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AUSTRALIA’S EMISSIONS PROJECTIONS 2016

DECEMBER 2016© Commonwealth of Australia, 2016.Australia’s emissions projections 2016 is licensed by the Commonwealth of Australia for use under a Creative Commons By Attribution 3.0 Australia licence with the exception of the Coat of Arms of the Commonwealth of Australia, the logo of the agency responsible for publishing the report, content supplied by third parties, and any images depicting people. For licence conditions see: http://creativecommons.org/licenses/by/3.0/au/ This report should be attributed as ‘Australia’s emissions projections 2016, Commonwealth of Australia 2016’.The Commonwealth of Australia has made all reasonable efforts to identify content supplied by third parties using the following format ‘© Copyright, [name of third party] ’.Further information about projections of greenhouse gas emissions is available on the Department of the Environment and Energy’s website: www.environment.gov.au. To contact the Projections team, please email [email protected] views and opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Australian Government or the Minister for the Environment and Energy.Image: View of Tasmanian wilderness from Lyell Highway on the west coast, Tasmania © Leanne Chow, 2015

Australia’s Emissions Projections 2016

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Executive summary The 2016 emissions projections show Australia continues to make progress in reducing

emissions.

Australia’s 2020 target (5 per cent below 2000 levels) Australia is on track to over-achieve on its 2020 target by 224 million tonnes of carbon

dioxide equivalent (Mt CO2-e), inclusive of carryover, or 97 Mt CO2-e without carryover. This is larger than the April 2016 projections update, which estimated Australia would

surpass its 2020 target by 78 Mt CO2-e. Emissions in 2020 are projected to be 559 Mt CO2-e, a downward revision of 19 Mt CO2-e

since the April 2016 update. This change is due to:

o the closure of Hazelwood power stationo lower electricity demand due to increased energy efficiencyo lower-than-forecast emissions from land clearing.

The key drivers of emissions to 2020 are expansions in Australia’s liquefied natural gas industry and growth in transport activity.

Australia’s 2030 target (26–28 per cent below 2005 levels) Emissions in 2030 are projected to be 592 Mt CO2-e. Taking account of sensitivity analyses, the range for annual emissions in 2030 is 571 to 616

Mt CO2-e. The 2030 target will require:

o 990–1055 Mt CO2-e in cumulative emissions reductions between 2021 and 2030 under the baseline projection

o 842–1202 Mt CO2-e when taking account of the sensitivity analyses. These estimates do not take account of the National Energy Productivity Plan, vehicle

efficiency standards, the phase-down of hydrofluorocarbons, or policy changes that might flow from the 2017 review of climate policies or work of the Council of Australian Government’s (COAG) Energy Council.

The key drivers of emissions to 2030 are:o increased electricity demand linked to rising economic activityo increases in transport activity linked to population growtho increased herd numbers in agriculture linked to international demand.


ContentsAUSTRALIA’S EMISSIONS PROJECTIONS 2016.....................................................................................i

Executive summary...........................................................................................................................iiAustralia’s 2020 target (5 per cent below 2000 levels)................................................................................................. iiAustralia’s 2030 target (26–28 per cent below 2005 levels)......................................................................................... ii

Introduction......................................................................................................................................1

Projection results..............................................................................................................................2Australia’s progress towards meeting the 2020 target.................................................................................................2Emissions projections to 2030..................................................................................................................................... 4Changes from the 2014–15 projections....................................................................................................................... 5Progress to the 2030 target......................................................................................................................................... 6Other metrics............................................................................................................................................................. 6

Sectoral trends..................................................................................................................................8Electricity................................................................................................................................................................... 8Direct combustion.................................................................................................................................................... 10Transport.................................................................................................................................................................. 12Fugitives................................................................................................................................................................... 14Industrial processes and product use........................................................................................................................ 16Agriculture............................................................................................................................................................... 17Waste....................................................................................................................................................................... 19Land use, land use change and forestry..................................................................................................................... 20

Sensitivity Analyses.........................................................................................................................23Lower emissions sensitivity....................................................................................................................................... 23Higher emissions sensitivity...................................................................................................................................... 25

Appendix A—Methodology.............................................................................................................26

Appendix B—Sectoral assumptions.................................................................................................29

Appendix C—Land classification systems under Kyoto Protocol and UNFCCC..................................32

Appendix D—Sensitivity Methodology............................................................................................34

Appendix E—References.................................................................................................................37


IntroductionEmissions projections are estimates of Australia’s future greenhouse gas emissions. They provide an indicative assessment of how Australia is tracking against its emissions reduction targets. They also provide an understanding of the expected drivers of future emissions.The projections provide an estimate of the abatement task associated with Australia’s emissions reduction targets. This represents the total emissions that must be avoided or offset for Australia to achieve its target. If the abatement task is a negative value, this indicates Australia is on track to over-achieve on its commitments.The 2016 projections include:

A projection of emissions from 2016 to 2020, which provides an estimate of the abatement task Australia must achieve to meet its 2020 emissions reduction target based on a carbon budget.

A projection of emissions from 2021 to 2030, which provides an estimate of the abatement task Australia must achieve to meet its 2030 emissions reduction target.

These projections update those provided in Tracking to 2020, released in December 2015 (DoE 2015c; see sector chapters for specific comparisons). They also update those provided in the fact sheet Tracking to 2020—April 2016 update (DoE 2016) and, for projections to 2030, Australia’s emissions projections 2014–15 (DoE 2015a).This report includes a baseline projection as well as sensitivity analyses to illustrate how emissions may differ given variations in key drivers of Australia’s emissions—energy exports and technology change.


Projection results

Australia’s progress towards meeting the 2020 targetAustralia’s emissions in 2015 were 527 Mt CO2-e. This represents a 12 per cent decline on 2005 levels. This has been driven by:

reductions in electricity emissions, due to increased energy efficiency and flatter growth in demand

ongoing subdued economic conditions resulting in slower overall emissions growth lower deforestation rates than historical levels.

Over the period 2015 to 2020, Australia’s emissions are projected to grow. This is primarily driven by the development of new Liquefied Natural Gas (LNG) facilities in Western Australia, Queensland and the Northern Territory. This expansion of the LNG industry results in increases in emissions for the direct combustion and fugitives sectors. The Renewable Energy Target, flat electricity demand, and the announced closure of Hazelwood power station sees emissions in the electricity sector projected to decline slightly, offsetting some of the overall growth in emissions to 2020.Emissions in 2020 are projected to be 559 Mt CO2-e, around 3 per cent lower than projected in the April update (Figure 1).

Figure 1 Projected emissions in 2020 over time

Note: Projected emissions in 2020 have been calculated using the information available in each publication. It is important to note that year to year figures are not directly comparable as the underlying assumptions and policy measures differ. Emissions accounting approaches to comply with international reporting standards and target trajectories are also different between projections.

Australia is expected to surpass the emissions reductions required to meet its 2020 target by 97 Mt CO2-e. This is in addition to Australia’s carryover of 128 Mt CO2-e. Taken together the overachievement is 224 Mt CO2-e. These estimates are calculated using the following steps:

Over the period 2013 to 2020, Australia’s cumulative emissions are projected to be 4353 Mt CO2-e, once the effect of policies such as the Emissions Reductions Fund and the Renewable Energy Target have been taken into account.

The carbon budget associated with the target of 5 per cent below 2000 levels equates to a maximum of 4432 Mt CO2-e over the period 2013 to 2020.

The difference between the projection and the budget is -79 Mt CO2-e.


The cumulative abatement task is then adjusted for estimates of voluntary action1 by households and businesses, which is considered additional to national targets.

The cumulative abatement task is further adjusted to take account of 25 Mt CO2-e of international units voluntarily transferred to the Commonwealth under the Waste Industry Protocol2.

The result of these calculations is outlined in Table 1. Australia also holds 128 Mt CO2-e of surplus units from the Kyoto Protocol first commitment

period (our ‘carryover’). The sum of these units and our projected overachievement for the 2013 to 2020 period is 224 Mt CO2-e.

Table 1 Cumulative abatement task, 2013 to 2020

Calculation of 2020 abatement task: 5 per cent below 2000 levels in 2020 (Mt CO2-e)

Cumulative emissions 2013–2020 4353

Target trajectory 2013–2020 4432

Unadjusted abatement task -79

Voluntary action +8

Waste Protocol units -25

Abatement task -97

Carryover from 2008–2012 -128

Abatement task with carryover -224Note: totals may not sum due to rounding.

Changes since the April 2016 projections update

The changes since the April 2016 projection reflect lower than previously projected emissions growth across the economy, particularly due to:

the announcement in November 2016 of the forthcoming closure of Hazelwood power station in Victoria due to occur in April 2017

lower projected electricity demand due to improved energy efficiency lower expected emissions in the land sector, as new data confirms that emissions from land

clearing are been lower than previously estimated improvements in the national greenhouse gas inventory, which have revised historical

estimates of land sector emissions

1 Voluntary action refers to individuals and companies offsetting their emissions to become ‘carbon-neutral’ and households buying GreenPower (a government-accredited program for energy retailers to purchase renewable energy on behalf of customers). Voluntary action achieves emissions reductions additional to—that is, above and beyond—national targets.

2 Under the carbon tax, many landfill facility operators charged their customers in relation to future carbon liabilities that were expected to accrue as the waste being deposited decayed over many decades. Now that the carbon tax has been repealed, the voluntary Waste Industry Protocol allows these landfill operators to acquit these charges by purchasing carbon abatement credits and voluntarily transferring them the Commonwealth.


lower deforestation rates and higher sparse vegetation gains have contributed to a revised estimate of 527 Mt CO2-e in 2015.


Figure 2 Change in the cumulative abatement task, 2013 to 2020

Emissions projections to 2030Emissions in 2030 are projected to be 592 Mt CO2-e, which is 0.5 per cent below 2005 levels (595 Mt CO2-e). This is a reduction of 132 Mt CO2-e, or 18 per cent, from the estimate of 724 Mt CO2-e given in the 2014–15 projections.Emissions projections are inherently uncertain, and this uncertainty increases the further into the future emissions are projected. Taking account of sensitivity analyses prepared for this report suggests Australia’s emissions in 2030 could range from 571 Mt CO2-e and to 616 Mt CO2-e.

Figure 3 Australia’s emissions trends, 1990 to 2030

Source: Department of the Environment and Energy 2016; Department of the Environment and Energy analysis

Note: The historical emissions from 1990 to 2015 have been revised since the release of Australia’s emissions projections 2014–15, published in March 2015. It is important to note that year to year figures are different in these publications and not directly comparable as the underlying assumptions, accounting systems and policy measures differ.


