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Chapter 11 Recommended emissions reduction goals for Australia

The Authority has assessed the evidence and insights presented in this Draft Report and recommends a coordinated set of emissions reductions goals for Australia.

In the short term, the Authority recommends that Australia should aim to achieve more than the current unconditional 2020 target of a 5 per cent reduction in emissions. It is also recommends that Australia adopt a medium term pathway that is consistent with a long term national emissions budget geared to limiting global warming relative to pre-industrial levels to below 2 degrees. The Authority presents two options.

  • a 2020 emissions reduction target of 15 per cent below 2000 levels, with a 2030 trajectory range of 35–50 per cent; or
  • a 2020 target of 25 per cent with a 2030 trajectory range of 40–50 per cent.

The Authority will recommend a single 2020 target and a single 2030 trajectory range in its Final Report.

A coordinated set of goals can help guide Australia’s progress to a low-emissions future, providing a degree of certainty in the short term and some predictability over the long term. At the same time, it preserves flexibility to respond to changing circumstances over time.

Chapter 11 presents the Authority’s recommended emissions reduction goals. It:

  • brings together the key lines of evidence from throughout this Draft Report to conclude that a 5 per cent 2020 emissions reduction target is inadequate when viewed against any of these key considerations; and
  • compares two options for a medium term pathway (2020 target and 2030 trajectory range) that would be responsible next steps for Australia. They keep open the option of acting consistently with Australia’s national interest in limiting warming to below 2 degrees without sharp changes in the level of action over time.

11.1 Australia’s pathway to a low-emissions future

The Authority considers that Australia should adopt a coordinated set of emissions reduction goals that will guide Australia’s journey to a low-emissions future. As outlined in Chapter 8, Australia needs goals that provide short, medium and long term milestones; linked by a credible pathway from each to the next. The goals need to be internally consistent and subject to review over time. As discussed in Chapter 9, adopting a 2050 emissions budget is especially important in this regard – it clarifies trade-offs between short, medium and long term action.

These goals could provide useful guidance to the Government as it makes important decisions on emissions goals in the months and years to come. The Authority has designed the goals to support a predictable and stable environment for businesses and others, balancing greater certainty in the short term and greater flexibility to respond to changing circumstances in the longer term.

As discussed in Chapter 9, the Authority recommends a long term national emissions budget to 2050 of 10 100 million tonnes of carbon dioxide equivalent (Mt CO2-e), which is consistent with Australia’s fair share of the estimated global emissions budget that provides a 67 per cent chance of limiting warming to below 2 degrees.

Chapter 11 recommends two options for a medium term pathway that preserves Australia’s ability to stay within this budget – either:

  • an emissions reduction target for 2020 of 15 per cent below 2000 levels, combined with a 2030 trajectory range of 35 to 50 per cent below 2000 (the light blue line in Figure 11.1); or
  • an emissions reduction target for 2020 of 25 per cent below 2000 levels, combined with a 2030 trajectory range of 40 to 50 per cent below 2000 (the dark blue line in Figure 11.1).

Figure 11.1: The Authority’s options for Australia’s pathway to 2030

This is a line graph that shows Australia’s historical emissions from 1990 to 2012, Australia’s first Kyoto commitment period target and two options for a pathway to 2030: • an emissions reduction target for 2020 of 15 per cent below 2000 levels, combined with a 2030 trajectory range of 35 to 50 per cent below 2000; or •	an emissions reduction target for 2020 of 25 per cent below 2000 levels, combined with a 2030 trajectory range of 40 to 50 per cent below 2000

Note: All targets are percentage reductions from 2000 levels. Indicative trajectories for 2013–2020 and are based on a straight line from the mid-point of Australia’s Kyoto Protocol first commitment period target (108 per cent of 1990 levels in 2010) to the 2020 target. The trajectory ranges are based on straight lines from the 2020 target to either end of the trajectory range in 2030. See Sections 8.4 and 8.5 for further details.
Source: Climate Change Authority; historical emissions from The Treasury and DIICCSRTE 2013

Post-2020 goals should be subject to periodic review to take account of changing information. In weighing different considerations, the Authority has reflected on how the future might unfold. The recommendations are made in the knowledge that understanding of the climate will continue to improve over time and that international action and economic factors will change, sometimes in unexpected ways. This uncertainty is not a reason to avoid making recommendations for post-2020 action. Instead, it suggests that the goals should allow for flexibility and be subject to periodic review according to clear criteria, as recommended in Chapter 8.

