Clean energy and emissions reduction investments in 2021-22 Budget

18 November 2021 17:55

The Morrison Government has pledged nearly $1.8 billion in energy and emissions reductions in recent weeks, an investment that is expected to form a plank in the upcoming May Budget. The announcements were made in the lead up to the virtual Leaders’ Climate Summit, convened by US President Joe Biden, and held on 22-23 April. On his first day in office, US President Biden re-established the US’ commitment to the Paris Agreement. Shortly after, he announced that he would convene the global leaders’ summit to stimulate efforts by the largest economic powers to address the climate crisis. The Climate Summit represents a key milestone towards the United Nations Climate Change Conference (COP26), to be held this November in Glasgow.

Australia’s announcements launched on Sunday 18 April, when Prime Minister Scott Morrison and South Australian Premier Steven Marshall signed a $1.08 billion State Energy and Emissions Reduction Deal to deliver “secure, reliable and affordable” energy to South Australians, while helping the nation achieve its emissions reduction targets. The agreement will see the Commonwealth contribute $660 million, and South Australia $422 million. The fossil fuel industry is expected to benefit from the deal, which includes gas targets of an additional 50 petajoules per annum by the end of 2023, and 80 petajoules per annum by 2030, to increase supplies of affordable gas to users in South Australia and the east coast gas market. Electricity supplies are to be bolstered with up to $100 million in joint support for Project EnergyConnect through joint underwriting of key early works on a 50/50 basis, to boost the flow of power between South Australia and New South Wales. According to the agreement, these targets will be balanced by clean energy initiatives, including $400 million in Commonwealth investment in carbon capture and storage, electric vehicles, hydrogen, and other emissions reduction projects, and up to $110 million in Commonwealth concessional finance for solar thermal and other storage projects in South Australia.

The PM said the deal struck a balance between providing South Australian households and industry with affordable energy, while ensuring Australia would meet emissions reduction targets. His Government has latched on to clean hydrogen and carbon capture technologies as key initiatives to drive down emissions while supporting Australian industry and manufacturing. On Wednesday, 21 April, the PM announced a further $539.2 million investment in new clean hydrogen, carbon capture, use and storage (CCS/CCUS) projects, funding to be revealed in the 2021-22 Federal Budget. The plan includes $275.5 million to accelerate the development of four additional clean hydrogen hubs in regional Australia and implement a clean hydrogen certification scheme, and $263.7 million to support the development of CCS/CCUS projects and hubs. “We want to make clean energy more affordable and reliable, while looking for ways our investments can get more people into work, Mr Morrison said. “We cannot pretend the world is not changing. If we do, we run the risk of stranding jobs in this country, especially in regional areas. Australia can and will continue to meet and beat our emissions reduction commitments, while protecting and growing jobs, by commercialising low emissions technologies like hydrogen and CCS/CCUS, that can support our industries and critical economic sectors. And when we commercialise those technologies, they also create new jobs.”

Energy Minister Angus Taylor added that the initiatives would help Australia meet its 2030 emissions targets and make progress towards net zero. “The Government’s investment will reduce technical and commercial barriers to deploying these technologies. It will encourage new large-scale investment from the private sector, creating jobs and supporting Australia’s economic recovery, particularly in regional areas," Minister Taylor said. “It's a tangible example of our commitment to being a low emissions technology leader, and reducing emissions through technology not taxes, or imposing costs on households, businesses or the economy."

The following day, the Prime Minister followed up with another announcement of a $565.8 million commitment in the 2021-22 Budget for low emissions international technology partnerships and initiatives via research and demonstration projects. Partners will be expected to put in $3 to $5 for every dollar of Government funding. Mr Morrison said that technology partnerships were essential to address global climate challenges while protecting domestic jobs in heavy industries and in regional areas. “These partnerships mean Australia will keep leading the way in low emissions technology that also means more jobs here at home,” he said. “The world is changing, and we want to stay ahead of the curve by working with international partners to protect the jobs we have in energy-reliant businesses, and create new jobs in the low emissions technology sector.” This would allow Australia to meet its emissions reduction commitments, he added, without sacrificing existing export industries such as agriculture, aluminium, coal, and gas. The plan is likely to provoke opposition from environmental groups, however, who take the view that a key purpose of investing in clean energy technologies is divesting from, and reducing the use of, fossil fuels.

