Australia: Country snapshot: Australia

Last Updated: 15 November 2015
Article by Elisa de Wit


On 11 August 2015, the Australian Government announced that Australia will implement an economy-wide target to reduce greenhouse gas emissions so they are 26-28 per cent below 2005 levels by 2030. According to Australia's submission,

'the target approximately doubles Australia's rate of emissions reductions, and significantly reduces emissions per capita and per unit of GDP. ...Against 2005 levels, Australia's target represents projected cuts of 50-52 per cent in emissions per capita by 2030 and 64-65 per cent per unit of GDP by 2030.'

Australia considers this target to be 'an ambitious, fair and responsible contribution to global efforts'. Australia's 2020 target was to reduce emissions by 5% below 2000 levels; the Australian Government has stated that its new 2030 target is 'a significant progression beyond Australia's 2020 commitment'.

The target will cover the energy, industrial processes and product use, agriculture, land-use, land-use change and forestry and waste sectors. Australia intends to meet this target through its Direct Action Plan, comprised of its existing Emissions Reduction Fund (ERF) and the associated new Safeguard Mechanism. These will be complemented by a range of new policies,

'including a National Energy Productivity Plan with a National Energy Productivity Target of a 40 per cent improvement between 2015 and 2030, the investigation of opportunities to improve the efficiency of light and heavy vehicles, and the enhanced management of synthetic greenhouse gas emissions under ozone protection laws and the Montréal Protocol.'

The full text of Australia's INDC submission can be accessed here.

On 17 July 2014, following a change of Government, Australia's carbon price, the Carbon Pricing Mechanism (CPM), was repealed. All liabilities under the CPM ended from 1 July 2014 and companies who had previously had a liability for the 2013/2014 financial year had to meet their obligations by 2 February 2015.

As a consequence of the repeal of the CPM, there is currently no carbon price, nor is there a carbon tax or emissions trading scheme in place in Australia. As part of the Australian Government's Direct Action Plan policy, however, a 'baseline and penalty' mechanism, known as the Safeguard Mechanism, is currently being developed by the Government.

The Australian Government intends to finalise the Safeguard Mechanism in late 2015 and to implement it on 1 July 2016. At present, it is intended that the Safeguard Mechanism will apply to approximately 140 large businesses which have direct emissions of more than 100,000 tonnes of CO2-e, covering about half of Australia's total emissions. These businesses will be required to keep their future emissions below a set baseline. As currently designed, these baselines will be set at a high level so the Safeguard Mechanism is unlikely to act as a driver for emissions reduction activities within these facilities. Indeed, the Explanatory Statement which accompanies the Safeguard Mechanism Rules states that it "is designed to accommodate economic growth and allow businesses to continue to operate at business-as-usual levels".

The Mechanism will be administered under the National Greenhouse and Energy Reporting Act 2007 (Cth) and emissions baselines will be set using historical data reported under the National Greenhouse and Energy Reporting Scheme (NGERS). It is intended that the Safeguard Mechanism will be reviewed between 2017 and 2018, and the Government has indicated that it will consider the need for the use of international units as a compliance option at this time.

In late 2011, Australia implemented a voluntary domestic offset scheme known as the Carbon Farming Initiative (CFI). The CFI, legislated under the Carbon Credits (Carbon Farming Initiative) 2011 Act (CFI Act), allows farmers and land managers to earn Australian Carbon Credit Units (ACCUs) by storing carbon or reducing greenhouse gas emissions on the land through various eligible projects (such as new tree plantations or capturing landfill gas). Whilst the CPM was in place, entities who had a carbon price liability could purchase the ACCUs to satisfy their liability. ACCUs could also be sold to people and businesses wishing to voluntarily offset their emissions.

Following the repeal of the CPM in 2014, the CFI Act (which initially only covered land-based offset projects), was expanded to include additional sectors under the new ERF, such as energy efficiency, transport, mining, oil and gas. The ERF is regulated by the Clean Energy Regulator, a government body which has the role of registering eligible offsets projects and issuing ACCUs.