11.2 Why Australia should do more than 5 per cent by 2020

The Authority considers that Australia should adopt a stronger 2020 target than 5 per cent. This conclusion is based on all of the strands of evidence considered in this Review.

First, a 5 per cent target does not keep pace with actions taken by other countries. As discussed in Chapter 5, the Authority considers that the Government’s target range conditions for moving beyond 5 per cent have been met. Looking more broadly, a 5 per cent target is weak compared with the targets of the United States and many of Australia’s neighbours and trading partners. On most measures, the only key country targets less ambitious than Australia’s 5 per cent are from countries that are much poorer than Australia, with lower levels of development and less governance capacity. A 5 per cent target also misses the opportunity of positively influencing other countries as they finalise their 2020 targets and consider 2030 goals.

Second, a 5 per cent target is inconsistent with Australia’s contribution to the long term goal to limit warming to below 2 degrees. As discussed in Chapter 9, a 5 per cent target would result in Australia using 86 per cent of its national emissions budget in fewer than half of the years it was intended to cover. It leaves far too much of the emissions reduction task for later. Beyond 2020, Australians would either bear a very large share of emissions reductions or have to abandon the long term national emissions budget. This is inequitable in the first case and against Australia’s national interest in the second. The minimum 2020 target that can be credibly combined with the recommended national emissions budget is 15 per cent.

Keeping global temperature rise below 2 degrees is strongly in Australia’s national interest – it would be a false economy to take actions inconsistent with this goal. Australia cannot secure this goal by itself, but it is difficult to see how Australia could reasonably argue for others to do more if its own actions are inconsistent with the long term objective.

Third, adopting stronger targets is easier than previously thought. Three main factors contribute to this outcome:

  • Official projections from 2012 suggested that Australia would need to cut its emissions by 155 Mt in 2020 and 754 Mt over the period 2013 to 2020 to achieve the unconditional 5 per cent target (Department of Climate Change and Energy Efficiency 2012). If Australia sustained the same amount of emissions reduction effort, the latest projections suggest it would now achieve an 11 per cent target instead. The 5 per cent target would require Australia to cut its emissions by 131 Mt in 2020 and 593 Mt over the period 2013 to 2020 (The Treasury and DIICCSRTE 2013).
  • Australia could use its ‘carryover’ from the first commitment period of the Kyoto Protocol to strengthen its 2020 target by 3 percentage points, as discussed in Chapter 8.
  • A wider set of land sector activities than before will count toward Australia’s target under the second commitment period of the Kyoto Protocol. The changes are expected to provide emissions reductions equivalent to an additional 3 percentage points for Australia’s 2020 target.

Any Australian action to reduce emissions is starting from a solid base, with the prospect of greater reductions to come. As discussed in chapters 7 and 12, Australia’s emissions were below its 2008–2012 Kyoto Protocol commitment. Australia has made progress toward meeting the 5 per cent unconditional target and has the capacity to achieve more. The emissions intensity of the Australian economy is falling – while the economy and the Australian population have grown steadily since 1990, emissions have remained relatively flat. Significant, identified, low to medium cost emissions reduction opportunities are yet to be realised.

Fourth, stronger targets can be achieved with relatively small impacts on the economy. Chapter 10 sets out modelling estimates from The Treasury and DIICCSRTE (2013) that show stronger targets can be achieved while maintaining economic growth and rising incomes.

Overall, a 2020 emissions reduction target stronger than 5 per cent is desirable, feasible and affordable. The following section sets out the Authority’s proposed options in more detail.

11.3 Australia’s responsible next step – a 15 or 25 per cent pathway

Chapter 9 showed that either a 15 or 25 per cent target would be a responsible next step in light of the Authority’s recommended 2050 national emissions budget. Either would support a stable, predictable transition to a low-emissions future while maintaining the flexibility to respond to new information.

The Authority’s preferred approach to the 2030 trajectory range is set out in Section 8.4 and illustrated in Section 8.5. The Authority proposes a trajectory range that provides clear links to long term goals, namely the recommended national 2050 emissions budget and the currently legislated 2050 target. If adopted by Government, a range constructed in this way could help indicate that Australia is prepared to keep within its share of the global emissions budget. It would also maintain Australia’s flexibility to take into account the latest information on climate science, international action and economic factors prior to making final decisions on medium term goals.

