Viewpoint: Australia sets basis for energy transition

Australia's energy transition is expected to broaden in 2023 with Canberra to unveil its electric vehicle (EV) strategy, set baselines for facilities with the largest greenhouse gas (GHG) emissions, as well as tighten rules on firms to ensure they are not making false claims about their emissions cuts.

These policies build on the advances made in 2022 for the country's energy transition, which will affect domestic coal and gas consumption as utilities pledged to close coal and gas base-load power plants earlier than previously planned. The federal government in May ushered in deeper GHG emissions cut targets and imposed a renewable energy target of 82pc by 2030. Most of the GHG emissions reduction initiatives are related to Australia's electricity generation sector, which is the country's largest single source of emissions and represent a third of total emissions.

The coal-fired power plant closures and the increase in renewables is projected to cut GHG emissions from electricity generation by 50pc to 79mn t of carbon dioxide equivalent (CO2) by the end of the decade from 158mn t of CO2e in 2021. The fall in power generation emissions puts Australia on track to reduce emissions by 40pc by 2030, just short of its target of a 43pc cut.

The latest Australian emissions projections show CO2 to continue to rise for the transport, agriculture and the fugitive emissions from extracting coal, oil and gas. Canberra also has its sights on transport emissions, which account for around 20pc of Australia's emissions.

Canberra has released a discussion paper on EVs, aiming to align polices at the federal and state level to stimulate EV sales. These possible new policies include setting emissions target for the light vehicle market, improving fuel standards for gasoline cars and providing financial incentives to purchase EVs. The latest national vehicle sales data for November 2022 showed EV sales accounted for 4.7pc of total sales in the month, up from an average of 0.49pc in 2021 of the 1.05mn vehicles sold in 2021.

Australian independent Santos is building a 1.7mn t/yr carbon capture and storage (CCS) unit in the onshore Cooper basin in South Australia, which it intends to capture scope one and two GHG emissions that includes fugitive emissions from the extraction process, but is reliant on carbon credits to fund the venture.

A review of Australia's carbon credit market is to be done in 2023, which may influence the construction of further CCS projects as the carbon credit market requires tighter validity rules given the scale of questionable credits in the market.

The federal government plans to reform the safeguard mechanism, which imposes emissions caps on all facilities emitting over 100,000 t/yr of CO2e, covering around 215 facilities.

Hydrogen future

Australian federal and state governments have been promoting hydrogen from renewable sources as a possible way to decarbonise heavy industry such as steel production and other industrial processes that will be subject to the safeguard mechanism. Few hydrogen projects have been sanctioned beyond the concept stage but 2023 will see the expected opening of the country's first electrolyser facility in Gladstone, Queensland by Fortescue Futures Industries (FFI).

FFI plans to use the electrolysers for the conversion of the Gibson island ammonia plant in Queensland to be run on green hydrogen, with a final investment decision to be made in 2023. This makes 2023 an important year for making inroads into reducing emissions from the industrial processes sector.

All sectors will be affected by Canberra's plans to introduce new climate risk disclosure rules for all firms to provide greater transparency, boost investor confidence particular for investment funds with environment, social and governance mandates and ensure Australia's regulations are up to date with other jurisdictions.

By Kevin Morrison