Most of the projected growth in emissions to 2030 is in the electricity, transport and agriculture sectors. This is driven by increased electricity demand linked to economic activity, increases in transport activity linked to population, and increased stocking numbers in agriculture driven by overseas demand. Emissions in other sectors are projected to stabilise and grow only slightly after 2020 (Figure 4).

Figure 4 Domestic emissions, 1990 to 2030

Table 2 Sectoral breakdown of 2016 projections results to 2030

Emissions by sector (Mt CO2-e) 2000 2005 2015 2020 2030

National Greenhouse Gas Inventory

Projection

Electricity 175 197 187 176 186

Direct combustion 75 82 95 108 110

Transport 74 82 93 101 111

Fugitives 39 37 41 45 47

Industrial processes and product use

27 32 33 35 36

Agriculture 79 76 70 73 78

Waste 15 14 12 10 11

Land use, land use change and forestry

67 76 -4 11 13

Total 550 595 527 559 592

Changes from the 2014–15 projectionsFactors which have contributed to the revision are:


the inclusion of abatement over the period 2021 to 2030 from existing contracts under the $2.55 billion Emissions Reduction Fund and estimated abatement from the remaining $440 million

the Government’s commitment to a Large-scale Renewable Energy Target of 33,000 GWh. The 2014–15 Projections reflected government policy at the time to change the target to around 26,000 GWh, which represented 20 per cent of projected electricity demand in 2020

the announcement of the forthcoming closure of Hazelwood power station in Victoria in April 2017

flatter electricity demand than previously forecast due to improving energy efficiency revised expectations for growth in renewable generation as costs decline, particularly for

solar lower than previously projected production in the non-ferrous metal manufacturing, coal

and LNG industries revised expectations for the uptake of electric vehicles and improvements in vehicle

efficiency in the transport sector.

Figure 5 Emissions in 2030 over time

Note: Projected emissions in 2030 have been calculated using the information available in each publication. It is important to note that year to year figures are not directly comparable as the underlying assumptions and policy measures differ. Emissions accounting approaches to comply with international reporting standards and target trajectories are also different between projections.

Progress to the 2030 targetThe current estimate is that cumulative emissions reductions of 990 Mt CO2-e (26 per cent reduction) to 1055 Mt CO2-e (28 per cent reduction) will be needed over the period 2021–2030 to meet Australia’s 2030 target. Taking into account uncertainty as tested through sensitivities, the 2030 target may require cumulative reductions in the range of 842 Mt CO2-e to 1202 Mt CO2-e over 2021–2030. Further information on sensitivities can be found in the sensitivities chapter.These results reflect the fact that the Government’s policies are primarily geared towards the 2020 target at this stage. Policy settings that the Government might agree to as part of its 2017 review of climate change policies are not included in these projections. These projections do not take account of abatement from:


the National Energy Productivity Plan, as detailed measures under the Plan are still at an early stage of implementation

the ongoing work of the Ministerial Forum on Vehicles, which is considering potential measures to improve the fuel efficiency of light vehicles

the Government’s commitment to the phase-down of hydrofluorocarbons (HFCs), the details of which are still being developed

proposed state renewable energy measures other processes, for example, the work of the COAG Energy Council.

Other metricsThe emissions intensity of the economy (Figure 6) has declined and is projected to fall by 50 per cent in 2030 when compared to 2005. Emissions per person are also expected to fall steadily by 32 per cent in 2030 when compared to 2005.

Figure 6 Emissions intensity of GDP relative to 2005 levels, 2005 to 2030


Sectoral trendsThis chapter sets out the emissions projections associated with each sector in the overall projections results. This breakdown into sectors is consistent with the international guidelines for reporting under UNFCCC. These sectors are described in Table 3 below:

Table 3 Projections sector coverage

Sector Coverage

Electricity Emissions from combustion of fuels to generate electricity on and off-gridIncludes emissions from electricity used to power electric vehicles

Direct combustion Emissions from combustion of fuels to generate steam, heat or pressure, other than electricity generation and transport

Transport Emissions from combustion of fuels for transport

Fugitives Emissions released during the extraction, processing and delivery of fossil fuels

Industrial processes and product use

Emissions from non-energy related industrial production and processesIncludes emissions from hydrofluorocarbons (used in refrigerants and air conditioning)

Agriculture Emissions from livestock and manure managementEmissions from rice cultivation, application of nitrogen to soils, and burning of agricultural residues

Waste Emissions from disposal of material to landfill and wastewater

Land use, land use change and forestry

Emissions from deforestation, reforestation, revegetation, forest management and savanna burningEmissions from cropland and grazing land management

ElectricityEmissions from electricity generation are the result of fuel combustion for the production of electricity both on-grid and off-grid. Electricity generation represents the largest share of emissions in the national greenhouse gas inventory.Emissions in the electricity sector have grown by 44 per cent since 1990 to be 187 Mt CO2-e in 2015. Emissions are projected to fall to 2020 to be 176 Mt CO2-e before growing, albeit more slowly than historic rates, to be 186 Mt CO2-e in 2030. Electricity emissions are not expected to reach the peak levels seen in 2009 due to a combination of relatively flat electricity demand and a gradual decrease in the emissions intensity of the electricity sector. The results presented below are inclusive of abatement from the Emissions Reduction Fund and the Renewable Energy Target. The results do not include the impact of the National Energy


Productivity Plan.


Figure 7 Electricity emissions, 1990 to 2030


Electricity emissions to 2020

Electricity emissions are projected to decrease by 6 per cent from 2015 levels to be 176 Mt CO2-e in 2020. Electricity demand, influenced by population growth and the economy, is a key driver of electricity emissions. Improvements in energy efficiency have led to forecasts of continued flat growth in electricity demand. This contributes to the projected decline in emissions to 2020. Increases in renewable generation to meet the Large-scale Renewable Energy Target of 33,000 GWh in 2020 is also expected to drive electricity emissions down to 2020. The Large-scale Renewable Energy Target is projected to encourage new builds of wind capacity, and wind generation will double to 2020 on 2015 levels. Small scale and utility scale solar capacity is also expected to grow, driven by declining costs of rooftop solar photo voltaic (PV) and funding from the Australian Renewable Energy Agency (ARENA) for large-scale solar projects. The closure of Hazelwood brown coal power station sees electricity generation that would otherwise have been met by Hazelwood being taken up by less emissions-intensive black coal generators. Demand-driven increases in the domestic gas price, principally from LNG facilities ramping up to full production, also boosts black coal generation to 2020. Black coal holds the largest share of the electricity supply mix at 45 per cent in 2020. Nevertheless, due to the Renewable Energy Target and the closure of Hazelwood, from 2016 to 2020 the electricity supply becomes less emissions intensive by 12 per cent.

Electricity emissions to 2030

After 2020 emissions are projected to grow steadily to reach 186 Mt CO2-e in 2030, roughly equivalent to 2015 levels. Electricity demand continues to grow slowly driving the flat growth in emissions from electricity generation. There are gradual changes to the electricity supply mix. By 2030 non-renewable generation from coal and gas accounts for 53 per cent and 19 per cent of the supply mix respectively. This is a decline of around 2 per cent in non-renewable generation when compared to the supply mix in 2020. Renewable generation makes up 26 per cent of the sent out electricity generation. More than 2,000 MW of coal capacity is assumed to retire after 2020. Oversupply in the electricity market sees this generation being taken up by existing coal and some gas. It is projected that there will be little change in emission levels as a result of these closures. Over the period from 2020 to 2030 there are small improvements in the emissions intensity of electricity, driven by Australia’s Emissions Projections 2016

growth in small scale renewable generation and increases in gas generation as new gas capacity is built from the mid-2020s onwards. The costs of small scale solar technology are expected to continue to fall. The installation of rooftop solar PV grows strongly in the residential and commercial sectors across the projections period. Rooftop solar PV generation almost doubles from 2020 to 2030. By 2030, electricity from total solar generation accounts for 8 per cent of the supply mix. Electricity sector emissions take into account electricity demand from electric vehicles. Some of the growth in electricity demand through the 2020s can be attributed to increased electric vehicle activity. By 2030, electric vehicles are expected to make up 15 per cent of new vehicle sales, consuming around 5,200 GWh of electricity.

Figure 8 Projected sent-out electricity generation by fuel mix, 2016 to 2030

Source: ACIL Allen 2016; Department of the Environment and Energy analysis

Change from previous projections3

Emissions from electricity are projected to be 12 Mt CO2-e lower in 2020. This is mostly due to flatter growth in electricity demand than assumed in Tracking to 2020. These projections assume electricity demand grows by 1.3 per cent a year to 2020 and 1.2 per cent from 2021 to 2030 compared to the previous projections which assumed an average growth rate of 1.9 per cent a year to 2020 and 1.3 per cent to 2030. These projections also take into account the announced closure of the Hazelwood power station in 2017.

Direct combustionEmissions from direct combustion are from the burning of fuels for energy used directly, in the form of heat, steam or pressure (excluding for electricity generation and transport). The direct combustion sector consists of six subsectors: energy, mining, manufacturing, buildings, primary industries and military. Energy used in mobile equipment in mining, manufacturing, construction, agriculture, forestry and fishing is also included in direct combustion.Emissions in the direct combustion sector have increased by 44 per cent since 1990 to be 95 Mt CO2-e in 2015. Emissions are projected to be 108 Mt CO2-e in 2020, an increase of 14 per cent above 2015 levels. This growth is expected to reduce from 2020, with emissions

3 Unless otherwise stated, all changes referenced under this subheading in the sector chapters are compared to the Tracking to 2020 projections, published in December 2015.


projected to be 110 Mt CO2-e in 2030, an increase of 16 per cent above 2015 levels.

Figure 9 Direct combustion emissions, 1990 to 2030


The majority of the growth to 2020 is driven by increased exports of Australian commodities, particularly energy resources. Australia’s export volumes are expected to increase, due to increased production volumes following a period of investment and Australia’s proximity to emerging economies such as China and India (Office of the Chief Economist 2016a).

Energy including LNG

Growth in direct combustion emissions from 2015 to 2020 is mostly driven by an expected increase in LNG production of nearly 200 per cent. The Australian LNG industry is expected to continue its rapid expansion until around 2019, with five new facilities expected to open over this period. In 2020, direct combustion emissions from LNG are expected to be 19 Mt CO2-e. After this initial period of growth no further facility expansions are projected, and LNG production is expected to remain stable. Direct combustion emissions associated with LNG will drop slightly from 2021 to 2030 as an increasing portion of electricity is used at the gas fields and processing plants. All other industries within the energy subsector are expected to remain relatively stable over the projections period.