The top and bottom edges of the trajectory range are straight lines that start at the 2020 target and end in 2030 (Figure 11.1). The ‘bottom’ or stronger end of the trajectory range follows the level required to stay within the recommended 2050 emissions budget. The ‘top’ or weaker end follows a straight line to the legislated 2050 target of 80 per cent reduction on 2000 levels. As discussed in Chapter 8, the top end of the trajectory range is not consistent with the Authority’s recommended budget, but does meet the 80 per cent 2050 target in current legislation. The relationship between the 80 per cent target and the 2 degree warming limit is discussed in Box 11.1.

Table 11.1 compares trajectory ranges for the recommended and alternative national emissions budgets. In this Chapter, including in Table 11.1, the Authority has adopted a ‘traffic light’ grading of options for the purpose of comparison. These are indicative assessments based on the Authority’s judgment when weighing the evidence. Green indicates a feasible option; amber indicates an option that creates tensions or may be challenging to achieve; and red options (none of which appear in Table 11.1) are not considered plausible.

Table 11.1 shows that both 15 and 25 per cent 2020 targets would require the bottom end of the trajectory range to track to 50 per cent below 2000 levels in 2030 to maintain Australia’s ability to meet the recommended national emissions budget. With a 15 per cent target, stronger emissions reductions would be required after 2030 than with a 25 per cent target in order to meet the recommended national emissions budget (see Section 9.5).

Table 11.1: Relationships between 2020 targets and 2030 trajectory ranges for recommended and alternative national emissions budgets

 

2030 trajectory range
(% reduction from 2000 levels)

 

Probability of staying below 2 degrees

2020 target
(% reduction from 2000 levels)

50%

67%
(recommended)

75%

15

35*

35–50 (recommended)

35–65

25

45*

40–50 (recommended)

45–60

 

Notes: Trajectory ranges calculated as described in text and rounded to multiples of five. Shading indicates feasible (green) and less feasible (amber) combinations. Because the 25 per cent trajectory starts at a lower level in 2020 than the 15 per cent trajectory, the 2030 reduction relative to 2000 levels to meet the legislated 80 per cent reduction in 2050 is stronger, although the average annualised reductions are somewhat smaller (see Figure 11.1). *For a 50 per cent probability budget, the top and bottom ends of the Authority’s proposed trajectory range would be very similar.
Source: Climate Change Authority

The right-hand column shows that a 25 per cent target could keep open the possibility of pursuing a higher probability budget or a lower warming limit in the future. Strong reductions in emissions to 2020 would allow a credible 2030 trajectory that achieves a 2050 budget based on a 75 rather than a 67 per cent probability of limiting warming to below 2 degrees. While the stronger trajectory would be challenging, it would involve the same decadal change post-2020 as the trajectory for a 15 per cent 2020 target to meet the 67 per cent probability budget.

A 25 per cent 2020 target with a wider 2030 trajectory range would also provide greater flexibility to respond to new information about the size of Australia’s emissions budget. For example, if the estimated global emissions budget for a given probability of avoiding 2 degrees was revised downwards, the periodic review recommended in Chapter 8 could revise Australia’s long term emissions budget. Stronger early action positions Australia better to manage these risks.

Using a trajectory range consistent with a higher probability budget would also increase the flexibility to respond to stronger international action. The international community has agreed to conclude a review in 2015 of whether the 2 degree limit should be strengthened to a 1.5 degree limit. The Authority’s recommended national emissions budget is based on a likely probability of limiting warming to below 2 degrees, so provides some probability of limiting warming to no more than 1.5 degrees (Section 3.1 and 3.3). A stronger global budget would increase the probability of limiting warming to no more than 1.5 degrees, and stronger early action by Australia could accommodate these changes more easily.

The Authority will recommend a single 2020 target and single 2030 trajectory range in its Final Report. The rest of Chapter 11 compares these two pathways.

11.3.1 Comparing the 15 and 25 per cent pathways

The Authority’s two options for pathways to 2030 are compared below according to the key lines of evidence guiding this Review – climate science and Australia’s contribution to the below 2 degree goal, international action on climate change and the economic implications of Australia’s action.

First, the Authority has considered the two options in relation to the below 2 degree goal. Sections 9.5 and 11.3 compared these targets’ distribution of effort over time and consistency with different long term emissions budgets. A stronger target in 2020 means that more of the national emissions budget will be available for use later. If Australia follows the bottom end of the trajectory range to 2030, a 2020 target of 15 per cent would leave 19 per cent of the emissions budget for use after 2030, while a 25 per cent target would leave 25 per cent of the budget. This means that a 15 per cent target requires steeper reductions after 2020.

