Direct Action is here, but how will Australia reduce carbon dioxide after 2024

The passage of the Emissions Reduction Fund by the Senate yesterday night has allowed the federal government to take a major step in achieving Australia’s target to reduce greenhouse gases emissions to 5% less than 2000 levels by 2020.

The Fund for Emissions Reduction will be the centerpiece of the Coalition’s Direct Action Plan. This plan will replace the Mechanism for Carbon Pricing that was repealed this July.

The two major Australian parties have agreed on a national minimum target to reduce greenhouse gas emissions by 5% below the levels of 2000 by 2020. The Federal Government has adopted the Emissions Reduction Fund as its signature policy in order to meet this minimum target.

The fund is a direct payment made by the government directly to businesses that agree to reduce greenhouse gas emissions. The fund will do this by auctioning projects to reduce greenhouse gases. Businesses can then “bid” on their projects, and those that are able to reduce emissions for the least amount of money get paid.

ClimateWorks’s previous research suggests that if the fund is well-designed, it could fund some emission reduction opportunities in Australia.

It could be used to fund projects that reduce emissions by large amounts at a reasonable cost using proven technologies, such as projects. 

The government’s White Paper states that the fund’s budget will be A$2,55 billion. Future budgets may consider additional funding. The budget’s suitability for the task is still a concern.

Beyond 2020

The Emissions Reduction Fund was created to encourage emissions reductions from now until 2020 with the aim of meeting the 5% goal.

Even if the target is achieved, a far more important question is: how will Australia achieve the fundamental shift to a low-carbon economy that we know will be needed globally and in Australia before the middle of the century?

The energy system needs to undergo a major transformation, and this will take more than five years. The Pathways for Deep Decarbonisation report, presented to world leaders during the recent UN Climate Summit in New York, shows how near-zero carbon systems are possible for all major emitting nations while maintaining economic growth.

Australia’s paths are described in a separate national document, which shows the abundance of renewable energy options available to Australia and that it can achieve near zero carbon electricity by using renewables.

Alternatives include a combination of renewables, nuclear, and carbon capture and storage. The low-carbon electricity produced could be used to replace petrol, diesel, and gas in passenger vehicles and cars. It could also replace the gas used for heating coo,ling, and cooking. In trucks, the gas would replace diesel and be the primary fossil fuel in the industry. This can be converted to bioenergy, sequestered using carbon capture and storage, and the remainder sequestered through carbon forestry.

Australia’s report shows a reduction of 71% in CO2 emissions due to energy. The economy will grow by nearly 150% between now and 2050, and mining and manufacturing will continue in a world that is decarbonizing.

In order to reduce remaining emissions and keep warming below Australia’s “safe” threshold, an increase in land-based sequestration of carbon is required to complement the energy transition.

How to decarbonise before 2050

The Deep Decarbonisation Pathways report shows that it is feasible to transition to decarbonized economies by 2050. However, this would require an acceleration of activity in all sectors to reduce emissions and put the economy on a trajectory that can be achieved for deep decarbonization.

The project also highlighted the importance of making decisions across the entire economy today based on long-term emission reductions.

It will be important to:

Accelerate the reduction of emissions, especially through energy efficiency measures that are already proven and profitable.

Avoid locking in emissions-intensive technology, especially for assets with a long lifespan, such as buildings, power plants, and industrial facilities, which, if constructed today, could still be operational in 2050.

Prepare for the future through investment in research and technology to reduce the cost of low-carbon technologies, the building of the necessary supply chain, and the development of local skills and abilities in these new processes and technologies.

The Emissions Reduction Fund could continue to function beyond 2020. In this case, the “safeguard mechanism,” as proposed, would act as a ceiling on national total emissions. This could be reduced every year to match the trajectory needed to reach complete decarbonization in 2050.

This would mean budgeting every year for an ever-growing task or a shift to trading between emitters instead of government purchases.

The Emissions Reduction Fund, as it is currently designed, is best suited for incentivizing a specific set of emission reduction activities.

The Deep Decarbonisation Report shows that the transition is required in all sectors of the economic system, but some areas may be better rewarded through other mechanisms.

The mechanisms are minimum standards of efficiency for long-lived assets, such as buildings, vehicles, and industrial developments, to prevent “locking in” of inefficient technologies. They also include long-term incentives to transition to zero-carbon electricity, including an increased Renewable Energy Target, or similar measures, and continued support for new technology.

No matter if the Emissions Reduction Fund plays a role after 2020, additional measures are needed to accelerate this transition. We have a limited time to adopt technologies that will power our economy and not create emissions.