Australia seeks climate progress at Cop 28

Delivering on its climate pledges will involve the country's transition from fossil fuel to green energy superpower, writes Tom Major

Australia has pledged to support the UN climate summit Cop 28 presidency to strive for "ambitious and concrete outcomes" to reduce greenhouse gas (GHG) emissions, but it is sticking to its emissions targets even though they are deemed insufficient to keep to the goals of the Paris Agreement.

The country's engagement in climate negotiations has stepped up after the election of a Labor government in May last year, and it is now seen as playing a much more constructive role. Australia was one of the few countries to have updated its 2030 nationally determined contribution (NDC) — or climate pledge — last year, as requested in the Glasgow pact made at Cop 26. Its government legislated a deeper cut to GHG emissions by 2030 to a 43pc reduction from 2005, compared with a previous 26-28pc reduction. But this still falls short of the 75pc cut needed to help limit the global temperature increase to 1.5°C, which was advocated by the minority Green party.

Canberra has, however, permanently , as part of its commitment to not using carryover carbon credits for any future emissions-reduction targets. It had faced criticism that those units enabled the country to increase emissions under the Kyoto crediting period by 8pc above 1990 levels.

Shaky targets

The country has also committed to an 82pc renewable energy target by 2030 as it phases out its coal-fired power generation, but major projects designed to help reach this goal have been delayed because of rising costs. Renewables represented 39pc of generation across the National Electricity Market in the year to March 2023, but new investment has slumped in recent months.

And with committed renewable energy projects standing at just 400MW in the first half of 2023, Australia is on track to fall well short of the 5 GW/yr required to meet its 82pc goal. The Australian Energy Market Operator (Aemo) has reiterated warnings that the country may fail to replace its coal-fired power generation unless obstacles including increasing project costs, falling investment levels and skilled labour shortages are addressed. In the September quarter, the states of New South Wales and Victoria said they were making plans for coal-fired power plants, on which they are heavily reliant for their energy needs, to remain open beyond or up to their planned closures — scheduled between 2025 and 2035.

Australia's renewable targets also face issues with grid capacity. The national grid is creaking under the strain of new generation projects and requires tens of billions of dollars in new transmission capacity. But labour shortages, community opposition and inflation are creating headwinds for developers. And although offshore wind has been touted as a solution to the headaches associated with land-based development, planned zones remain uncertain because of environmental and cultural heritage concerns.

Emissions from electricity were 3.9pc down on the year for the year to 30 March, attributed to greater renewable power uptake. But electricity-related emissions, which the department of climate change, energy, environment and water expects will do much of the heavy lifting until 2035, will not decrease to the projected 2030 targetif coal-fired power continues to dominate the grid.

Australia's emissions were 466mn t of CO2 equivalent (CO2e) in the year to March 2023 — 24pc below emissions in the year to June 2005, the baseline year for Australia's 2030 target under the Paris Agreement — but up fractionally on the 465.5mn t CO2e recorded for the previous 12 months on a post-Covid recovery in transport and a rise in agriculture-related emissions.

Some progress on emissions reduction could come from the start of Australia's enhanced safeguard mechanism from 1 July. It requires major emitters of more than 100,000 t/yr of CO2e to cut emissions by 4.9pc/yr until 2030. And although the mining and energy sectors continue to struggle for solutions to reduce emissions, investment in battery-powered mine vehicles and green power grids for remote operations to reduce diesel use is gathering momentum.

But Climate Action 100+, the world's largest green investor alliance, has released assessments of 14 Australian emissions-heavy firms, showing that 57pc have fully disclosed their net zero commitments but lack short-term targets to meet them. Only 7pc of them currently meet the group's short-term — to 2025 — GHG reduction target covering at least 95pc of Scope 1, 2 and 3 emissions.

Australia has promised that sectoral emissions-reduction strategies to cut output from five emissions-intensive areas will be developed by mid-2024 on the recommendation of the government's Climate Change Authority (CCA), which is also tasked with updating Australia's 2030 target with a new 2035 goal by the end of next year.

Reality check

The country might find itself at odds with calls at Cop 28 to speed up the phase-out of coal-fired power generation, at a time when global coal use keeps hitting record highs. It is also under pressure from its trading partners to continue supplying LNG and coal, amid worldwide energy security concerns, while state governments reliant on coal royalty payments and seeking cheaper domestic gas continue to approve new mines and natural gas fields. Australia is forecast to increase its thermal coal exports to 196mn t from 178mn t in 2022.

Most vocally, energy trade partner Japan has promised to continue financing foreign fossil fuel projects, as long as it is necessary for its energy security and geopolitical interests. This comes despite Tokyo's pursuit of renewables, nuclear and cleaner fuels such as sustainably sourced hydrogen and ammonia. With few renewable energy prospects of their own, Japan and South Korea are regarded as key investors in Australia's green hydrogen export ambitions, leading Canberra to reassure Tokyo and Seoul that it remains a reliable trade partner.

In the wake of the US Inflation Reduction Act (IRA), Australia has initiated its own A$2bn ($1.27bn) hydrogen production subsidy known as Hydrogen Headstart, which plans to subsidise two or three major projects, targeting 1,000MW of electrolyser capacity by 2030. The first subsidies are expected to be paid in the 2026-27 fiscal year.

The government is also keen to tout the nation's reputation as a safe, reliable investment environment to drive a critical minerals sector that it hopes will replace jobs lost in fossil fuel industries in years to come. With most of Australia's lithium exported because of a lack of downstream processing capacity, a national battery strategy is being designed to develop onshore processing.

Australia's lithium concentrate production is predicted to rise to 4mn t in 2024-25 from 3.1mn t in 2022-23, mainly driven by mine expansions and new mines — after it grew by around 50pc on the year in January-June. With increased demand also expected for its aluminium, copper and nickel output in the next two years as the world decarbonises, Canberra is seeking closer ties with the US for investment in its critical minerals sector.

Ahead of Australia's expected role in co-hosting Cop 31 in 2026, greater scrutiny is likely to come to bear on the fossil-fuel dependent nation, which faces serious headwinds in realising its stated goal of turning its resources-rich economy into a net zero, green energy superpower for the coming decades.