Mining

Growth in direct combustion emissions over the period to 2020 is also driven by the mining subsector, where emissions are projected to increase by 14 per cent from 17 Mt CO2-e in 2015 to 19 Mt CO2-e in 2020. The mining subsector is broken down into coal mining and other mining. Direct combustion emissions from coal production are expected from 8 Mt CO2-e in 2015 to 9 Mt CO2-e in 2030. The increase in coal production is driven by a projected increase in coal exports, due to demand from developing economies, particularly from India.Other mining includes all mining other than coal and is primarily made up of emissions from iron, gold and copper ore mining. Emissions are projected to increase by 22 per cent to 2020 from 9 Mt CO2-e to 11 Mt CO2-e. Iron ore exports will increase due to a number of factors, including an increase in steel consumption in China, with imported iron ore (particularly from Australia) being a more competitive option compared to local iron ore (Office of the Chief Economist 2016a). After 2020, the growth in emissions from iron ore mining is offset by a projected decrease in gold ore


production to 2028 as a number of large gold mines reach the end of their lifespan. This drop in gold mining emissions has resulted in projected other mining emissions dropping by 2 per cent from 2020 to 2030.

Manufacturing

Manufacturing of goods and commodities is the largest subsector, contributing 36 Mt CO2-e or 38 per cent of direct combustion emissions in 2015. Most emissions result from the manufacture of basic nonferrous metals, such as alumina and nickel. Emissions are projected to fall by 4 per cent over the period to 2020, reaching 35 Mt CO2-e. All industry groups within manufacturing are projected to contribute to this drop, with production of some highly emissions-intensive products (such as clinker) moving offshore. The drop is also a result of the closure of the Gove alumina refinery and suspended operations at the Queensland Nickel refinery. After 2020, manufacturing emissions are projected to remain stable.

Primary industries

Emissions from primary industries, which includes fuel used for on-farm vehicles and machinery, is projected to grow steadily over the projections period in-line with the agriculture sector. Growth is slightly stronger over the short term as the industry recovers from the recent drought, growing from 6 Mt CO2-e in 2015 to 7 Mt CO2-e in 2020 and to 8 Mt CO2-e in 2030.

Buildings

Emissions from buildings and the construction industry are relatively flat over the projections period. The majority of emissions in the subsector are from residential buildings, where gas demand and associated emissions are projected to be stable. Demand for gas from commercial buildings, such as offices, schools and hospitals, shows slight growth from the mid-2020s onwards, broadly in-line with economic growth.

Change from previous projections

Emissions from direct combustion are projected to be 5 Mt CO2-e lower in 2020 compared to the December 2015 projections. This is due to:

the closure of the Queensland Nickel refinery in Townsville lower forecasts for LNG production due to lower spot prices lower forecasts for coal, copper ore and zinc ore mining.

TransportThe transport sector consists of emissions from the combustion of fuels for transportation. This includes road, domestic aviation, rail, domestic shipping, off-road recreational vehicle activity and gas pipeline transport. Road transport includes cars, light commercial vehicles, motorcycles, rigid trucks, articulated trucks and buses. Emissions from electricity used in electric vehicles and rail are accounted for under the electricity sector. Emissions from the production and refining of oil-based fuels, including biofuels, are included in the direct combustion sector.


Figure 10 Transport emissions, 1990 to 2030


Emissions in the transport sector have increased by 52 per cent since 1990 to be 93 Mt CO2-e in 2015. Emissions are projected to be 101 Mt CO2-e in 2020, an increase of 9 per cent above 2015 levels. Emissions are projected to be 111 Mt CO2-e in 2030, an increase of 19 per cent above 2015 levels. This growth in emissions is driven by increases in transport activity, due to population and economic growth.

Road sector

Road transport is the dominant source of transport emissions and accounted for 79 Mt CO2-e in 2015 or 85 per cent of total transport emissions. Emissions are projected to reach 85 Mt CO2-e in 2020, and increase to 92 Mt CO2-e in 2030. Over the period 2015 to 2020, emissions are expected to grow by an average of 1.6 per cent a year and thereafter at an average of 0.7 per cent a year. This decline in the emissions growth rate is primarily due to improvements in efficiency and technology. The road fuel mix is dominated by petrol and diesel accounting for 95 per cent of fuel consumption in road transport in 2015. The growing popularity of diesel vehicles manufactured in Europe and sold in Australia has seen an increase in diesel fuel. This trend is likely to continue in the short term and at the same time, oil prices are projected to average $83 a barrel (expressed in real 2016 dollars) over the projections period, resulting in growth in road transport emissions. From 2025 onwards, the growth rate for petrol and diesel fuel consumption reduces slightly as a result of the increased uptake of electric vehicles. Shifting trends towards electric vehicles are not expected to be driven by a scarcity of oil, but rather due to consumer demand for new technologies which will accelerate as economies of scale reduce the cost of technology over time. Despite continued growth, biofuel, ethanol and biodiesel are projected to remain only a small per cent of the road fuel consumed. Light duty vehicles (cars and light commercial vehicles) are the largest contributor of road transport emissions, accounting for 57 Mt CO2-e in 2015 or 72 per cent of road transport emissions. This relative share declines to 70 per cent in 2020 and 68 per cent in 2030, reflecting fuel efficiency improvements and uptake of electric vehicles, offsetting in part the continued growth in activity. Growth in emissions is expected to slow as new cars replace retired vehicles,


and efficiency of the entire car fleet will improve. It is assumed that electric vehicles sales will be 0.5 per cent of new sales in 2020 and a higher uptake is anticipated from 2020 onwards. By 2025, the price of electric vehicles is expected to decline reaching parity with traditional internal combustion engines vehicles. Electric vehicles are projected to make 15 per cent of new vehicle sales by 2030.The proportion of electric vehicles in the light vehicle fleet is projected to be 4 per cent by 2030, with hybrids and plug-in hybrid vehicles limited to a transitionary role, reflecting the assumed cost premium of these vehicles over electric vehicles. Further detail on electric vehicle assumptions can be found in Transport Sector Greenhouse Gas Emissions Projections 2016 (Reedman, Luke J. and Graham, Paul W. 2016).Heavy duty vehicles (articulated trucks and rigid trucks) were the second largest contributor to road transport emissions at 20 Mt CO2-e in 2015. Emissions are expected to grow by 37 per cent by 2030, reaching 27 Mt CO2-e due to increased activity and limited uptake of low emissions fuels. Heavy vehicle activity is expected to grow steadily due to increased requirements for consumer goods, resulting in an increase in volume for freight carried. Historically, the improvement in freight transport efficiency has been limited to articulated trucks only at a rate of approximately 0.6 per cent each year and this is forecast to continue (ABMARC 2016). Electric vehicles are projected to make up 5 per cent of the heavy vehicle fleet by 2030. In contrast, hybrids and plug-in hybrid vehicles are projected to be a negligible proportion of the heavy vehicle fleet. Emissions from buses and motorcycles were 2 Mt CO2-e and 0.3 Mt CO2-e in 2015 and are projected to remain the same in 2020 and 2030.

Non-road sector

Emissions from non-road transport were 14 Mt CO2-e in 2015, contributing 15 per cent of total transport emissions. Of this, 8 Mt CO2-e were from domestic aviation, 3 Mt CO2-e from rail transport, 2 Mt CO2-e from domestic shipping and 0.6 Mt CO2-e from other transport (off-road recreational vehicle activity and pipeline transport). Non-road transport emissions are projected to reach 16 Mt CO2-e in 2020 and 19 Mt CO2-e in 2030. Growth in emissions is largely driven by the domestic aviation subsector. Compared with 2015 levels, emissions from domestic aviation are projected to be 14 per cent higher in 2020 and 40 per cent higher in 2030. Strong growth in domestic passenger numbers since 2011 is expected to continue throughout the projections period. A combination of falling airfares due to increased competition, lower oil prices and an increasing passenger preference for air travel over road or rail for long distances are expected to drive this growth. Emissions from rail transport are projected to increase gradually from 3.7 Mt CO2-e in 2020 to 4.4 Mt CO2-e in 2030. This is driven by lower freight rail activity due to slower growth in iron ore production in Australia and an increase in road freight transport. Historically, passenger rail has increased at an average rate of 1.5 per cent per year (ABMARC 2016). Over the forecast period, it is anticipated that the rate of use of train travel will increase further, resulting in an increase in rail emissions. Emissions from domestic shipping and other transport are projected to remain flat throughout the projections period due to the slowdown in the refining and manufacturing industries in Australia.


Emissions from transport are projected to be 2 Mt CO2-e lower in 2020 compared to the December 2015 projections. This is largely due to a lower inventory starting point that sees a reduction in cars, rail, domestic shipping and other transportation emissions.


FugitivesFugitive emissions are released during the extraction, processing and delivery of fossil fuels. Fugitive emissions do not include emissions from fuel combusted to generate electricity, operate mining plant and equipment, or transport fossil fuels by road, rail or sea.Fugitive emissions have increased by 15 per cent since 1990 to be 41 Mt CO2-e in 2015 (Figure 11). Fugitive emissions in 2020 are projected to reach 45 Mt CO2-e, an increase of 8 per cent on 2015 levels. In 2030, emissions are projected to be 47 Mt CO2-e, an increase of 12 per cent on 2015 levels. These results include abatement from emissions reduction projects under the Emissions Reduction Fund.Over the projections period, fugitive emissions from LNG production are projected to more than double. Moderate growth is projected for fugitive emissions from coal and domestic gas, while fugitive emissions associated with oil are projected to decline.

Figure 11 Fugitive emissions, 1990 to 2030


Coal

Fugitive emissions from coal mines were 27 Mt CO2-e in 2015; 66 per cent of total fugitive emissions. Emissions are projected to be 28 Mt CO2-e in 2020, an increase of 1 per cent above 2015 levels. In 2030, emissions will be 29 Mt CO2-e, an increase of 6 per cent above 2015 levels. This trend is linked to increases in coal production to meet export demand, particularly from India, for steel making and electricity generation (Office of the Chief Economist 2016a). Estimates of coal production have been revised down in this projections update, in part due to energy related commitments made by countries at the 2015 Paris Climate Change Conference (IEA 2016).Coal production estimates are based are based on production estimates for individual mines from the Office of the Chief Economist and AME Group and growth rates from the International Energy Agency’s World Energy Outlook 2016. Compared with 2015 levels, Australia’s coal production is projected to be 1 per cent lower in 2020 and 3 per cent higher in 2030. In the period to 2020, emissions growth is projected to be higher than production growth because of an increase in underground coal mining and emissions from abandoned coal mines.Fugitive emissions from individual coal mines are dependent on the amount and type of gas in the coal resource. On average, Australian underground coal mines have a fugitive emissions intensity Australia’s Emissions Projections 2016

more than 10 times higher than surface mines. Currently around 20 per cent of Australia’s coal production is from underground mines. The proportion of coal from underground mines will increase, as a number of prospective underground coal mines are planned to commence production after 2020.Emissions from coal mines continue to be estimated after the mine has been decommissioned. Emissions decline exponentially over time based on historical emissions, mine size and water inflow. Several gassy coal mines are expected to close from 2015 to 2019, resulting in a temporary spike in emissions in 2020.

