In his maiden speech as Prime Minister of Australia, Anthony Albanese used the phrase ‘climate change’ four times in two minutes, providing a level of optimism that change is indeed on its way. “The new Australian Government’s priorities align with the Quad agenda, taking action on climate change and building a stronger and more resilient Indo-Pacific”, Albanese said.
Further encouraged by the success of the independents and Greens in the election, the Australian Government appears committed to action on climate change and reducing greenhouse gas (GHG) - or carbon - emissions. This will help to catalyse the rapid decarbonisation of the Australian economy and accelerate the disruptive, irreversible changes to global value chains and the role businesses play in them. This shift is already underway, driven by the clear expectations of financiers, customers, and other stakeholders.
But what will the outcome of the Federal Election mean for sustainability, and specifically for carbon emissions and climate change? We take a look at the expected changes and outcomes for a more sustainable future.
1. Reaffirmation of commitment to a 2050 Net Zero target with a stronger 2030 target.
In accordance with the UNFCCC Paris Agreement, Labor has committed to Net Zero emissions by 2050, along with a target of a 43% reduction in emissions by 2030, based on 2005 figures. This is consistent with 2°C of warming globally.
However, in the lead-up to the 2022 Federal Election, more Australians identified climate change as their number one issue than any other topic. This was made evident by the election of a strong representation of pro-climate (so-called teal) independents. The teal independents, whose target is a 60% reduction by 2030, will seek to ramp up the Government’s 2030 emissions target. Other crossbenchers are likely to take a similar stance. The Greens’ target however is for a 75% reduction by 2030 and Net Zero by 2035. It is expected that these factors combined will push Labor to a commitment of a higher (c.48% to 50% reduction) 2030 target, which will bring us more in line with the UK and Europe.
2. Investment in electricity transmission grinds, renewables green metals, electric vehicles batteries and critical minerals.
The Government has committed to a number of investments in this space, including:
- $20 billion to upgrade the main electricity grid to allow it to support a renewable energy target of 82% by 2030.
- Co-investment of $100 million for 85 solar banks across the country.
- Green steel and aluminium production.
- Community batteries ($200 million), incentives for electric vehicles (EVs) and a national battery strategy.
- Support for the development of onshore processing of critical metals through the proposed $15 billion National Reconstruction Fund and $1 billion Value Adding in Minerals fund.
3. Transformation of the safeguard mechanism into a formal baseline and credit market mechanism
We expect to see a review of the existing safeguard mechanism and transformation into a formal baseline and credit market mechanism, including lowering the emissions threshold for coverage (encompassing more companies and sectors) and incrementally decreasing baselines to drive decarbonisation. It is also expected that companies that stay below their baselines will have access to tradeable credits.
An independent review and strengthening of Australia’s carbon credit scheme (and associated Australian Carbon Credit Unit's, or ACCUs) is also anticipated following criticism of the integrity of offsets (credits) generated under the scheme.
4. Other initiatives
The Government is expected to lead by example by reducing the Australian Public Service’s own emissions to Net Zero by 2030 (with some exemptions, such as the Australian Defence Force).
It’s also expected we’ll see the creation of 10,000 new energy apprentices and a $10 million New Energy Skills program, ensuring training pathways are fit-for-purpose.
5. Energy efficiency improvement
Although not currently stated as Labor Government policy, to reach its stated target of 43% reduction by 2030, the Government will need to develop and implement a national strategy with measures to improve energy efficiency across the economy. Australia was ranked as the worst-performing major developed country in the world in 2018 by the American Council for Energy-Efficient Economies (ACEEE). Potential policies and measures for increasing energy efficiency have already been identified in the Report of the Prime Minister’s Task Group on Energy Efficiency in 2010. The Government can be expected to identify and implement a range of policies and measures similar to those recommended in the 2010 report.
What does this mean for business?
The election of the Labor Government and teal independents means that Australia should face a dramatic acceleration in carbon regulation and trading framework development over the next year or two. This will impact most businesses in Australia by creating new risks and opportunities for them in some way.
“There is a growing understanding amongst our clients that carbon management programs will become part of a company’s business strategy – no matter the size of the company” said Catherine Bell, BDO, Principal, Sustainability
As a result of the transition to low carbon between now and 2030 (and beyond), new business partnerships, supply chains, products and services will emerge - disrupting business as we know it. Policy, regulation, and the clear expectations of financiers, customers and other stakeholders are evolving fast, which has quickly made this a leadership issue.
While carbon is the new liability - or asset - on the balance sheet creating both tangible risks and immense new opportunities, many businesses, both large and small, are yet to understand their emissions profile, much less what the embedded carbon is in their products and services (Scope 3). The outcome of the Federal election means that almost all businesses need to not only understand their GHG emissions and any liability or the impact this can have on them, but also develop and implement transparent decarbonisation or Net Zero emissions strategy in line with science-based targets and international standards. These targets then need to be independently verified, along with any progress against them, and clearly communicated.
Companies should not just focus on the potential risks or downside of decarbonisation, but also identify and realise the many opportunities that this rapid transition will bring.
Here to help
If you’d like to discuss what Australia’s recent change of Government means for your sustainability and emission reduction plans, please speak to one of our sustainability experts.