Pathways to deep decarbonization in Australia

Executive summary This report is part of the global Deep Decarbonization Pathways Project (DDPP), which aims to understand and show how countries can transition to a very low carbon economy. The project comprises 15 countries representing more than 70% of global greenhouse gas emissions and is convened under the auspices of the Sustainable Development Solutions Network (SDSN) and the Institute for Sustainable Development and International Relations (IDDRI). The report presents an illustrative deep decarbonisation pathway for Australia – just one of many possible pathways – developed using a combination of well-established modelling tools to identify feasible and least-cost options. The frame of reference for the analysis is that all countries decarbonise by 2050, consistent with the objective of limiting the increase in global mean surface temperature to 2°C in order to avoid dangerous climate change. This work finds that Australia can achieve net zero emissions by 2050 and live within its recommended carbon budget, using technologies that exist today, while maintaining economic prosperity. Major technological transitions are needed in some industries and many activities, but no fundamental change to Australia’s economy is required. Economic activity and Australian incomes keep rising. The economy grows by 150% to 2050, while net emissions fall to zero and energy sector emissions are reduced by more than four fifths. Decarbonisation of energy systems in all countries relies on three pillars: ambitious energy efficiency; low carbon electricity; and electrification and fuel switching. For Australia there is a fourth pillar: reducing non-energy emissions in industry and agriculture. In the illustrative pathway, ambitious energy efficiency in all sectors leads to a halving of the final energy intensity of the economy between now and 2050. Low carbon electricity is supplied by renewable energy or a mix of renewable energy and either CCS or nuclear power. Electricity prices increase at moderate rates and then stabilise and are more than offset by the savings in electricity from energy efficiency, so average household electricity bills decline over time (not taking into account switching cars and heating to electricity). Emissions from transport, industry and buildings are hugely reduced through energy efficiency and switching from fossil fuels to carbon-free electricity and biofuels or gas. Remaining energy emissions are 3.0 tonnes of carbon dioxide equivalent per person at 2050, with about half of this attributable to production for export. Non-energy emissions from industry are reduced through substitution with less emissions-intensive materials, process improvements and carbon capture and storage in some applications. Agriculture emissions are reduced through best practice farming and increased carbon forestry compensates for all remaining emissions at 2050. The agriculture and forestry sector maintains a similar share of GDP as today, as do the mining and manufacturing industries, with the exception of coal, oil and petroleum. The technologies required for decarbonisation are currently available or under development. Ongoing commercialisation, enhancement and integration will improve their cost-competitiveness and performance. Experience with technological change, such as the rapid fall in costs of solar cells seen in recent years, suggests that there will be positive surprises along the way. The analysis shows that deep decarbonisation requires neither substantial lifestyle changes nor large changes in Australia’s economic structure. Australia retains its international advantage in primary industries, including mining and agriculture. While some technologies and activities decline, others expand and contribute to continued economic growth. The largest changes occur in the energy and land sectors. Australia’s rich renewable energy resources could make it an energy superpower in a world where clean energy dominates. Together with substantial potential for geological sequestration and vast land available for carbon forestry, this creates economic opportunities for Australia in a decarbonised world. Achieving deep decarbonisation in this way by mid-century as outlined in this report – within the timeframe required to limit global warming to 2°C – would be a significant transition for Australia, and such a transition needs to be well managed. The experience with previous episodes of far-reaching economic change – such as the transition from agriculture to mining as a dominant factor in exports, as well as the rise of Australia’s service industry – has shown the flexibility, adaptability and resilience of Australia’s economy.