The Regulator also has the role of purchasing the ACCUs generated from registered projects and to date, has done this by way of reverse auctions. The Australian Government has committed $2.55 billion to the ERF and has recently announced a further funding amount of $2.4 billion (to be allocated from 2018-2030).

The first ERF auction was held on 15 and 16 April 2015. At this auction the Clean Energy Regulator purchased around 47 million tonnes of abatement at an average price of AU$13.95, with a total contract value of just over $660 million. The second ERF auction will take place on 4 and 5 November 2015.

There is also a Federal Government backed National Carbon Offset Standard (NCOS) which has operated since 1 July 2010. The NCOS provides a national standard for genuine voluntary carbon emissions offseting, setting 'minimum requirements for calculating, auditing and offsetting the carbon footprint of an organisation, product or event to achieve "carbon neutrality"'. It assists consumers in making informed choices and interpreting carbon neutral claims. As part of the NCOS, the Carbon Neutral programme is a voluntary scheme which allows for products, organisations and events to be certified as 'carbon neutral'.

Renewable energy

Australia's primary renewable energy policy is the Renewable Energy Target scheme (RET) (originally established in January 2001 under an earlier policy) which operates in two parts under the Renewable Energy (Electricity) Act 2000 (Cth): the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES).

On 23 June 2015, the Australian Government agreed to a new mandatory renewable energy target for large-scale generation of 33,000 GWh in 2020, which will amount to approximately 23.5% of Australia's electricity generation in 2020 from renewable sources. (Previously, the target had been legislated at 41,000 GWh, which would have generated around 26% of renewable energy by 2020). Like the ERF, the RET is regulated by the Clean Energy Regulator.

Under the LRET, financial incentives are provided for the establishment or expansion of renewable energy power stations, such as wind and solar farms or hydro-electric power stations. Large-scale Generation Certificates (LGCs) are created for these renewable energy power stations, where one LGC is equivalent to 1 MWh of eligible renewable electricity generated above the power station's baseline. LGCs can be sold to liable entities such as electricity retailers, and are then surrendered annually to the Clean Energy Regulator in order to demonstrate compliance with the RET's annual targets.

Similarly, RET-liable entities with an obligation under the LRET, are obligated to buy Small-scale Technology Certificates (STCs), which are surrendered to the Clean Energy Regulator on a quarterly basis. STCs are created under the SRES for eligible installations of solar water heaters, heat pumps and small-scale solar panel, wind and hydro systems by households, small businesses and community groups.

The Australian Government also has a Solar Town Programme, involving funding of $2.1 million (from 2014 to 2017) to support community organisations who wish to install solar photovoltaic panels or a solar hot water systems on existing buildings in the local community. Community sites and regions are preselected by the Australian Government and the second round (2015-2016) of the programme is currently open to community organisations operating within the City of Playford or the City of Salisbury in South Australia.

Energy efficiency

Australia does not have any Federal energy efficiency target in place. There are, however various State based schemes and targets; for example, the Victorian Energy Efficiency Scheme's 2012-15 target is 5.4 million tonnes CO2-e per year.

On 2 July 2009, the Council of Australian Governments (COAG) adopted the National Strategy on Energy Efficiency (NSEE). The NSEE was last updated in June 2010, and is part of a ten year strategy which focuses on improving energy efficiency across the Australian economy, with an aim to 'streamline roles and responsibilities across government by providing a nationally consistent and coordinated approach to energy efficiency.' The NSEE forms part of the National Partnership Agreement on Energy Efficiency. This Intergovernmental Agreement 'provides [the] overarching direction and objectives for the NSEE' that are to be undertaken by the Commonwealth, State and Territory governments.

