Energetics' Insights

When the Nationally Determined Commitments (NDCs) of signatory countries to the Paris Agreement are aggregated, we can see that the world is not on track to limit warming to less than 2^oC. Climate Action Tracker shows that the world is heading towards 2.7^oC[1]. Australia’s individual emissions reduction target falls within a group of countries with NDCs described as ‘inadequate’[2] with Climate Action Tracker stating “if most other countries followed the Australian approach, global warming would exceed 3–4°C”. 

Therefore, the preliminary stocktake of action as required under the Paris Agreement to take place in 2018 will need to consider options from the outset for Australia to strengthen our existing NDC target. 

Meeting our 2020 target, but prioritising 2030 and the 2 degree commitment

The Kyoto Protocol is in force until 2020, and Australia is bound to achieve our 2020 target of 5% below 2000 GHG emissions levels. As Energetics’ analysis shows[3] Australia is on track to deliver the cumulative abatement required to meet our 2020 target. However, national emissions have grown by 1.3% since 2015 and are forecast to continue to grow meaning that from an absolute perspective, Australia’s emissions will not be 5% below 2000 levels in 2020.

The requirement under the Paris Agreement for successive NDCs to demonstrate a progression will place pressure on nations to update GHG emissions reduction targets to show substantial and representative action. Parties will be transparently compared against peers, and nations, such as Australia, that are currently perceived as having ‘inadequate’ targets,[4] will be under increasing global pressure to improve performance.

This Australian trend in increasing emissions not only makes meeting the Paris Agreement targets more difficult, it is inconsistent with global GHG emissions trends which have remained essentially flat since 2013.[5]

The fact that Australia is on track to meet the current cumulative 2020 emissions reduction targets should not be seen as an excuse for delayed action. Prioritisation must be given immediately to refining Australia’s existing climate change policy framework so that it has a clear pathway to safeguarding against future emissions increases, is capable of delivering the current Australian 2030 emissions reduction target, and has enough flexibility to manage the likely future enhancements in Australia’s emissions reduction target arising from the Paris Agreement ‘enhanced transparency framework’ provisions.

With a preliminary global stocktake of country-specific climate change action occurring in 2018, Australia’s initial position will be informed by the 2017 policy review[6] being undertaken by the Department of the Environment and Energy. The key consideration in this policy review will be accounting for the global legal and political pressure that will arise as a signatory to the Paris Agreement and ensuring that policies are able to ramp-up to meet any future increases in the Australian emissions reduction target.

2030 emissions reduction targets: the implications for business

Meeting Australia’s 2030 Paris Agreement emissions reduction targets – current and potential successive – will not only impact the Australian government, it will also impact on all businesses based and operating in Australia. The 2017 policy review will provide further guidance on the mechanisms that might be used to achieve our Paris commitments: greater coverage or declining baselines incorporated into the safeguard mechanism, increased regulations or alternative incentives under the National Energy Productivity Plan (NEPP), or increased funding for the Emissions Reduction Fund (ERF).

Regardless of the policy settings, Australian business should consider the current Australian emissions reduction targets as the baseline, and prepare for alternative scenarios where Australian emissions reduction targets are stronger.

References

[1] Climate Tracker | INDCS lower projected warming to 2.7C

[2] “The “inadequate” rating indicates that Australia’s commitment is not in line with most interpretations of a “fair” approach to reach a 2°C pathway: if most other countries followed the Australian approach, global warming would exceed 3–4°C.” Climate Action Tracker | Australia set to overshoot its 2030 target by large margin

[3] Energetics | Tracking Australia’s emissions to 2020 and implications for reductions required for 2030

[4] Climate Action Tracker | Tracking INDCs

[5] International Energy Agency (IEA) | Decoupling of global emissions and economic growth confirmed

[6] Department of the Environment and Energy | Australia’s 2030 climate change target