Transitioning
a s t o g regions
eg o s to a low
o carbon
ca bo future
utu e
Meg Argyriou
ClimateWorks Australia
2nd February 2012
Introducing ClimateWorks Australia
Affiliations:
1
What is a low carbon growth plan? (LCGP)
•
Internationally recognised tool
•
Least cost opportunities (bang for buck)
•
Low Carbon Growth Plan for Australia
-
Eureka prize and wide recognition
2
In the LCGP for Australia, ClimateWorks identified 62 opportunities
to achieve a 25% emissions reduction target by 20201
Industry
Buildings
2020 Australia GHG emissions reduction investor cost curve (from Jan. 2012 on)
Emissions reduction cost to an investor
A$/tCO2e
Car and light commercial efficiency improvement
Large articulated truck efficiency improvement
Hybrid cars
Residential appliances and electronics
Commercial retrofit energy waste reduction
Commercial retrofit HVAC
Residential lighting
g
g
Commercial elevators and appliances
Commercial retrofit lighting
200
150
100
50
Transport
Agriculture
Forestry
Power
Solar PV (distributed)
Coal CCS new build
Capital improvements to existing
Biogas
black coal plant thermal efficiency
Commercial retrofit insulation
Chemicals processes and fuel shift
Cropland carbon sequestration
Coal IGCC with CCS
Strategic reforestation of non-marginal
Wave/tidal
land with environmental forest
Iron and steel
OCGT retrofit to base-load CCGT
processes
Reforestation of marginal land
with environmental forest
Other industry energy efficiency
Mining energy efficiency
0
0
-50
-100
50
100
150
200
Gas CCS
Solar thermal
Geothermal
Wind offshore
Solar PV
(centralised)
Electric cars
-150
-200
250
-250
-300
-350
-400
Pasture and grassland management
Reforestation of marginal land with timber plantation
Reduced T&D losses
Cement clinker substitution by slag
Commercial cogeneration
Industrial cogeneration
g
Operational improvements to existing black coal plants thermal efficiency
Commercial new builds
Active livestock feeding
Commercial retrofit water heating
Residential new builds
Reduced cropland soil emissions
Gas T&D network maintenance
Pulp, paper and print energy efficiency
Food, beverage and tobacco energy efficiency
Onshore wind
(marginal locations)
Biomass co
co-firing
firing
Biomass dedicated
Degraded farmland
restoration
Onshore wind (best locations)
Gas CCGT new build
Residential building envelope
Improved forest management
Aluminium energy efficiency
1 Assuming that no significant action is taken in 2011, and that 2011 projections for business-as-usual emissions in 2020 will stay stable in 2012
SOURCE: ClimateWorks team analysis, derived from 2020 GHG emissions reduction cost curve (exhibit 5)
250
Emissions reduction potential
MtCO2e per year
Anti-methanogenic treatments
Reduced deforestation and regrowth clearing
CCGT increased utilisation
Mining VAM oxidation
3
Opportunities can be divided into 3 ‘theme’s of actions to reduce
carbon emissions using existing technologies available domestically
energy
efficiency
land
SOURCE: ClimateWorks Australia, Low Carbon Growth Plan for Australia
cleaner
power
4
Strong interest from business and government for LCGPs
at a ‘local’ level
Business
Government
5
Our methodology is defined by key parameters
• McKinsey cost curve methodology

