Conclusion of the Commonwealth Government’s 2017 review of climate policy

The Commonwealth Government’s 2017 review of climate policies was widely anticipated, however its fairly pedestrian discussion paper, released in March, should have lowered expectations that it would result in any breakthrough policy recommendations. In spite of this, the Final Report, published on Monday[1], has no doubt elicited many glib comments from analysts across the Australian energy and climate space. From our perspective, at the end of almost a year of consultation and review, the Government has committed to undertake more consultation and reviews, the key one being the development of a long-term, whole-of-economy, emission reduction strategy by 2020.

The Government has stated this strategy “will not be prescriptive”. However it will provide yet another opportunity for climate-friendly stakeholders to push the Government towards making real commitments to long-term emission reductions that it was unable to contemplate in 2017 because of political constraints and the dominance of energy market issues. The timing of the ‘strategy’ review means it will be heavily affected by the next federal election, where climate is expected to be a hotly contested point of difference between the major parties (and probably still within the Liberal/ National Coalition). Ideally the election will deliver the victor some sort of specific policy mandate that is also not entirely focused on the electricity sector, given the National Energy Guarantee seems to have tentative support and will build some momentum as the details continued to be fleshed out. As many have suggested, this mandate could be to transform the Safeguard Mechanism into something that delivers progressive reductions in facility emissions (rather than just allowing for their increase as flagged in the review final report).

Like many submissions to the 2017 review[2], the Institute called on the Government to identify an emission reduction pathway beyond the current 2030 target, and eventually towards ‘net zero’ in line with the Paris Agreement. We suggested that the overall policy framework include legislated targets combined with interim carbon budgets. These could be combined with an obligation for the government to periodically report progress against budgets and the overall target, thus allowing it the opportunity to justify policy changes, for example, to deal with changing technology and economic circumstances, while still providing some certainty around the ‘direction of travel’. In the same way that the Paris Agreement involves elements of transparency and ‘shaming’ of signatories into action, the mirroring of long-term targets and periodic reviews in national policy frameworks provides an opportunity for governments to delegate some accountability onto emitting sectors, allowing industry to present its own ideas on meeting their ‘fair share’ of emission reductions for public scrutiny. Such transparency would align with growing demands for carbon risk disclosure by shareholders and prudential authorities.

The Institute’s CCS Policy Indicator is a synthesis of information gathered through our monitoring of policies around the world that directly and indirectly support CCS deployment. Like many emission reduction technologies, the business case and political support for CCS is closely linked to whether or not we are likely to honour our Paris Agreement targets, namely our understanding and embracing of the huge technological transformation that must occur over a very short time. For this reason, countries that tend to rank more highly in the CCS Policy Indicator have made firm long-term emission reduction commitments, and have backed this up with institutional underpinnings that are designed to outlive short-term wavering in policy support because of electoral cycles or external shocks. While these arrangements are not a panacea, they significantly enlighten the debate about ‘how’ to achieve emission reductions, and also help move the debate beyond questions of ‘whether’ that are posed by an ever-shrinking segment of the community.

In 2015, the UK was the highest-ranking country in the Institute’s CCS Policy Indicator[3], although has since dropped in ranking[4] following the sudden cancellation of the £1 billion CCS Commercialisation Programme. While some Australian commentators might have regarded this cancellation as avoiding a “dud investment”[5], the reporting in the UK was diametrically opposite[6] and there is durable government support for CCS[7]. One key factor in this support is the clear and consistent public narrative on role of CCS from the UK’s Committee on Climate Change (CCC). The CCC is an independent statutory organisation established under the Climate Change Act 2008 with the responsibility for analysing the UK’s overall carbon budget, and periodically recommending interim five-year budgets to the UK Government, with associated recommendations for policy across a variety of sectors. The CCC annually reports progress towards the UK’s 2050 target as well as against carbon budgets, and provides views on actions taken to reduce UK emissions generally. The UK Government is legally required to consider CCC recommendations in setting carbon budgets and must publish reasons for any departures from such recommendations.

Contrasting to a view typically heard in the energy debate that CCS is prohibitively expensive, the CCC[8], echoed by parliamentary[9] and independent[10] inquiries, has highlighted that not having CCS results in higher costs in achieving emission reductions. This finding is consistent with bodies like the IPCC[11] and analysis undertaken recently by University College London.[12] A key reason for this is that CCS is one of the only means available for achieving large emission reductions in industrial sectors and, when combined with bioenergy production, can result in ‘net negative’ emissions. These factors only become important when policy-makers and the public have a line of sight to carbon neutrality and must act to reduce emissions from outside the electricity sector.

Norway also ranks highly in the Institute’s CCS Policy Indicator. Here there is also a convergence of strong, consistent support for CCS[13] and long-term legislated emission reduction targets. Other countries with similar long-term targets include Finland, Mexico, Sweden and Denmark. In Australia, Victoria[14] recently legislated a ‘net zero’ 2050 emission reduction target with five-yearly interim targets, and a ministerial obligation to report at the end of each interim period on whether targets had been met. Aspirational targets for carbon neutrality by 2050 also exist in several other Australian states.

We hope that, by 2020, and following broad consultation, it would be a fairly easy step for the Commonwealth Government to decide to legislate a 2050 emission reduction target and provide for supporting institutional arrangements. Ideally, this would be accompanied by technology-neutral policy mechanisms that encourage emission reductions in all sectors of the economy. This suite of interventions may or may not ultimately provide for a significant amount of CCS deployment. But our view is that much of the current resistance to CCS stems from a narrow, short-term view of where emission reductions need to be achieved.


[4] See Global Status of CCS: 2017, pp 35-37, and 2018 CCS Policy Indicator Report (forthcoming)