Box 11.1: Australia’s 2050 target and the ‘below 2 degrees’ global goal

Australia has made an international commitment to a collective global goal to limit warming to below 2 degrees. This is recognised in the objects of the Clean Energy Act 2011 (Cth), which also sets a long term goal for Australia to reduce emissions to 80 per cent below 2000 levels by 2050.

If the world is to stay below 2 degrees, there must be deep and rapid cuts in global emissions, and total global emissions from now until 2050 must stay within a tightly constrained global emissions budget (Chapter 3). The Authority recommends a long term national emissions budget for Australia based on its fair share of this finite global budget (Chapter 9).

If this long term national emissions budget remains the right one for Australia over the coming decades, the 2050 target may need to be strengthened. Whether the current, legislated 2050 target is appropriate for Australia will depend on how the world and Australia use their emissions budgets over time. Using more now implies there is less to use later, and vice versa. For example, Figure 11.2 illustrates two pathways to 2050 that would meet the recommended long term emissions budget. The light blue line shows a pathway that takes stronger action later (15 per cent emissions reductions by 2020, 50 per cent by 2030 and zero net emissions by 2045). The dark blue line shows a pathway with stronger action earlier (25 per cent emissions reductions by 2020, 65 per cent by 2030; and 80 per cent by 2050).

Figure 11.2: Different pathways to 2050 that meet the recommended long term emissions budget

This is a line graph that shows two different emissions reduction pathways from the mid-point of Australia’s first Kyoto commitment period target that meet the recommend long term emissions budget: • A straight line trajectory to an emissions reduction target for 2020 of 15 per cent below 2000 levels then a straight line to zero net emissions by 2045; and • A curved trajectory to an emissions reduction target for 2020 of 25 per cent below 2000 levels, then 65 per cent by 2030 and 80 per cent by 2050.

Source: Climate Change Authority; historical emissions from The Treasury and DIICCSRTE 2013

While both trajectories meet the recommended 2050 emissions budget, emissions after 2050 are also relevant to limiting warming to below 2 degrees. Even if emissions follow the pathway illustrated by the dark blue line, Australia would need to reduce emissions further after 2050.

In the current Review, the Authority has focused on recommending a long term national emissions budget and medium term pathways that would keep Australia within this budget. Together these recommendations support a stable, predictable transition to a low-emissions future while maintaining the flexibility to respond to new information. The Authority recommends that Australia’s post-2020 emission reduction goals, including the 2050 budget, are reviewed periodically and refined over time based on the best available information.

When considering how the options compare in relation to the below 2 degree goal, Australia’s exposure to impacts is also relevant. Australia’s high level of exposure to the impacts of climate change mean that it has a strong interest in avoiding temperature increases of 2 degrees or more. An early global peak is a key characteristic of global pathways that keep temperature increases below 2 degrees, and a stronger Australian 2020 target helps global emissions peak sooner (Chapter 3).

Second, considering international action, both options are broadly comparable to the actions of other key countries. The Government’s target conditions for a 15 per cent target are closer to being met than the 25 per cent conditions. Looking more broadly, Australia’s high level of development and high per person emissions relative to most other countries suggest stronger action by Australia is appropriate. Furthermore, greater international action is clearly in Australia’s interest and a stronger target may positively influence other countries to increase their level of action. The international community is currently reviewing the level of global action – both to 2020 and beyond. Australia can have a positive or negative influence and, at this critical time, it is better for it to be positive.

Third, the relative effects on the economy of the two options must be considered. On economic impacts, The Treasury and DIICCSRTE modelling shows that Australia can achieve stronger targets at relatively small cost. Under current legislative arrangements, with a move to a 15 or 25 per cent target, the economy and incomes continue to grow. Gross National Income (GNI) per person is projected to grow by an average of 0.80 per cent annually to 2020 with a 5 per cent target, 0.78 per cent with a 15 per cent target and 0.76 per cent with a 25 per cent target.

The Authority’s cost estimates:

  • are based on the European carbon price, which is assumed to rise from $5.50 per tonne in 2015 to just over $30 per tonne in 2020. International emissions reductions are currently available at low prices and in high volumes; if Australia purchased alternative, lower cost international emissions reductions, the cost of achieving stronger targets could be significantly lower. Potential sources of international emissions reductions are discussed in Chapter 13; and
  • include the cost of maintaining the same overall level of Government revenue, so there is no change to the Government’s ability to provide other services.