While there are no national energy efficiency targets in place in Australia, under the ERF, energy projects can now earn ACCUs. Eligible projects must be carried out in accordance with recently introduced energy efficiency methodology determinations. There are now currently four energy efficiency methodology determinations, including projects which reduce emissions associated with:

  • Aggregated small energy users - the energy consumption of grid electricity or natural gas by groups of households and small businesses;
  • Commercial buildings - fuel combustion and electricity consumption in existing commercial building by improving their energy efficiency;
  • Commercial and public lighting - improving the energy performance of lighting systems in commercial and industrial buildings, as well as in public areas, such as pedestrian, street, and traffic lighting ; and
  • Industrial Electricity and Fuel Efficiency - the consumption of electricity and fossil fuels in the industrial sector, covering a broad range activities including lighting upgrades, heating, ventilation and cooling system upgrades, boiler upgrades and variable speed drive installation.

Financial support

Australia has a number of Federal and State-based financial initiatives in place to support clean energy investment, research and development. At a Federal level, the Clean Energy Finance Corporation (CEFC) was established to facilitate increased finance into the commercialisation and deployment of Australian based renewable energy, energy efficiency and low emissions technologies. The CEFC operates like a traditional financier and works with co-financiers and project proponents to determine ways to secure financing solutions for projects in the clean energy sector.

The CEFC is a statutory Commonwealth authority, which was established, and operates under, the Clean Energy Finance Corporation Act 2011 (Cth) (CEFC Act). CEFC investment opportunities are governed by the CEFC Act, any regulations made under the CEFC Act (of which there are currently none), the CEFC Investment Mandate and any policies made under the CEFC Act. The CEFC commenced funding investments from 1 July 2013 and has access to funding of $10 billion over a five year period, comprised of annual appropriations to the CEFC Special Account of $2 billion every 1 July from 2013 to 2017 inclusive. After its first full year in operation, the 2013-14 financial year, the CEFC contracted investments of over $900 million in projects totalling over $3 billion in value. Further information about the CEFC can be found here.

Another Federal initiative is the Australian Renewable Energy Agency (ARENA), a commercially oriented agency established on 1 July 2012 by the Australian Renewable Energy Agency Act 2011 (Cth). ARENA has two objectives:

  • to improve the competitiveness of renewable energy technologies; and
  • to increase the supply of renewable energy in Australia.

ARENA has approximately $2.5 billion of legislated funding until 2022 'to invest in projects and initiatives that hasten the commercialisation of renewable energy solutions and diversify Australia's energy mix.' Investments span the commercialisation pathway from research and development to demonstration and near-commercial deployment projects. ARENA also has a mandate to capture and share knowledge from projects, and each project includes a knowledge sharing plan for this purpose. Under ARENA's General Funding Strategy and Investment Plan, investment focus areas are identified, within which its priorities for new investment have been identified, including integrating renewables and grids, renewables for industrial processes, off-grid areas, fringe-of-grid and network-constrained areas and large-scale solar photovoltaics.

There are also various State-based initiatives in place to support clean energy investment, research and development. For example, under the Australian Capital Territory's (ACT) Government's legislated 90% renewable energy target (requiring 90% of Canberra's electricity supply to be from large-scale renewables by 2020), the ACT Government has implemented renewable energy reverse auctions. To date, there have been three ACT renewable energy auctions; one for large-scale solar projects (Solar Auction) and two for wind energy projects (Wind Auction).

For the Solar Auction, in January 2012, requests for proposals were issued by the Act Government for grants of Feed-in-Tariffs (FiT) in relation to projects of up to 40 Megawatts of large-scale solar generation in the ACT. At the completion of the Solar Auction process, three proposals were granted a FiT entitlement. The first Wind Auction was announced on 12 March 2014, for grants of 20 year FiT entitlements for up to 200MW of wind generation capacity under a reverse Wind Auction process. On 6 February 2015, three successful proponents were announced, amounting to $50 million of local investment in wind power generation. A request for proposals for the second Wind Auction, for a further total of 200MW of wind generation capacity, was announced by the ACT Government on 10 August 2015. The Request for Proposals period for the second Wind Auction closed on 30 September 2015.

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Elisa de Wit
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