Natural gas and oil

Fugitive emissions from natural gas and oil are estimated to be 14 Mt CO2-e in 2015; 34 per cent of total fugitive emissions. Natural gas and oil fugitive emissions are projected to increase to 17 Mt CO2-e in 2020, an increase of 23 per cent above 2015 levels. In 2030, emissions are projected to be 18 Mt CO2-e, an increase of 25 per cent above 2015 levels. Most of the increase is due to the rapid expansion of Australia’s LNG industry. Australia is now the world’s second largest LNG exporter, and by 2020 will become the largest (Office of the Chief Economist 2015). Australia’s LNG production will supply increased demand in Asian markets, in particular from China. China’s imports of LNG are projected to increase at an average annual rate of 17 per cent to 2021 (Office of the Chief Economist, 2016a). Fugitive emissions from LNG were 4 Mt CO2-e in 2015. In 2020 they are projected to double to 8 Mt CO2-e, as new LNG plants ramp-up to full production. Fugitive emissions from LNG are highly dependent on the carbon dioxide content of the raw gas, which varies between projects and gas fields. The carbon dioxide content of coal seam gas fields that supply the Queensland LNG plants is generally much lower than the conventional offshore gas fields in Western Australia and the Northern Territory that supply Australia’s remaining LNG capacity. Fugitive emissions at the Gorgon plant will be lower with carbon capture and storage, which is projected to commence in the second half of calendar year 2017.Prospects for new LNG capacity in Australia are expected to be limited, other than projects already committed, and capacity is projected to remain unchanged between 2020 and 2030. Global capacity is projected to grow by around 6 per cent a year to 2021 (Office of the Chief Economist 2016a). Strong competition from other countries and low oil and LNG spot prices are constraining the availability of funds for additional capital investment in Australia.Fugitive emissions from domestic gas are estimated to be 8 Mt CO2-e in 2015. The major domestic users of gas are the electricity generation, industry, residential and commercial sectors. In 2020, emissions from domestic gas are projected to remain at 8 Mt CO2-e, as increases in gas prices and additional renewable energy capacity reduce the demand for gas fired electricity generation. Emissions are projected to increase to 9 Mt CO2-e in 2030.Fugitive emissions from oil production and refining were 2 Mt CO2-e in 2015. Over the projections period, emissions are projected to decrease to 1 Mt CO2-e in 2020 and 2030 due to lower forecasts for crude oil production.


Fugitive emissions from coal are projected to be 1 Mt CO2-e lower in 2020 compared with the December 2015 projections. The recalculation is the result of a reduction in emissions from underground and open cut coal mines.Fugitive emissions from natural gas and oil are projected to be relatively unchanged in 2020 (an increase of less than 1 Mt CO2-e compared to the December 2015 projections).


Industrial processes and product useThe industrial processes and product use sector includes emissions from non-energy related production processes. Table 4 below lists the subsectors that comprise the industrial processes and product use sector and the main production processes that drive emissions from these subsectors.

Table 4 Production processes in the industrial process and product use sector

Subsector Main production processes

Metal industry Iron and steel, and aluminium production

Chemical industry Ammonia, nitric acid and titanium dioxide production

Mineral industry Clinker and lime production

Product uses as substitutes for ozone depleting substances

HFCs used in refrigeration and air conditioning equipment, foams, fire protection and aerosols

Non-energy products from fuel and solvent use

Combustion of lubricant oils not used for fuel

Other production Carbon dioxide generated in food production

Other product manufacture and use Sulphur hexafluoride used in electrical switchgear

Emissions from nitrogen trifluoride (NF3) are negligible in Australia and, in accordance with reporting guidelines, are not estimated.Industrial processes and product use emissions were 33 Mt CO2-e in 2015, a 27 per cent increase above 1990 levels (Figure 12). Emissions are projected to be 35 Mt CO2-e in 2020, an increase of 6 per cent above 2015 levels. In 2030, emissions will be 36 Mt CO2-e, an increase of 10 per cent above 2015 levels.


Figure 12 Industrial processes and product use emissions, 1990 to 2030


Product uses as substitutes for Ozone Depleting Substances

The increase in industrial processes and product use emissions is primarily due to the increasing replacement of ozone depleting substances (ODS) in refrigeration and air conditioning equipment, which leak gases gradually over their lifetime, with hydrofluorocarbons (HFCs). However, this growth is projected to slow by 2020 as the replacement of ODS with HFCs nears completion. This estimate does not account for the recently announced phase down of HFCs, which will reduce HFC emissions by 85 per cent by 2036. The phase-down will be considered in future projections, once detailed policy design is finalised.

Metal industry

Emissions from the metal industry are projected to decline over the period to 2020 before stabilising over the 2020 to 2030 period. This is driven by a projected decline in the production of iron and steel, and flat aluminium production in the medium term. Production from these subsectors has been affected by competition from low-cost producing countries, and low output prices resulting from excess global production capacity (Office of the Chief Economist 2016a).

Mineral industry

Emissions from the mineral industry are also expected to decline over the period to 2020 before recovering later in the period to 2030 as increases in emissions from lime production offset the projected decline in emissions from clinker production. A number of cement facilities have recently phased out or ceased clinker production in favour of importing clinker from low-cost international suppliers (IBISWorld 2016). Emissions from lime production are projected to grow, albeit slowly. Lime production has been supported by demand from the agricultural sector, but is constrained by downward trends in iron and steel, glass and paper manufacturing (IBISWorld 2016).

Chemical industry

Emissions from the chemical industry are projected to grow between 2015 and 2030, supported by demand for ammonium nitrate (produced using ammonia and nitric acid) from the mining industry. While nitric acid production is projected to grow over the period, growth is somewhat limited by capacity constraints at current facilities. One new nitric acid facility is expected to


commence over the projections period. However, Orica has announced that its proposed Kooragang Island development, which includes expanded nitric acid capacity, would not proceed due to current market conditions (Orica 2015). Ammonia production is projected to remain flat, as natural gas, a feedstock in producing ammonia, increases in price. Increases in domestic demand for ammonia are expected to be met by imports.Emissions from titanium dioxide and synthetic rutile are also projected to grow over the projections period, supported by expanded capacity at Cristal Australia’s Kemerton titanium dioxide facility.

Other subsectors

Emissions from the remaining subsectors: other product manufacture and use; non-energy products from fuels and solvents; and other production, constituted less than 2 per cent of industrial processes and product use emissions in 2015. Emissions were 0.5 Mt CO2-e in 2015, a decrease of 13 per cent below 2000 levels. Emissions are projected to increase to 0.6 Mt CO2-e in 2020 and 2030.


Industrial processes and product use emissions are projected to be 1 Mt CO2-e higher in 2020 compared to the December 2015 projections. This is predominantly due to an update of projected emissions for product uses as substitutes for ozone depleting substances, including updated estimates of bulk HFC imports.

AgricultureThe agriculture sector includes emissions from enteric fermentation (the digestive process of some animals including cattle and sheep), manure management, rice cultivation, agricultural soils and field burning of agricultural residues. It does not include emissions from electricity use or fuel combustion from operating equipment, which are included in the electricity and direct combustion sectors. Most agriculture emissions are from methane and nitrous oxide rather than carbon dioxide. With the exception of carbon dioxide from the application of lime and urea, carbon dioxide emissions from agriculture are not counted because they are considered part of the natural carbon cycle. Prescribed burning of savannas was previously reported in the agriculture sector, but is now accounted for in the land use, land use change and forestry sector.Agriculture emissions have decreased by 13 per cent since 1990 to be 70 Mt CO2-e in 2015. Emissions have typically been highly variable. Periods of low rainfall, from which there was some relief in 2005 and 2011, have caused reductions in agricultural activity and therefore emissions. After taking into account abatement from the Emissions Reduction Fund, emissions from agriculture are projected to be 73 Mt CO2-e in 2020, a 5 per cent increase on 2015 levels. Emissions are projected to be 78 Mt CO2-e in 2030, which is a 12 per cent increase on 2015.


Figure 13 Agriculture emissions, 1990 to 2030


Most agriculture emissions come from enteric fermentation and manure management associated with livestock production. Approximately 80 per cent of agriculture emissions in 2015 came from beef cattle (48 per cent), sheep (19 per cent), and dairy cattle (12 per cent). As a result, any variation in agricultural livestock production, particularly beef and lamb, has a major effect on emissions in the sector.

Beef cattle

Beef cattle numbers have grown steadily since 1990 until the recent drought which saw numbers of grazing beef cattle drop steeply from 2014. As seasonal conditions return to normal, a significant rebuilding of stock is expected from 2016. Emissions from grazing beef cattle (mostly from enteric fermentation) are projected to grow by 6 per cent from 31 Mt CO2-e in 2015 to 33 Mt CO2-e in 2020. For the remainder of the projections period growth continues as the expected carrying capacity of pastures improves, particularly in northern Australia. Grazing beef cattle emissions are projected to grow a further 7 per cent over this time to 36 Mt CO2-e in 2030. Grain fed beef cattle numbers are expected to grow more strongly than grazing beef due to the subsector being less susceptible to drought and some producers switching to grain feeding methods over drought years. Emissions from grain fed beef are projected to grow 18 per cent from 2 Mt CO2-e in 2015 to 3 Mt CO2-e in 2020, and a further 30 per cent to 4 Mt CO2-e in 2030.

Dairy

Emissions from the dairy industry are expected to remain at around 9 Mt CO2-e per year throughout the projections period. While the recent drop in farm gate milk prices has had an impact on the industry, future expected demand for Australian milk is expected to negate any impact on emissions.

Sheep

Restructuring of the sheep industry has seen a decline in sheep numbers and therefore emissions. This trend stabilised around 2010. As restocking following the end of the drought occurs, sheep numbers are expected to rise slightly over the projections period. Agriculture emissions from sheep (mostly from enteric fermentation) are expected to reflect these trends, with emissions


growing by 9 per cent to 14 Mt CO2-e over the projections period.

Pigs

Emissions from pigs, mostly from manure management, are minimal (less than 2 Mt CO2-e each year) but are projected to grow in line with increasing pig numbers. These projections include abatement from Emissions Reduction Fund piggery projects.

