pacific region to achieve economywide GHG reductions, the government announced 28 April.

For a country with modest GHG-reduction goals compared with other developed nations, the proposed program represents its latest effort to drive emissions reductions through market-based programs rather than new limits.

The message that markets and technology, in lieu of regulations or a carbon tax, will be Australia's climate solution came from Prime Minister Scott Morrison on 22 April when he spoke at the Leaders Summit on Climate organized by US President Joe Biden.

"Australia is on the pathway to net zero. Our goal is to get there as soon as we possibly can, through technology that enables and transforms our industries, not taxes that eliminate jobs," Morrison said. "For Australia, it is not a question of when or if we reach net zero, but importantly how. That is why we are investing in priority new technology solutions."

Morrison emphasized practicality over promises for the world's 16th-largest GHG emitter nation, according to the Union of Concerned Scientists (tied with Turkey at 0.42 gigatons/year).

"We are well on our way to meet and beat our Paris agreements, and we will update our long-term emissions reductions strategies for Glasgow," Morrison said, referring to the COP26 meeting scheduled for November.

"Emissions already are reduced by 19% from 2005 levels, and by 36% when you exclude exports," he said. "We are applying renewable energy technology 10 times faster than the world average, per person. We have the highest uptake of rooftop solar in the world…. In meeting our target for 2030, we will see emissions per-capita fall by almost half."

At the climate summit, Morrison did not state a target year to reach net zero, like China and India have done, despite Biden's request to participating countries to raise their climate ambitions. He did not follow the lead of US, Japan, Canada, and some other countries to use the summit to announce steeper emissions reductions for 2030.

Australia's nationally determined contribution (NDC) under the Paris Agreement, which was updated on 31 December 2020, is to reduce GHG emissions 26-28% below 2005 levels by 2030.

That range also was the promise of the US under the Obama administration, but Biden nearly doubled the US proposed cuts last week to 50-52%.

According to the Investor Group on Climate Change, a group of Australian and New Zealand investors with A$2 trillion in assets, unless Australia surpasses its current 2030 emissions reduction target, it will have the highest emissions intensity of any G20 country by the end of this decade.

Carbon offset exchange

One market-based idea that Australia is proposing is the expansion of its Emissions Reduction Fund (ERF) into a full-fledged online exchange for trading carbon offset emissions.

"The Emissions Reduction Fund is one of the largest and most robust offset schemes in the world," Angus Taylor, Australia's minister for energy and emissions reduction, said in announcing the proposal. "We see an opportunity to work with our Indo-Pacific partners, and pass on the know-how and success of that program to reduce emissions and create jobs."

ERF has been operating since 2016, as an "over the counter" market in which the government holds regular auctions for certified GHG abatement projects. Participants earn Australian carbon credit units (ACCU) for every ton of carbon dioxide-equivalent (CO2e) they store or avoid emitting, which they can sell to the government or to a private party. Qualifying programs can include capturing and destroying coal mine fugitive emissions of methane; combustion of landfill gas and wastewater treatment plant biogas; reforestation; commercial facility energy efficiency upgrades; and reductions in emissions intensity of transportation.

During 2020, ERF auctioned a record 16 million mt of CO2e.

In the 12th auction, held on 23 April, Australia's Clean Energy Regulator committed to purchasing 6.8 million mt of CO2e abatement credits on behalf of the country, at an average price of A$15.99/mt, from 10 projects.

If the new exchange is developed, the daily trading of credits would replace the over-the-counter auction model. The government anticipates that trading the credits will spread across the Indo-Pacific region, "increasing market transparency including pricing, slashing transaction costs and reducing red tape, while accelerating emissions reduction and providing a boost to Australia's economic recovery."

It estimates that the new exchange will save businesses up to A$100 million by 2030 in ACCU transaction costs.

"This initiative is to support the growing appetite across the private sector, government and the community to voluntarily reduce emissions," said David Parker, chair of the Clean Energy Regulator, in a statement.

Other programs

The possible carbon offsets trading exchange is one of a flurry of programs announced by the Australian government recently to reduce GHGs and protect natural areas that sequester carbon.

On 28 April, the government announced an A$100 million initiative to protect the Great Barrier Reef, Shark Bay, and the Ningaloo Coast. UNESCO, the UN Educational, Scientific and Cultural Organization, said in a report released in March that the marine sites off Australia's coast store more than 2 billion mt of "blue carbon," mainly from decaying plants and animals, and represent about 40% of the carbon locked away in the world's 50 Marine World Heritage sites.

A week prior, the Australian government announced an investment of more than A$1.1 billion to develop hydrogen and carbon capture and storage (CCS). With this new commitment, Morrison said the government will provide A$20 billion in the next decade to develop CCS, clean hydrogen, and green steel. He added that the government anticipates this will leverage up to A$80 billion in private investment as well.

"In Australia, our ambition is to produce the cheapest clean hydrogen in the world, at A$2/kg," Morrison said at the climate summit.

The investments and carbon exchange might result in a turnaround of Australia's current low ranking by at least one climate group. Of the top 60 GHG-emitter nations, Australia was ranked in the lowest category for its domestic climate policy for 2020 by the New Climate Institute, a research and advocacy organization based in Germany. It joined only the US and Algeria as countries in the bottom category for both its domestic and international climate policies.

The New Climate Institute also noted that in 2019 Australia adjusted its emissions for its baseline year of 2005 higher, making the task of reaching the percentage target decline for its 2030 NDC easier. "The 2016 projections reported 2005 emissions to be 598 million mt CO2e, whereas three years later the 2019 report estimates 2005 emissions at 611 million mt CO2e [including land use adjustments]," it said. This means that the country could declare it met the 2030 target with emissions about 13 million mt CO2e higher, or about 2% of its projected total emissions at that time.

On the other hand, an assessment by the Massachusetts Institute of Technology, "The Green Future Index 2021," sees Australia in a more positive light. Australia ranked 35th of 76 countries analyzed, fitting into a category with Poland, Mexico, and the US (ranked 40th) as "making progress or commitment toward building a green future."

Includes reporting by Abdul Latheef, OPIS.

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