Energy Minister Angus Taylor said the world looked to Australia as a leader in new and emerging energy technologies. “The five technologies prioritised under our Technology Investment Roadmap have the potential to substantially reduce or eliminate emissions from sectors that account for 90 per cent of global emissions,” he said. “Getting new energy technologies to parity will enable substantial reductions in global emissions – in both developing and developed countries – and ensure countries don’t have to choose between growth and decarbonisation.” Australia would not be able to make new energy technologies globally scalable and commercially viable independently, he added, highlighting existing collaboration with strategic partners including the US, the UK, Germany, Japan, Korea, and Singapore.

Carbon capture, utilisation and storage research organisation CO2CRC welcomed the Government’s announcements, saying that CCUS and hydrogen would be essential for the world to meet net zero emissions targets while continuing to drive economic developments. CO2CRC Chief Executive, David Byers said Australia was in a unique position as a global technology leader and energy producer, with the Government’s announcements now also positioning Australia as a leader in clean energy supply. “Using clean hydrogen as a source of energy has gained considerable traction. While technologies for green hydrogen generation are progressing fast, they are not yet cost competitive. The vast majority of commercially produced hydrogen is likely to be generated from gas and coal for years to come. When coupled with CCS, hydrogen production from gas and coal is emissions free,” Mr Byers said. “Industrial scale CCS projects already reduce significant amounts of carbon emissions around the globe. This includes the Chevron-led Gorgon LNG project in Western Australia, which has permanently removed and stored underground, four million tonnes of carbon dioxide since August 2019.”

Oil and gas industry peak body APPEA welcomed the Prime Minister’s support for “the gas industry’s potential for contribution to a cleaner energy future,” saying that natural gas would be part of an emissions reduction future. Southeast Asian demand for liquid natural gas is projected to double by 2040, even in scenarios that take into account the goal of global net zero emissions by 2050.

The Australia Institute took issue with fossil fuel subsidies, with new research indicating that just one Commonwealth tax break for the industry cost the country $7.84 billion in 2020-21. The total $10.3 billion in Government subsidies means that, every minute, $19,686 was effectively given by the Commonwealth to coal, oil and gas companies and major users of fossil fuels. This is topped up by the $1.2 billion spent by state governments to subsidise exploration, to refurbish coal ports, railways and power stations, and fund ‘clean coal’ research. “Coal, oil and gas companies in Australia give the impression that they are major contributors to the Australian economy, but our research shows that they are major recipients of government funds,” Rod Campbell, Research Director at The Australia Institute said. “A few years ago such subsidies would have been announced quietly, but now they’re central to government policy. Australia is increasing fossil fuel subsides, while the Biden Administration is committing to phase them out. Yet again, Australian governments are going against the tide of global trends and good climate policy.”

At the Leaders’ Climate Summit, President Biden committed the US to a 50-52% emissions reduction by 2030, compared with 2005 levels. Other nations making similar commitments included the United Kingdom (78% by 2035 from 1990 levels), the European Union (55% by 2030 from 1990 levels), Japan (46-50% by 2030, from 2013 levels), and Canada (40-45% by 2030 from 2005 levels). Australia’s Scott Morrison did not make a similar commitment, saying that “for Australia, it is not a question of if or even by when for net-zero, but importantly how”. The PM said the Government’s Technology Investment Roadmap would bring down the cost of clean hydrogen, energy storage and carbon capture. He also spoke of his intention to see Australia establish ‘hydrogen valleys’ that would rival the scale of California’s Silicon Valley. The Government would update its emissions reduction target before the Glasgow Climate Summit in November. The current target of a 26-28% cut by 2030, based on 2005 levels, lags well behind those made by major nations and trading blocs at the leaders’ summit. Australia is likely to come under significant international pressure to increase its commitment and take meaningful steps towards achieving it.

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