Crops

Crops contributed 7 per cent or 5 Mt CO2-e of total agriculture emissions in 2015 and are projected to increase by 6 per cent to 2020, and a further 12 per cent to 2030. Australian crop production is expected to increase steadily to 2030 as a result of growth in world population and incomes, and therefore global demand for Australian crops.


Emissions from agriculture are projected to be relatively unchanged in 2020 (around 1 Mt CO2-e compared to the December 2015 projections). While livestock activity is slightly higher in this projection, this growth is offset by revised lower emissions factors for livestock. The revisions to these emissions factors are the result of new research into the emissions intensity of livestock.

WasteThe waste sector covers emissions from the disposal of organic materials to landfill and wastewater emissions from domestic, commercial and industrial sources. Emissions are predominantly methane, generated from anaerobic decomposition of organic matter.Emissions in the waste sector have decreased by 39 per cent since 1990 to be 12 Mt CO2-e in 2015. Emissions are projected to be 10 Mt CO2-e in 2020, a decrease of 15 per cent below 2015 levels. Emissions are projected to be 11 Mt CO2-e in 2030, a decrease of 9 per cent below 2015 levels.

Figure 14 Waste emissions, 1990 to 2030


Solid waste

Over the modelling period to 2030 the decline in waste emissions is driven by expected Australia’s Emissions Projections 2016

abatement from solid waste facility projects under the Emissions Reduction Fund. Key drivers of solid waste emissions are methane capture rates and waste deposited in landfill, which are affected by population, per-capita waste generation and waste diversion.The solid waste to landfill subsector accounted for 75 per cent of waste emissions in 2015, or 9 Mt CO2-e. Emissions have declined since 1990 due to increased recycling and methane capture rates. This trend is expected to continue in the short term and emissions are projected to decline to 7 Mt CO2-e in 2020. Recycling is assumed to grow strongly through the early 2020s as states and territory governments strive to meet their published target levels for the diversion of solid waste from landfill, with growth slowing thereafter. Further detail on diversion rates for construction and demolition waste, and commercial and industrial waste can be found in Waste sector modelling and analysis (Hyder 2014).Projects under the Emissions Reduction Fund are expected to result in increased methane capture in the short term leading to lower emissions to 2020. Waste methods under the Emissions Reduction Fund provide an incentive to install new systems or upgrade an existing system that can avoid emissions by capturing and combusting the methane generated. At the end of the contract period, no further increase in methane capture is assumed as projects are not expected to expand under current policy arrangements. Compared to 2020 levels, emissions from solid waste to landfill are projected to be 4 per cent higher in 2030. Emissions associated with composting and incineration of solid waste constitute 1 per cent of waste emissions in 2015. Emissions are expected to remain low, with combined emissions around 0.3 Mt CO2-e a year throughout the projections.

Wastewater

Key drivers of wastewater emissions are population growth, growth in industrial production and methane capture rates. Wastewater emissions accounted for 24 per cent of waste emissions in 2015, or 2.9 Mt CO2-e. Emissions are projected to increase gradually from 3.0 Mt CO2-e in 2020 to 3.4 Mt CO2-e in 2030. This is due to population growth and increased industrial production outpacing improvements in methane capture from the Emissions Reduction Fund projects.


Waste emissions in 2020 are relatively unchanged. A small increase in emissions (less than 1 Mt CO2-e compared to the December 2015 projections) is predominantly due to lower abatement from waste projects under the Emissions Reduction Fund than previously modelled.

Land use, land use change and forestryUnlike other sectors, management actions in the land use, land use change and forestry (LULUCF) sector can generate both sources of greenhouse gas emissions and sinks that remove or sequester carbon dioxide from the atmosphere. Net emissions from management actions are heavily influenced by biological processes, so can be complex and challenging to estimate. The LULUCF sector projections are based on the UNFCCC inventory structure as described in Australia’s National Inventory Report 2014 (DoEE, 2016a). The major categories used include:

forest land, including forest land remaining forest and land converted to forest (e.g. harvest and regeneration of native forests and establishment and harvest of plantations)

forest land conversions (to cropland and grassland—i.e. permanent change in land use to agriculture and grazing)

cropland remaining cropland (i.e. woody horticulture and changes in soil carbon under herbaceous crops) and


grassland remaining grassland (e.g. changes in soil carbon through pastoral activities, fire management in savanna rangelands and changes in shrubby vegetation extent).

Figure 15 shows LULUCF net emissions. The most influential source of emissions, forest conversion (light blue), has been separated from the other land sector categories (grouped together as dark blue). The latter group covers the establishment and ongoing management of forests and grazing land with a minor contribution from cropland. Together, this group represents a significant carbon sink across the projections period.

Figure 15 Land use, land-use change and forestry emissions, 1990 to 2030


Australia’s historical net LULUCF emissions have declined by 70.6 Mt CO2-e from 2000 levels to an estimated net sink of -4.0 Mt CO2-e in 2015. This decline reflects a substantial reduction in emissions from forest clearing in recent years, along with higher net removals of carbon from the atmosphere—lower recent rates of harvesting have meant that regrowth of forests and established plantations has outweighed harvesting-related emissions. Post-drought net gains in sparse woody vegetation have also contributed to higher removals from the LULUCF sector in recent years. Annual emissions are projected to rise by 14.8 Mt CO2-e to 10.7 Mt CO2-e over the period to 2020, driven mainly by an expected gradual return to 2010 levels of forest clearing to support pastures for grazing as the national cattle herd rebuilds over time. This is expected to occur after a recent reduction in numbers reflecting drought and market conditions (see the agriculture chapter for more details). A projected gradual rise in net emissions from changes in sparse woody vegetation reflects movement towards long-term average outcomes.

Emissions to 2030

Overall emissions are projected to stabilise, rising by 2.5 Mt CO2-e from 2020 to 13.2 Mt CO2-e in 2030. The main influencing factors are:

The rate of annual forest conversions post-2020 is projected to remain stable, based on modelling that includes the forecast farmers’ terms of trade. A slight decline in net emissions over this period is driven by the assumption that a high proportion of these conversions will continue to be re-clearing of young, less biomass-intensive, regrowth forest.


Net emissions from changes in shrubby vegetation extent are projected to slowly increase over the next decade, stabilising at longer-term average levels by 2030.

A gradual increase in annual post-2020 wood harvest volumes for softwood and hardwood plantations to 2030 is forecast, based on ABARES (2015). ABARES also forecasts continued low harvesting from native forests together with a flat trend in plantation establishment.

Variations around the long term flat trend after 2020 reflects variability in abatement delivery profiles under Emissions Reduction Fund contracts as well as lagged effects such as management of existing timber plantations (e.g. continuation of standard thinning and pruning cycles) and vegetation recovery after biomass burning.

Changes to models and data for 2016 projections

While the inventory-based activity data collection and emissions modelling methods underpinning the current projections are essentially the same as those for the previous report, some models and activity data have been updated and extended for the latest National Inventory Report, released in August 2016. These changes have mainly lowered the short to medium term projections, with some residual effects persisting to 2030. These updates include:

Lower than anticipated levels of forest clearance observed in compiling the 2014 National Inventory Report. As a result, a gradual and more moderate return, to 2010 levels by 2020, is projected. The longer term projection is for net emissions to return to trend based on the projected farmers’ terms of trade.

Reclassification of emissions relating to biomass burning on savanna rangelands from Agriculture to LULUCF. These emissions have been below historical levels in recent years, but are projected to trend back towards historical averages over the longer term.

Extension of geospatial monitoring of gains and losses in sparse (sub-forest) woody vegetation to encompass the whole country. While generally balanced from 1990 to 2005, a net area gain of up to 2 million hectares has emerged in the post-drought period. Net emissions are projected to gradually revert to historical average levels after 2025.

Updated data on Emission Reduction Fund abatement. Information was only available for the first two auctions for previous projections.

A provision for the impact of recent changes to laws governing the clearance of vegetation in New South Wales.


Sensitivity AnalysesIt is not possible to predict future trends in emissions with complete certainty. The 2016 projections include sensitivities to assess how Australia’s emissions are impacted by different assumptions.

Figure 16 Sensitivity analyses compared to baseline projections, 1990 to 2030


Note: The historical emissions from 1990 to 2015 have been revised since the release of Australia’s emissions projections 2014–15, published in March 2015. It is important to note that year to year figures are different in these publications and not directly comparable as the underlying assumptions, accounting systems and policy measures differ.

Lower emissions sensitivityThe lower emissions sensitivity looks at an increased uptake and deployment of technology in the electricity and transport sectors and lower global demand for Australia’s LNG and coal exports than is assumed in the baseline. At a maximum emissions are projected to be down to 550 Mt CO2-e in 2020, 1 per cent lower than the baseline and down to 571 Mt CO2-e in 2030, 4 per cent lower than the baseline (Table 5). Cumulative emissions are projected to be lower than the baseline by up to 42 Mt CO2-e from 2017–2020 and by up to 148 Mt CO2-e from 2021–2030.

Table 5 Lower emissions sensitivity—emissions compared with the baseline in 2020 and 2030 (Mt CO2-e)

ElectricityDirect Combustion Fugitives Transport

Total Emissions

2020 Baseline 176 108 45 101 559

Lower emissions sensitivity

173 105 44 100 550

2030 Baseline 186 110 47 111 592

Lower emissions 182 105 41 103 571


sensitivityNote: The lower emissions sensitivity has no impact on emissions in the Agriculture, IPPU, LULUCF or Waste sectors. Figures show maximum

variation for the lower emissions sensitivity.

Higher rate of technology change

A combination of improved energy and vehicle efficiency, aggressive declines in technology costs and gradual decarbonisation of electricity generation as consumers choose to invest in small scale solar PV and storage lead to lower emissions than in the baseline. Under this sensitivity, electricity demand is higher than assumed in the baseline. Electricity consumption from increased electric vehicles grows strongly and more than offsets the expected energy efficiency savings in this sensitivity. Electricity consumption from electric vehicles is expected to be up to almost 11,000 GWh by 2030, an increase of more than 100 per cent relative to the baseline. This sensitivity assumes the costs of wind and solar technology will fall faster than historically projected. Capital costs of wind and solar are assumed to decline up to twice as fast as in the baseline. These aggressive cost declines mean large scale solar technology is competitive without policy support by the end of 2030, with up to 15 per cent more solar generation and 4 per cent more wind generation than compared to the baseline in 2030.Energy storage technologies help manage supply-side variability at the grid level and allow households and businesses to store electricity when prices are lowest. Lithium-ion batteries are emerging as an increasingly economic option to better manage the supply of renewable energy. Like solar and wind, the cost of battery energy storage systems have seen huge falls due to technological innovation, improvement in manufacturing processes and growing competitiveness (Global Data 2016). Under this sensitivity the uptake of battery storage is up to 30 per cent higher than assumed in the baseline. Transport activity remains largely unchanged from the baseline. However, a combination of vehicle efficiency improvements and the cost competitiveness of electric vehicles sees reductions in emissions when compared to the baseline projections. Electric vehicles are assumed to become cost competitive with internal combustion engines from 2025 and reach up to 30 per cent of new vehicle sales by 2030. The share of electric vehicles in the light vehicle fleet remains relatively small at up to 11 per cent and heavy vehicle fleet at up to 6 per cent in 2030. New light vehicle efficiency is expected to improve at 4 per cent a year from 2015 to 2030, compared with 2.5 per cent a year under the baseline. Truck efficiency is expected to improve at a faster rate than the baseline from 2015 to 2030, due to the higher uptake and use of autonomous and platooning4 technologies (ABMARC 2016).

