National climate strategy: a key focus of Federal Election 2022

Climate strategy has been a point of discussion and contention for the Australian Federal Government for the past decade. The Australian people have seen numerous iterations of federal climate policy, from the Emissions Trading Scheme to the Carbon Tax, to investments in renewable energy and the integration of Low Emissions Technology. However, in 2022 the focus on climate is sharper than ever.

Significant steps have been taken in the private sector, and financial services sector in particular, to shift global capital flows away from highly carbon-exposed activities and towards green ventures.

The outcomes of the 2021 United Nations Climate Change Conference (COP26), the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report and the International Energy Agency’s (IEA) Net Zero by 2050 Roadmap have all fostered global momentum towards achieving net zero greenhouse gas emissions by 2050. The IEA has emphasised that “governments need to provide credible step-by-step plans to reach their net zero goals… and facilitate an orderly transition”. As such, climate policies and targets have increasingly been placed centre stage internationally.

As the physical and transitional effects of climate change continue to become more visible across the globe, there is a growing emphasis on the need for a robust and proactive climate strategy for Australia. These sentiments are undoubtedly intensified by the implications of the current Russia-Ukraine crisis for global oil markets, crude oil supply and the prospective value of renewable energy.

This briefing canvasses the federal climate policy platforms of Australia’s three major political parties – being the Liberal National Coalition (LNC), the Australian Labor Party (ALP) and the Australian Greens (Greens) – with a focus on their proposed strategies in three key areas:

• Greenhouse gas (GHG) emissions reduction;
  
  
• The energy transition: renewable energy and carbon offsets; and
  
  
• Sustainable infrastructure.

Greenhouse gas emissions reduction strategy

The IPCC’s Sixth Assessment Report and the international commitments made at COP26 to the ‘phase-down’ of coal and fossil fuels, have crystallised current understandings of best practice regarding GHG emissions reduction targets for 2030 and 2050.

The current Coalition Government’s policy 2030 emissions reduction target of 35% (comparative to 2005 GHG emissions levels) announced in the lead up to COP26 has been the subject of international critique. Deputy US Presidential Climate Envoy Dr Jonathan Pershing, offered public commentary on the issue, calling on Australia “as a G20 member, as a leading developed country” to adopt an emissions reduction target of 40 to 50%, in line with the IPCC’s findings.  

These sentiments have been mirrored by a number of key Australian industry bodies and organisations. The Business Council of Australia’s (BCA) ‘Achieving a Net Zero Economy’ discussion paper called for a 46 to 50% reduction in GHG emissions by 2030, stating:

“Australia’s major trading partners are reorientating their economies and shifting demand away from carbon-intensive imports [and] substantially increasing their 2030 ambitions, with the USA adopting a 50 to 52% reduction on 2005 levels by 2030.” 

The 2030 GHG emissions reduction targets (comparative to 2005 GHG emissions levels) proposed by the LNC, ALP and Greens respectively are:

In conjunction with the aforementioned 2030 targets, the LNC and ALP emissions reduction strategies both emphasise a ‘gas-led’ pathway to net zero. The question arises as to how this position, which appears largely reliant on the LNG export market, sits with both the IPCC’s recommended emissions target for Australia and the International Energy Agency’s recent assessment that under a net zero emissions scenario, global trade in LNG may “fall by 60%” between 2020 and 2050”.

Given the above, and that Australia currently remains the second largest exporter of thermal coal globally, the BCA, has emphasised that an “integrated, national and bipartisan energy and climate change policy framework” is essential to achieving Australia’s emissions targets at the “lowest possible cost” while maintaining the competitiveness of Australian primary industry and bolstering economic growth.

In conjunction with the ALP’s proposal of a slightly higher emissions reduction target of 43% (comparative to the LNC’s 35%), the ALP has pinpointed the creation of a national climate policy as a key priority. It is noted that this has been listed by the Greens as a red line demand - in the case of an ALP win, the Greens will demand a six-month moratorium on all new coal, oil and gas projects as a condition of negotiating a national climate change policy.

The energy transition - renewable energy and carbon offsets

All three parties have made commitments to significantly invest in renewable energy and infrastructure, with a view to decreasing household electricity prices, building the domestic renewable job market and increasing Australia’s presence in the international renewable energy export market.

A brief summary of the overarching policies of each party is detailed below:

The prospective implications of the above policy positions of each party for the renewable energy sector are analysed in detail in our accompanying Insight, Sliding ballots: implications of the 2022 Federal Election for the renewable energy sector.

Each of the parties have emphasised the need to upgrade the national electricity grid and increase access, such that the majority (if not all) homes, businesses and vehicles are able to eventually be powered by clean energy supplied through the National Electricity Market.

The National Electricity Market’s draft 2022 Integrated System Plan notes the development and banking (via batteries) of renewable energy resources will be particularly important as coal-fired power stations continue to be gradually decommissioned over time. Ensuring ease of access to a bank of stored clean energy will safeguard against grid drop outs and/or spikes in electricity prices, in a scenario where factors such as extreme weather events may interfere with the production of solar or wind energy.

The commitments of each party to the creation of public resources such as solar banks for low income households, sustainable homes, the electrification of the national grid, and installation of public electric vehicle charging stations, are particularly important for a successful Australian energy transition.

