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Australia passes Climate Change Bill with upgraded emission reduction target

Highlights

43% emission cut target confirmed

Independent expert scrutiny established

Carbon market reform as next step

  • Author
  • Ivy Yin
  • Editor
  • Jonathan Fox
  • Commodity
  • Energy Transition Natural Gas Metals
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  • Energy Transition Environment and Sustainability

Australia's Climate Change Bill passed the Senate on Sept. 8, reaffirming the nation's target to cut greenhouse gas emissions by 43% from 2005 levels by 2030, and achieve net-zero by 2050, the government said in a statement.

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The 43% emissions reduction target is significantly higher than the previous government's commitment for a 26%-28% cut over a similar period.

"For almost a decade, Australia stumbled from one policy to another, and our economy and communities missed out on billions of dollars in public and private clean energy investment. But today that changes," the government said.

Minister for Climate Change and Energy Chris Bowen said the legislation put Australia "on a credible path to net zero."

The legislation enables a whole-of-government approach to drive down emissions and build accountability through an annual update to Parliament, the government said.

It empowered the Climate Change Authority to provide the government with independent expert advice, while agencies including the Australian Renewable Energy Agency, the Clean Energy Finance Corporation, Infrastructure Australia and the Northern Australia Infrastructure Facility would embed amended targets in their objectives and functions.

"The best way to secure the planning, investment and innovation that will underlie an efficient energy transition is through legislated targets," the Australia Chamber of Commerce and Industry said.

"Work now turns to creating policies that will mobilize investments to 2030 and beyond," said John Connor, CEO at Australia's carbon industry association Carbon Market Institute.

In the year to March 2022, Australia's emissions totaled 487.1 million mtCO2e, 1.5% or 7.4 million mtCO2e higher than the same period of 2021, according to the latest quarterly update of Australia's National Greenhouse Gas Inventory.

Carbon market reform as next step

"The next step is to ensure a strengthened Safeguard Mechanism and a carbon crediting system that is fit-for-purpose," the CMI's Connor said. "Both are urgent and vital to progress in addressing our twin climate and biodiversity crises."

The Safeguard Mechanism refers to Australia's compliance emissions trading scheme, which covers 212 facilities across the metals, mining, oil and gas extraction, manufacturing and waste sectors, CMI data showed.

Since 2017 there had been a surplus of free emissions quotas every year under the compliance scheme, ranging from 35-45 million mtCO2e, the data showed.

Consequently, covered sectors have had limited motivation to decarbonize, resulting in an increase in their total emissions of about 4% from 2017 to 2021.

In a report released in June, the CMI said that without reform, emissions covered under the scheme could jump further to 140 million mtCO2e in 2030, from 137 million mtCO2e in 2021.

Reform required the government to tighten the free emissions allowance quota and set a cap either for total emissions or for maximum emissions per unit of industrial output, called a "carbon intensity baseline".

Reference carbon intensity baselines already exist for each industry, while companies can choose to propose site-specific benchmarks for individual facilities.

Besides compliance market reform, in July energy minister Bowen announced the appointment of an independent panel to review the Australian Carbon Credit Unit system.

ACCUs are credits that cater to buyers with voluntary emission reduction targets.

In particular, the methodologies that guide carbon credit issuance from landfill gas and reforestation projects were expected to be scrutinized in response to concerns from market participants regarding the integrity of the rules.