Lower energy exports

Emissions associated with the production of Australia’s energy exports are a large contributor to Australia’s domestic emissions. Australia’s production of coal and LNG are assumed to be lower in this sensitivity due to lower global demand for Australian exports. This may occur due to increased emission reduction commitments by other countries, lower global economic growth, lower demand for energy due to efficiency improvements and competition from other countries and other fuels, including

4 Platooning is a technique where trucks travel closely one behind the other in a “platoon”. The vehicles are less than a few metres apart, and various autonomous vehicle technologies are used maintain speed and separation from other vehicles safely.


renewables. In the absence of widespread adoption of carbon capture and storage, thermal coal is most affected by stronger emission reduction commitments by other countries and faces competition in the electricity generation sector from a range of other fuels and technologies.Under the lower emissions sensitivity thermal coal production is projected to be up to 28 per cent lower than the baseline in 2030. Thermal coal is Australia’s fifth largest resource and energy commodity export by value, used predominantly for electricity generation. An increase in other countries emission reduction actions beyond what was pledged at the 2015 Paris climate conference would likely reduce global demand for thermal coal.5

In 2030 coking coal production is projected to be up to 7 per cent lower in the lower emissions sensitivity compared with the baseline. Coking coal is Australia’s second largest resource and energy commodity export by value and is used for iron and steel production. An increase in international emission reduction actions is projected to have a smaller impact on coking coal, compared with thermal coal (IEA 2016). Under the lower emissions sensitivity, LNG production is projected to be up to 15 per cent lower than the baseline in 2030. LNG is Australia’s third largest resource and energy commodity export by value. LNG facilities currently operating or under construction are projected to continue producing, but at lower levels than the baseline.

Higher emissions sensitivity The higher emissions sensitivity shows how Australia’s emissions might be impacted by higher global demand for Australia’s coal and LNG. Australia’s emissions in 2020 are projected to be up to 565 Mt CO2-e or 1 per cent higher than the baseline and up to 616 Mt CO2-e in 2030, 4 per cent higher than the baseline. Cumulative emissions are projected to be higher than the baseline by up to 13 Mt CO2-e from 2017–2020 and by up to 146 Mt CO2-e from 2021–2030.The higher emissions sensitivity results in higher emissions from the direct combustion, fugitives and electricity sectors (Table 6). Australia’s production of coal and LNG are higher in this sensitivity due to higher global demand for Australian exports. This may result from countries not expanding on their current policies to reduce emissions in the electricity sector, higher global economic growth, slower than expected improvements in energy efficiency, greater competitiveness for Australian exports, higher than expected global uptake of carbon capture and storage and slower than expected price declines for renewables.

Table 6 Higher emissions sensitivity—emissions compared with the baseline in 2020 and 2030 (Mt CO2-e)

Electricity

Direct Combustion Fugitives

Total Emissions

2020 Baseline 176 108 45 559

Higher emissions sensitivity 177 110 47 565

5 Energy related commitments made by countries in their Intended Nationally Determined Contributions (INDCs) are included in the baseline.


2030 Baseline 186 110 47 592

Higher emissions sensitivity 191 118 56 616Note: The higher emissions sensitivity has no impact on emissions in the Agriculture, IPPU, LULUCF, Transport or Waste sectors. Figures show

maximum variation for the higher emissions sensitivity.

Under the higher emissions sensitivity, thermal coal production is projected to be up to 37 per cent higher than the baseline in 2030. In 2030, coking coal production is projected to be up to 3 per cent higher in the higher emissions sensitivity compared with the baseline. Under the higher emissions sensitivity, LNG production is projected to be up to 38 per cent higher than the baseline in 2030. LNG facilities currently operating or under construction are projected to produce at levels higher than the baseline. In addition, high prices would incentivise additional new capacity from expansions and new facilities which might start production from 2025.


Appendix A—MethodologyAccounting approach

The projections are prepared at the sectoral level consistent with international guidelines adopted by the United Nations Framework Convention on Climate Change (UNFCCC). This includes projecting Australia’s emissions for the Kyoto Protocol greenhouse gases. These are expressed in terms of carbon dioxide equivalent (CO2-e) using the 100 year global warming potentials contained in the Intergovernmental Panel on Climate Change’s Fourth Assessment Report (IPCC 2007). As greenhouse gases vary in their radiative activity and in their atmospheric residence time, converting emissions into CO2-e allows the aggregate effect of emissions of the various gases to be considered.Australia’s emissions projections are estimated on a UNFCCC accounting basis consistent with Australia’s accounting approach to the 2030 target (DFAT 2015). Australia’s National Greenhouse Gas Inventory is prepared on both a UNFCCC and Kyoto Protocol accounting basis. The difference between the two accounting frameworks is the treatment of emissions sources and sinks from the land use, land use change and forestry sector. UNFCCC provisions are underpinned by a comprehensive approach to emissions accounting and require the inclusion of all sources and sinks where there is adequate data, while Kyoto provisions require a more limited set of sources and sinks from land use change and forestry activities. Details around the land classification system of the land use, land use change and forestry sector under the two accounting frameworks can be found at Appendix C. There is a small difference in the level of emissions between the two approaches. For example, Australia’s net emissions in 2014 are lower under the UNFCCC accounting framework by 0.2 Mt CO2-e or 0.04 per cent of Australia’s total emissions. Unless stated otherwise, all years in this report align with the definition of reporting year used in the National Greenhouse Gas Inventory. Reporting years for all sectors except Land Use, Land Use Change and Forestry are reported for financial years as key data sources are published on this basis. For instance, ‘2030’ refers to financial year 2029–30. The estimates of emissions and removals in the land use, land use change and forestry sector, where inventory-specific monitoring systems have been put in place, are estimated on a calendar year basis.

Data sources

The projections are developed using a combination of top-down and bottom-up modelling prepared by the Department’s analysts and external consultants. The preparation of the projections is based on the following data sources:

historical emissions data from National Inventory Report 2014 (revised), released in August 2016, and Quarterly Update of Australia’s National Greenhouse Gas Inventory, March Quarter 20166

macroeconomic assumptions of gross domestic product, exchange rates, labour costs and population growth consistent with the Australian Government’s 2016–17 Budget and

commodity forecasts and activity levels informed by a number of publications and data from government agencies and other bodies, including:

o the Department of Industry, Innovation and Scienceo the Australian Bureau of Agricultural and Resource Economics and Sciences o the Bureau of Infrastructure, Transport and Regional Economics

6 Forthcoming.


o the Australian Energy Market Operator.The Department applies consistent assumptions across all sectors of these projections. Further information on data sources, including key assumptions specific to each sector, is available in Appendix B.Every effort is made to take account of available information and analysis. However, there are inevitably sources that become available too close to the release of the projections to allow for detailed integration into the projections.


What is the difference between emissions projections and emissions forecasts?

The Department regularly prepares emissions projections using the latest data including production and activity levels, commodity prices and macroeconomic assumptions. The Department makes reasonable assumptions about this data into the future based on the advice of other government agencies and external consultants. These include macroeconomic forecasts by the Australian Treasury; activity forecasts by other government agencies such as the Australian Bureau of Agricultural and Resource Economics and Sciences and the Department of Industry, Innovation and Science; forecasts by other public bodies such as the Australian Energy Market Operator; and announced investment intentions by businesses.

The projections are modelled taking this data into account and indicate what Australia’s future emissions could be if the assumptions that underpin the projections continue to occur. For example, the projections presume that assumptions around the current rates of economic and population growth, the take up of certain technologies and the impacts of current government policies will remain valid. The projections do not attempt to account for the inevitable, but as yet unknown, changes that will occur in technology, energy demand and supply and the international and domestic economy.

In contrast, emissions forecasts speculate on the expectations or predictions of what will happen in the future and thus what future emissions will be. In a forecast the assumptions represent expectations of actual future events or changes. For example, this could mean forecasting emissions based on plausible predictions of how technology may evolve, how consumers and businesses will react to these technological changes and subsequently what impacts this would have on emissions. Alternatively this could mean forecasting emissions based on plausible expectations about restructures in the Australian economy. Often a number of different scenarios that reflect different forecast assumptions are undertaken at the same time.

Both projections and forecasts are inherently uncertain, involving judgements about the growth path of future global and domestic economies, policies and measures, technological innovation and human behaviour. This uncertainty increases the further into the future emissions are projected (or forecast). Recognising this, the Department often prepares sensitivity analyses to accompany the baseline projections to forecast plausible upper and lower bounds for the projections.

The distinction between forecasts and projections is present in the Treasury’s economic estimates underlying Australian Government fiscal projections, which divide the forecast horizon into two distinct periods: the near-term forecast period which covers the first two years beyond the current financial year; and the longer-term projection period which includes the last two years of the forward estimates, and up to 36 more years for intergenerational analysis. The economic estimates over the forecast period are based on a range of short-run forecasting methodologies, while those over the projection period are based on medium- to long-run rules. (Source: Treasury’s medium-term economic projection methodology, Working Paper 2014–02, Release date: 13 May 2014).

Consideration of policies

The projections present a baseline projection that is developed on the basis of current policies and measures. They also present sensitivity analyses developed on the basis of changes to key assumptions in Australia’s energy export or technology uptake. Both the baseline and sensitivities take account of a Large-scale Renewable Energy Target of 33,000 GWh by 2020, and abatement from the Emissions Reductions Fund7. They do not take account of estimates of abatement from policies and initiatives that are still undergoing detailed development. These include:

the National Energy Productivity Plan, which is being progressed in collaboration with the states and territories through the COAG Energy Council

measures to improve the fuel efficiency of Australia’s vehicle fleet, currently being progressed by the Ministerial Forum on Vehicle Emissions

the planned phase-down of hydrofluorocarbons

7 This estimate includes the results of the first four auctions and projected abatement from future auctions of the $2.55b that has not yet been committed.


proposed renewable energy targets in Queensland, Victoria and South Australia policy changes that might result from the Australian Government’s 2017 review of climate

change policies, or the COAG Energy Council’s Independent Review to develop a Blueprint for Energy Security in the National Electricity Market.