All three parties have articulated an intention to expand and deepen the domestic carbon offsets market, with a particular focus on making abatement activities available to the industry sectors that may be more difficult to readily decarbonise (such as shipping, air travel and freight). In particular, the LNC has committed to investing $2.5 billion in future offset projects via the Emissions Reduction Fund (the existing federal carbon offset scheme). The current Coalition Government’s ‘Long-Term Emissions Reduction Plan’ indicates that initial priority projects under the Emissions Reduction Fund will include CCS projects in particular. Inclusion under the Emissions Reduction Fund would result in the CCS project being eligible to earn Australian Carbon Credit Units, which may later be sold to the Federal Government or secondary market.

While offset strategies such as CCS will make tangible contributions to the energy transition and achieving Australia emissions target, the current available scientific evidence indicates that taking a multifaceted approach to emissions reduction will be essential.

Relevantly, the IPCC notes that CCS “has the potential to compensate for residual CO2 emissions to reach net zero”,[1] however it is not anticipated that it will be possible to sequester the quantity of carbon required to achieve the IPCC’s best-case scenarios of 1.5 and 1.9 degrees.

As an example of the positions taken on this risk issue, Chris Bowen MP from the ALP previously identified, (see our previous Insight on CCS) that CCS is “not the answer to all our problems” and is “not an excuse not to reduce emissions”.

Sustainable infrastructure – preparing Australian society for net zero  

While much of the climate commentary over the past decade has focussed on the economic risks associated with Australia’s prospective net zero transition pathways, throughout the 2022 Federal Election campaign trail a hopeful emphasis has emerged on the opportunities that steel, hydrogen and other products may offer Australian primary industry and manufacturing.

The IEA’s 2050 Roadmap projects that international demand for steel (for production of wind turbines and electric vehicles), elements critical to the production of transmission lines, wiring, batteries and solar cells (including copper, aluminium, lithium, cobalt and silicon) and uranium (for nuclear power generation, noting that nuclear power has now been included as a green transition power source within the European Union’ Green Taxonomy legislation), will increase exponentially.

The export opportunities for Australian industry in this space are anticipated to be significant, both in the decarbonised global economy of the future and in the short to medium term, as many countries seek to establish renewable energy capabilities. If renewable energy produced by Australian solar and wind farms can be harnessed to power steel and aluminium production, this is projected to create a fundamental price advantage, given one-third to half of the manufacturing cost of these products stems from the electricity required by the refining process.[2]

Investment in green hydrogen and green steel has been pinpointed as a key priority for all three major parties. The opportunities that exist for Australia in this space are likely to be integral to a successful economic and social transition to net zero, given the number of households dependent on jobs in the coal, oil and gas industry among other highly carbon-exposed sectors.

The scaling of Australia’s domestic and international export markets for steel (and over time, green steel), hydrogen, uranium, lithium, aluminium, copper, cobalt, rare earth elements and other materials may assist in creating local jobs to ease the transition.

The manufacturing, installation and maintenance work associated with new infrastructure projects and services such as rooftop solar and electric vehicles will also offer new opportunities. It is anticipated that much of the $75 million committed by the LNC to low emissions technologies will flow into such projects in order to bolster movement towards these initiatives, the first series of projects being:

• the installation of electric vehicle charging stations throughout major cities;
  
  
• development of carbon capture and storage hubs;
  
  
• development of hydrogen hubs; and
  
  
• creation of manufacturing facilities for low-emission steel production.  

These priorities were likewise reflected in the 2022-23 Federal Budget handed down by the current Coalition Government, which included a $300 million investment in low-emission LNG green hydrogen production and CCS infrastructure in Darwin, and a $200 million investment in low-emissions manufacturing and CCS infrastructure in the Pilbara region.[3]  

The priority projects articulated by the ALP in this space likewise seek to maximise the economic and industrial opportunities presented by renewable and low emissions technologies, but differ slightly in approach. The ALP’s ‘Powering Australia plan is primarily focused upon:

• the upgrade of the national electricity grid to increase renewable energy capability and access;
  
  
• installation of community batteries and solar banks, with a focus on providing access to low-income households;
  
  
• investment in manufacturing facilities for steel and aluminium production, and in particular low-emission production;
  
  
• development and deployment of renewable energy and low-emissions technologies, particularly in Australia’s regional areas; and
  
  
• investment in the training and re-training (where applicable) of industry personnel to perform roles in the renewable energy sector.

Key takeaways

Both the LNC and ALP have emphasised the role for Australian primary industry in the energy transition. A particular emphasis has emerged within the LNC’s climate strategy on a gas-led transition, whereby continued investment in natural gas supplies and gas-fired power will be accompanied by increased investment in CCS, soil carbon sequestration, hydrogen developments and electric vehicle charging infrastructure. Increasing low-emission steel production capabilities has likewise been pinpointed as a key priority.  

In comparison, the ALP’s strategy adopts a slightly more ambitious emissions reduction target, accompanied by the parallel goal of achieving 82% renewable energy in the National Electricity Market by 2030.

The key landmarks of the ALP policy platform include significant investment in the upgrade of the national electricity grid to increase renewable energy capability, accompanied by investment in solar banks, community batteries, electric vehicle discounts and energy apprenticeships and training programs designed to make the transition (and associated economic benefits) accessible to the broader population.

We are likely to see further movement and readjustment of each of the key players’ federal climate policy platform in the lead up towards the Federal Election on 21 May 2022.