Chapter 10 also discussed the timing of Australian and global emissions reductions from an economic perspective. The international carbon price is currently much lower than the projected long-run price consistent with limiting global warming to below 2 degrees, suggesting that the carbon price could increase rapidly in the future, as the level of action becomes clearer. On balance, given very low current prices, and the trend of strengthening international action (discussed in Chapter 4), the Authority considers it is more likely that prices will rise and stronger near term action will prove cost effective.

The comparisons in this section are summarised in Table 11.2, which also shows the 5 per cent target. The shading represents a ‘traffic light’ assessment of the advantages or disadvantages of each target across the different considerations. Red indicates an assessment that the target option may not be desirable or plausible, based on that criterion; amber indicates that the target option may raise tensions; and green indicates an assessment that the target option is a reasonable one.

Table 11.2: Comparison of the Authority’s options and the 5 per cent 2020 target

2020 targets (% reduction below 2000 levels)

5

15

25

2030 trajectory range (% reduction below 2000 levels)

30–50

35–50

40–50

Taking a prudent approach to 2 degrees

 

 

 

Safest emissions budget compatible with this target (probability of limiting warming to below 2 degrees)

50%*

67%

75%

Sharing the global emissions budget

 

 

 

Consistent with Australia’s fair share of the 67 per cent global emissions budget?

No

Yes

Yes

Distributing Australia’s effort over time

 

 

 

Change in emissions from 2020 to bottom of trajectory range in 2030 (percentage point difference between 2020 and 2030 targets)

45 percentage points

35 percentage points

25 percentage points

Amount of 2050 emissions budget remaining after 2030 (following bottom of trajectory range)

14%

19%

25%

International action on climate change

 

 

 

How Australia’s target compares to other key countries; opportunity to positively influence global action

 

 

 

Economic costs under legislated policy

 

 

 

Real average annual growth in GNI per person 2013 to 2020 (medium scenario)

0.80%

0.78%

0.76%

Assessment against Australia’s target conditions

 

 

 

Authority’s assessment of whether conditions for this target have been met

Conditions for moving beyond 5 per cent are met

Unclear – some elements are met; others are marginal.

Conditions not met

Note: Shading indicates feasibility of compared options – red indicates an option that is undesirable or not feasible; amber indicates an option that creates tensions or may be challenging to achieve; and green indicates a feasible option.
* Red because 50 per cent is less than the Authority’s preferred 67 per cent probability.
Source: Climate Change Authority, The Treasury and DIICCSRTE modelling 2013

11.4 Next steps for recommending emissions reduction goals

The Authority will make a single recommendation for Australia’s 2020 target, associated 2013–2020 emissions trajectory and budget, and 2030 trajectory range in its Final Report and will provide a clear rationale for its recommendations.

These draft recommendations should be read in conjunction with the Authority’s recommendations in Chapter 8 on the future review of medium and long term goals. Future reviews would ensure Australia’s goals respond flexibly to new information while continuing to provide clear guidance. In particular, the Authority recommends that the trajectory range should be extended and narrowed regularly to maintain a similar period of guidance over time, and future targets and trajectories should be set within the range by applying clear, general criteria.

This concludes Part C and the Authority’s consideration of responsible emissions reductions goals for Australia over the coming decades. Part D surveys opportunities and challenges for realising the recommended goals.

Options for Draft recommendations

R.5 The Authority is canvassing two sets of options for emissions reduction goals at this time:

 

Option 1

Option 2

2020 emissions reduction target

15 per cent below 2000 levels

25 per cent below 2000 levels

Indicative national emissions trajectory for the period 2013–2020

A straight line to the 2020 target. This line starts at Australia’s first commitment period target under the Kyoto Protocol (108 per cent of 1990 levels) in 2010, and ends at 15 per cent below 2000 levels in 2020.

A straight line to the 2020 target. This line starts at Australia’s first commitment period target under the Kyoto Protocol (108 per cent of 1990 levels) in 2010, and ends at 25 per cent below 2000 levels in 2020.

National carbon budget for the period 2013–2020

4 314 Mt CO2-e

4 010 Mt CO2-e

Trajectory range to 2030

Beyond 2020, reduce emissions within a trajectory range bounded by the paths to a 35 and 50 per cent reduction below 2000 levels in 2030.

Beyond 2020, reduce emissions within a trajectory range bounded by the paths to a 40 and 50 per cent reduction below 2000 levels in 2030.