Methodology for calculating Australia’s cumulative abatement task to 2020

The Australian Government is committed to reducing emissions to 5 per cent below 2000 levels by 2020, equivalent to 12 per cent below 2005 levels. This target has been communicated to the UNFCCC as a pledge under the Cancun Agreement.Australia’s 2020 target is accounted against a carbon budget from 2013 to 2020. Australia’s carbon budget is calculated based on a linear decrease from 2010 to 2020, beginning from the mid-point of the Kyoto Protocol first commitment period (CP1, 2008 to 2012) target level and ending at 5 per cent below 2000 levels in 2020. The cumulative abatement task is defined as the difference in cumulative emissions over the Kyoto Protocol second commitment period (CP2, 2013 to 2020) and the target trajectory. This approach to defining the carbon budget has been used consistently since 2012 (DFAT 2012) and is based on guidance published by the UNFCCC Secretariat developed for the Cancun Agreement (UNFCCC 2011).

Methodology for calculating Australia’s abatement task to 2030

The Australian Government is committed to reducing emissions by 26–28 per cent below 2005 levels by 2030, in its Nationally Determined Contribution submitted to the UNFCCC on 11 August 2015.International rules and guidance on how to define a carbon budget associated with a target under the Paris Agreement have yet to be developed. For this report, the calculation of Australia’s 2030 abatement task is based on the existing guidance developed in the context of the Cancun Agreement (UNFCCC 2011).

Institutional arrangements and quality assurance

The projections are prepared by the Department of the Environment and Energy using the best available data and independent expertise to analyse Australia’s future emissions abatement task. The Department engages with a technical working group comprising of representatives from Commonwealth agencies to test the methodologies, assumptions and projections results. Australia makes formal submissions on its emissions projections to the United Nations and these are subject to UN expert review.


Appendix B—Sectoral assumptions

ElectricityThe electricity generation emissions projections have been prepared based on modelling and research commissioned by the Department of the Environment and Energy and undertaken by ACIL Allen (2016). The results have been scaled to align with Australia’s National Greenhouse Gas Inventory March 2016 Quarterly update (DoEE 2016b). Abatement from the Emissions Reduction Fund has been adjusted separately.The Department has sourced data from the Australia Energy Market Operator (AEMO 2016) and the National Greenhouse and Energy Reporting scheme to inform electricity demand projections for each of the major electricity grids and large off-grid users. The modelling of the electricity emissions projections simulates the electricity market across Australia taking into account the bidding behaviours of energy market incumbents, potential new entrants as well as technology costs, assumptions around the uptake of embedded generation and the impacts of policy.

Direct combustionEmissions were projected by economic sector using Commonwealth or third party activity information including the National Greenhouse and Energy Reporting data, Office of the Chief Economist commodity forecasts, AME Group’s industry analysis, IBISWorld industry reports and Australian Energy Market Operator’s gas demand forecast (AEMO 2015). Activity forecasts used for the direct combustion sector are consistent with those used in other sectors.For the 2016 projection, a deteriorating emissions intensity trend of 1 per cent a year (compounding) was applied to the mining subsector projection. This is to account for the increase in fuel use per unit of production as ore mined tends to become lower grade over time, due to higher grade ore being mined first.

Transport The Department commissioned the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and ABMARC to undertake the modelling of transport emissions for the 2016 projections. The results have been scaled to align with Australia’s National Greenhouse Gas Inventory March 2016 Quarterly update (DoEE 2016b). The latest transport activity data provided by the Bureau of Infrastructure, Transport and Regional Economics was input into CSIRO’s energy sector model. Technological development and vehicle efficiency improvements trends were provided by ABMARC in consultation with the Department of Infrastructure and Regional Development. The oil price projections are based on the Office of the Chief Economist’s June 2016 Resources and Energy Quarterly (Office of the Chief Economist 2016b) and the U.S. Energy Information Administration’s International Energy Outlook 2016 released in May 2016 (EIA 2016).The modelling takes into account current policies and measures that apply to the transport sector. This includes the abatement estimates from the Emissions Reduction Fund. The recently announced review of fuel efficiency (CO2) measures for light vehicles is not included as this policy is still in its early stages of development.


Fugitives

Coal

Emissions from coal mining are projected for each mine based on projections of coal production and emissions intensity. Black coal production is sourced from the Office of the Chief Economist and AME Group. From 2022, production from potential new coal mines is scaled so that growth in Australia’s thermal and coking coal production is equal to growth rates from the International Energy Agency’s World Energy Outlook 2016. Brown coal production is estimated as part of the electricity sector modelling.Emissions intensity is sourced from company data reported under the National Greenhouse and Energy Reporting System, National Greenhouse Gas Inventory data and environmental impact statements.Emissions for abandoned coal mines are estimated for each closed mine in accordance with the method outlined in Australia’s National Inventory Report which takes account of:

mine closure history emissions at time of closure emission decay curves mine void size and mine water inflow rates.

The modelling includes abatement estimates from the Emissions Reduction Fund.

Oil and Gas

Emissions from LNG facilities are projected for each facility based on LNG production and the emissions intensity of production. LNG production estimates are sourced from Office of the Chief Economist, AME Group and Lewis Grey Advisory (2016). Emissions intensity estimates are sourced from the National Greenhouse and Energy Reporting System, environmental impact statements and expert advice.Fugitive emissions from oil and domestic gas consumption are based on historical National Greenhouse Gas Inventory intensities and the activity data listed below:

Domestic Gas Consumption—2015 National Gas Forecasting Report, AEMO and Gas Statement of Opportunities November 2015, Independent Market Operator.

Unaccounted for Gas Losses—2015 National Gas Forecasting Report, AEMO. High Pressure Gas Pipeline Length—Energy Supply Association of Australia (2015),

consultations with the Office of the Chief Economist and media reports. Oil Production—Australian Energy Projections to 2049–50, Office of the Chief Economist. Oil Refining—Resources and Energy Quarterly March 2016a, Office of the Chief Economist

and advice from the Office of the Chief Economist.

Industrial processes and product useCommodity production estimates were based on a range of sources, mainly from the Office of the Chief Economist, IBISWorld reports, AME Group’s metals analysis, and chemicals and minerals market analysis commissioned from Persistence Market Research. These sources were cross-checked against company statements about the time and scale of new project commencements and facility closures.The industrial processes and product use projections are produced from industry level modelling of


emissions growth in the activities that make up the sector. These projections do not incorporate the Australian Government’s recently announced HFC phase-down policy.New facilities and facility closures that are explicitly included in the industrial processes and product use sector are outlined in Tables 7 and 8 below.

Table 7 New facilities and expansions assumed to commence

Company and location Facility type

Yara Pilbara Nitrates, Burrup Peninsula Nitric acid

Cristal Australia, Kemerton Titanium dioxide

Table 8 Facilities assumed to close

Company and location Facility type

Adelaide Brighton, Munster Clinker

Boral, Maldon Clinker

Sibelco, Lilydale Lime

AgricultureThe 2016 agriculture projections have been updated based on the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES 2016) productivity forecasts to 2021. After 2021, activity forecasts are based on modelling completed by the Centre for International Economics in 2015. Emissions are calculated as the product of agricultural activity and the relevant emissions factor, and converted to carbon dioxide equivalent. Emissions factors are sourced from the National Greenhouse Gas Inventory, and are assumed to be constant over the projections period.

WasteThe assumptions for per person waste generation and waste diversion are based on the research by Hyder Consulting (Hyder 2014). The Projections use population forecasts that are consistent with the 2016–17 Budget (Australian Government 2016), and population forecasts consistent with Australian Bureau of Statistics modelling thereafter (ABS 2013). The modelling also includes abatement estimates from the Emissions Reduction Fund.

Land use, land use change and forestryThe Full Carbon Accounting Model (FullCAM) provides the modelling framework for estimating land sector emissions in the national inventory. FullCAM models the exchanges of carbon between the terrestrial biological system and the atmosphere in a full/closed cycle mass balance model which includes all biomass, litter and soil pools. The model uses data on climate, soils and management practices, as well as land use changes observed from satellite imagery to produce estimates of emissions and removals across the Australian landscape.Key assumptions include:

The forecast land clearing rates on forest lands converted to croplands and grasslands are assumed to return to historical levels before following the relationship between land clearing activity and the farmers’ terms of trade described in the Department of the


Environment and Energy’s National Inventory Report 2014 (Revised) (DoEE 2016a). For projections of net emissions from forest lands, log harvest forecasts were adopted from

the ‘business as usual’ scenario published in the Outlook Scenarios for Australia’s Forestry Sector: Key Drivers and Opportunities (ABARES 2015). The projections utilised the FullCAM modelling framework to estimate emissions, in conjunction with the harvested wood products model as described in section 2.1 of Australian Land Use, Land Use-Change and Forestry emissions projections to 2035 (DoE 2015b).

The projections include abatement from vegetation, soil carbon and savanna burning projects under the Emissions Reduction Fund.

For cropland and grassland emissions projections, management practices are assumed to remain unchanged over the projections period, and emissions to gradually return to long-run average conditions.


Appendix C—Land classification systems under Kyoto Protocol and UNFCCCAustralia’s projections for the land use, land use change and forestry (LULUCF) sector are based on projections models for the same land classifications and sub-categories that are used to estimate and report on Australia’s historical anthropogenic emissions each year in the National Greenhouse Gas Inventory. LULUCF in the National Greenhouse Gas Inventory is reported under two separate classification systems: one of these systems is used for reporting under the UNFCCC and a separate system is used for reporting under the Kyoto Protocol.The UNFCCC classification is relevant to the Government’s 2030 emissions reduction commitment under the Paris Agreement, and is the most comprehensive system with regard to coverage of land classification and emissions processes. The Kyoto Protocol classification system also remains relevant as the Australian Government is a party to the Kyoto Protocol and has inscribed an emission reduction commitment in the treaty amendments agreed for the second commitment period of the Kyoto Protocol, 2013–2020. The Government is also using classification systems from the Kyoto Protocol in the monitoring and reporting of its commitment to reduce emissions by 5 per cent below 2000 levels by 2020. In previous years, projections results have been reported on the basis of the Kyoto Protocol. However, reflecting the Government’s intention, as expressed in its INDC, to utilise UNFCCC reporting frameworks under the Paris agreement, the LULUCF projections in this document are based on the UNFCCC classification system.There are some essential differences between the two classification systems which can limit the extent to which projections under the two frameworks can be readily compared. However, they can be reconciled per Table 9 below, and the differences have become less significant over time as Australia has extended its coverage of land activities under the Kyoto Protocol. The UNFCCC system has a broader coverage than the Kyoto Protocol classification system, principally in relation to forests.

Table 9 Comparison of land classification systems used for emissions reporting

UNFCCC Kyoto Protocol

Forest land

Forest land—multiple use forests Forest Management

Forest land—pre-1990 plantations Forest Management

Forest land—private native forests Monitored for Forest Management activity

Forest land—conservation reserves Monitored for Forest Management activity

Forest land—other native forest Monitored for Forest Management activity

Land converted to forest

New plantations since 1990 Afforestation / Reforestation


UNFCCC Kyoto Protocol

Native regeneration since 1990—direct human induced

Afforestation / Reforestation

Cropland

Croplands—permanent Cropland management

Forest converted to crops Deforestation

Grassland, wetlands converted to crops Cropland management

Grassland

Grasslands—permanent Grazing land management

Forest converted to grass since 1990—direct human induced

Deforestation

Forest converted to grass—pre-1990 conversion—direct human induced

Grazing land management

Cropland, wetlands converted to grass Grazing land management

Settlements Revegetation

Wetlands Revegetation


Appendix D—Sensitivity Methodology

Lower emissions sensitivity The electricity component of this sensitivity is based on research and modelling commissioned by the Department and undertaken by ACIL Allen (2016). The cost declines of small and large-scale solar and wind technology have been doubled relative to the baseline assumptions. Energy efficiency assumptions are informed by the Australian Energy Market Operator’s National Electricity Forecast Report (AEMO 2016) with comparable adjustments also made to demand in the Western Australia Wholesale Electricity Market. Assumptions around the uptake of solar PV and batteries are informed by AEMO’s high uptake scenario in the National Electricity Market and the Wholesale Electricity Market. Further details can be found in Electricity emissions modelling for Australia’s emissions projections 2016 (ACIL Allen 2016). The transport component of this sensitivity is based on research and modelling commissioned by the Department and undertaken by ABMARC (2016). The lower emissions sensitivity takes into account a range of demographic and societal trends, the regulatory environment in Australia and overseas and the rapid uptake of technology that has an impact on transport emissions. Further details can be found in the Australian Transport Technology Forecast and Activity Report (ABMARC 2016).In 2015 Australia exported 90 per cent of its black coal production (DIIS 2016). In the lower emissions sensitivity the demand for Australian coal from 2022 is projected to be lower which may be a result of increased emission reduction commitments by other countries, lower global economic growth, lower demand for energy due to efficiency improvements and increased competition from other countries and other fuels, including renewables. The sensitivity contains a larger decline in thermal coal production, used for electricity generation compared with coking coal production which is used to make steel. Thermal coal is subject to greater competition from other electricity generation sources and would experience a larger impact from increased emission reduction actions in other countries (Table 10).LNG currently supplies around 9 per cent of the global demand for gas and is sensitive to changes in global demand for gas because LNG tends to be the highest cost source of gas due to the cost of liquefaction. Domestic and international pipelines tend to be lower cost although these sources are not available in all countries (Lewis Grey Advisory 2016). In this sensitivity LNG facilities currently operating or under construction are projected to produce at up to 15 per cent below the baseline. In addition, the sensitivity applies a one-year lag in the ramp-up to full production for LNG plants that are currently under construction.

Table 10 Lower emissions sensitivity and baseline production of coal and LNG in key years (Mt)

2015 2020 2025 2030

Thermal Coal Production (Run of Mine)

Baseline 317 322 323 334

Lower emissions sensitivity 317 322 266 239

Coking Coal Production (Run of Mine)


Baseline 243 246 251 260


LNG Production

Baseline 25 75 75 75


Notes: Lignite production is the same in the lower emissions sensitivity compared with baseline. Figures show the maximum variation associated with the sensitivity.

Electricity emissions for this sensitivity are calculated based on the change in coal and LNG production. An electricity intensity of black and brown coal production was calculated using historic coal production and energy data from the Australian Energy Update (Department of Industry, Innovation and Science 2016). Emissions were determined using an average emissions intensity of electricity demand in NSW and Queensland. This is because around 99 per cent of projected black coal production over the modelling period is expected to occur in these states.As outlined in Appendix B, the electricity intensity of LNG production is calculated based on historic data reported under the National Greenhouse and Energy Reporting scheme or proponent environmental impact statement documentation. These assumptions inform the calculation of electricity emissions from LNG production under this sensitivity. In addition, electricity emissions from the processing of LNG from projects in Queensland are based on data from the Australia Energy Market Operator from work undertaken by Lewis Grey Advisory (2016). Electricity use from gas extraction and processing has been adjusted in line with production and emissions are determined using the emissions intensity of Queensland electricity demand.

Higher emissions sensitivityFrom 2022 demand for Australian coal is projected to be higher than the baseline in this sensitivity. Potential drivers include:countries not expanding on their current policies to reduce emissions in the electricity sector,

higher global economic growth slower than expected improvements in energy efficiency higher than expected global uptake of carbon capture and storage and slower than expected price declines for renewables.

The higher emissions sensitivity contains a larger increase in thermal coal production which is combusted for electricity generation compared with coking coal production which is used to make steel (Table 11).In this sensitivity LNG facilities currently operating or under construction are projected to produce at up to 100 per cent of their nameplate capacity. In addition, high prices are expected to incentivise the development of a new LNG facility in Western Australia and capacity expansions in Western Australia and Queensland.Electricity emissions for this sensitivity are calculated according to the same assumptions as those in the lower emissions sensitivity.

Table 11 Higher emissions sensitivity and baseline production of coal and LNG in key years (Mt)

2015 2020 2025 2030


Thermal Coal Production (Run of Mine)

Baseline 317 322 323 334


Coking Coal Production (Run of Mine)

Baseline 243 246 251 260


LNG Production

Baseline 25 75 75 75


Notes: Lignite production is the same in the lower emissions sensitivity compared with baseline. Figures show the maximum variation associated with the sensitivity.


Appendix E—References ABARES 2015, Outlook scenarios for Australia’s forestry sector: key drivers and opportunities, Australian Bureau of Agricultural and Resource Economics, Canberra, ACT.ABARES 2016a, Agricultural commodities, March quarter 2016, Australian Bureau of Agricultural and Resource Economics, Canberra, ACT.ABARES 2016b, Agricultural commodities, June quarter 2016, Australian Bureau of Agricultural and Resource Economics, Canberra, ACT.ABARES 2016c, Agricultural commodities, September quarter 2016, Australian Bureau of Agricultural and Resource Economics, Canberra, ACT.ABMARC 2016, Australian Transport Technology Forecast and Activity Report, ABMARC, Woori Yallock, Victoria.ABS 2013, Population Projections [Series B], Australia, 2012 (base) to 2101 (cat. no. 3222.0), Australian Bureau of Statistics, Canberra, ACT.ACIL Allen 2016, Electricity emissions modelling for Australia’s emissions projections 2016, ACIL Allen consulting, Brisbane, QLD. AEMO 2015, National Gas Forecasting Report, Australian Energy Market Operator, available at: https://www.aemo.com.au/media/Files/Gas/Planning/Reports/NGFR/2015/2015%20National%20Gas%20Forecasting%20Report.pdfAEMO 2016, National Electricity Forecasting Report, Australian Energy Market Operator available at https://www.aemo.com.au/-/media/Files/Electricity/NEM/Planning_and_Forecasting/NEFR/2016/2016-National-Electricity-Forecasting-Report-NEFR.pdf Australian Government 2016, Budget 2016–17, Australian Government, Canberra, ACT.DFAT 2012, Quantified Emission Limitation or Reduction Objective (QELRO), Department of Foreign Affairs and Trade, Canberra, ACT.DFAT 2015, Australia’s Intended Nationally Determined Contribution to a new Climate Change Agreement, Department of Foreign Affairs and Trade, Canberra, ACT.DoE 2015a, Australia’s emissions projections 2014–15, Department of the Environment, Canberra, ACT.DoE 2015b, Australian Land Use, Land Use-Change and Forestry emissions projections to 2035, Department of the Environment, Canberra, ACT.DoE 2015c, Tracking to 2020: an interim update of Australia’s greenhouse gas emissions projections, Department of the Environment, Canberra, ACT.DoE 2016, Tracking to 2020–April 2016 Update, Department of the Environment, available at: http://environment.gov.au/climate-change/publications/factsheet-tracking-to-2020-april-2016-update DoEE 2016a, National Inventory Report 2014 (Revised), Department of the Environment and Energy, Canberra, ACT.DoEE 2016b, Australian National Greenhouse Accounts: Quarterly Update of Australia’s National Greenhouse Gas Inventory March Quarter 2016, Department of the Environment and Energy, Canberra, ACT.DIIS 2016, Australian energy update 2016, Department of Industry, Innovation and Science, Canberra, ACT.


EIA 2016, International Energy Outlook 2016, U.S. Energy Information Administration, Washington, USA.Global Data 2016, Grid Connected battery energy storage system—Market size, competitive landscape, key country analysis and forecasts to 2020, New York, United States.Hyder Consulting 2014, Waste Sector Modelling and Analysis, Hyder Consulting, North Sydney, NSW.IBISWorld 2016, Cement and Lime Manufacturing in Australia June 2016, Melbourne, Vic.IEA 2016, World Energy Outlook 2016, International Energy Agency, Paris, France.IPCC 2007, Fourth Assessment Report: Working Group 1 Report: The Physical Science Basis, Cambridge University Press, Cambridge, UK.Lewis Gray Advisory 2016, Projections of Gas & Electricity used in LNG Public Report, Melbourne, Vic.Office of the Chief Economist 2016a, Resources and Energy Quarterly March Quarter 2016, Department of Industry, Innovation and Science, Canberra ACT.Office of the Chief Economist 2016b, Resources and Energy Quarterly June Quarter 2016, Department of Industry, Innovation and Science, Canberra ACT.Office of the Chief Economist 2016c, Resources and Energy Quarterly September Quarter 2016, Department of Industry, Innovation and Science, Canberra ACT.Orica 2015, Orica Annual Report 2015, Orica Limited, Melbourne, Vic.Reedman, Luke J. and Graham, Paul W. 2016. Transport Sector Greenhouse Gas Emissions Projections 2016, Report No. EP167895, CSIRO, Australia.Treasury 2014, Treasury’s medium-term economic projection methodology, The Treasury, Canberra, ACT.UNFCCC 2011, Issues relating to the transformation of pledges for emission reductions into quantified emission limitation and reduction objectives: methodology and examples, revised technical paper, United Nations Framework Convention on Climate Change, New York, USA.


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