• Technology or best practice solutions (above BAU)
Method 
Sectors

• No business mix or significant lifestyle changes
• Opportunities within the regional boundaries
Assumes 
6
In developing a regional LCGP, we follow a 6 step process
Estimate the BAU emissions
Develop a cost curve using
scaled-down national data
Engage locally to refine cost
curve with local data
Identify barriers and tools to
overcome
Develop Action Plan, based on
local strategic priorities
Present the findings
Support implementation
7
6 step process to develop LCGP– local engagement is key
Estimate the BAU emissions
Develop a cost curve using
scaled-down national data
Engage locally to refine cost
curve with local data
Identify barriers and tools to
overcome
Develop Action Plan, based on
local strategic priorities
Present the findings
Support implementation
8
In Geelong, local engagement was key to the quality of the
research and its successful implementation
9
In Gippsland, the consultation process was even more
extensive
Snapshot of the key businesses we met with (not exhaustive).
East Gippsland
Food Cluster
10
Findings: Geelong can reverse the growth in its emissions
by 2020
Reducing Greater Geelong’s emissions by 1.3 million tonnes achieves
a 14% reduction compared to BAU, or 6% below 2000 levels
Million tCO2e
9.3
8.8
1.3
14% below
2020 BAU levels
84
8.4
6% below
2000 levels
2000
2010
2020
11
Geelong can reduce its emissions by 6% below 2000 levels,
saving $33 million across the local economy each year
Bus and rigid truck efficiency improvement
Cost of emissions reduction
A$/tCO2e
300
Power
Buildings
Industry
Forestry
Industry mid-scale solar
Transport
Agriculture
Residential solar PV
Chemicals
Geothermal
250
Petroleum & gas cogeneration
200
Waste to energy
Industry cogeneration
150
Hybrids/electric cars
Cement
100
New builds
Aluminium
Transport behaviour change
50
Buildings cogeneration
0
0
200
400
600
-50
800
1 000
1,000
1 200
1,200
Emissions reduction potential
ktCO2e per year
Agriculture
-100
Other industry energy efficiency
-150
Petroleum and gas
Forestry
Commercial building retrofits
-200
-250
Residential building retrofits
Internal combustion engine improved efficiency
SOURCE: ClimateWorks 2020 Greater Geelong emissions reduction investor cost curve (simplified for illustration)
12
The largest overall opportunities by sector in Geelong are
in improved energy efficiency in industry and buildings
Industry
Transport
21%
B ildi
Buildings
Agriculture
Forestry
Power
40%
2%
1%
30%
6%
13
By 2020, Gippsland can reduce its emissions by 1.5 million tonnes
per year while saving almost $100 million annually.
Excluding the power sector
I d t
Industry
T
Transport
t
B ildi
Buildings
F
Forestry
t
A i lt
Agriculture
Chemicals
Bus and rigid truck efficiency improvement
On site electricity generation - biomass/biogas
Cost of emissions reduction
Higher standard new buildings
A$/tCO2e
Street lighting energy efficiency
150
Building envelope
Residential solar PV
Forest management
Strategic reforestation of less-productive
land with environmental forest
Lighting
100
Soil carbon sequestration
Dairy Processing Energy Efficiency
St t i reforestation
Strategic
f
t ti off productive
d ti
land with environmental forest
Dairy farm energy efficiency
50
0
0
200
400
600
800
-50
1,000
1,200
1,400
Emissions reduction potential
ktCO2e per year
-100
Pulp, paper and print energy efficiency
-150
150
Food and beverage energy efficiency
Electronics & appliances
-200
Reduced cropland soil emissions
-250
Commercial building
g energy
gy waste reduction
Heating, ventilation & air conditioning
-300
Hybrid s and electric cars
Mining energy efficiency
-350
Shift some commuter car travel to rail
S
Large articulated truck efficiency improvement
Livestock
Reforestation of less-productive
land with timber plantation
Buildings cogeneration
Gas Processing
g Energy
gy Efficiency
y
Industry cogeneration
Commercial building water heating
On site heat generation - biomass/biogas
Other industry energy efficiency
Car & light commercial vehicle efficiency improvement
-550
Eco driving
14
70% of all opportunities identified in the Plan are already profitable
yet are not being taken up, indicating that a range of barriers exist.
Opportunities that come at a net cost,
focused on agriculture and forestry, can
be captured for an average of $26/tonne
(before CFI credits factored in)
Gippsland’s households and businesses
could save $
$110 million each yyear
through improved energy efficiency
Capturing these opportunities
would
ld generate
t over $800 million
illi
in inward investment to the region,
helping to stimulate the local economy
15
Under business-as-usual, Gippsland’s emissions are expected to
rise by 9% from 7.6 million tonnes to 8.3 million tonnes by 2020.
Reducing Gippsland’s emissions by 1.5
million tonnes achieves an 18% reduction
compared
d to
t BAU,
BAU or 10% b
below
l
2000 llevels
l
Million tCO2e
8.3
7.6
-10%
1.5
6.8
2000
-18%
By implementing the
opportunities identified
in this Plan, Gippsland
could reduce its
emissions to 10% below
2000 levels
2020
16
All sectors can benefit from reducing emissions
Excluding
g the power
p
sector
e.g. Reducing emissions from dairy
cattle; environmental plantings
e.g. Bioenergy, Improved
energy efficiency
On the land
26%
38%
Ho seholds
Households
e.g. Choosing more efficient
appliances; building new homes
to a higher standard
Manufacturing, mining & freight
12%
24%
%
Commercial & services
e.g. Retrofitting existing buildings,
d
downsizing
i i equipment
i
t
17
Opportunities to reduce emissions are often hindered by a
combination of price and non-price barriers.
Barrier type
Example barriers
Is the opportunity
profitable?

Capturing the opportunity doesn’t generate a profit, even factoring in any savings
from efficiencies
How hard is it to
access the capital
needed?

Limited access to capital means emissions reduction projects are low priority

Difficult to access loans for energy efficiency projects or projects with higher risk

Payback period is too long

Lack of awareness of p
potential financial or p
productivity
y benefits

Emissions reduction projects are not core business

Staff don’t have required skills

Split incentives mean the person who invests in the opportunity does not reap the
benefits (e.g. building owner vs. tenant)

Without aggregation,
aggregation the project is too small for an individual business

Difficult to access energy efficient equipment through existing supply channels

There are not enough workers with the skills to roll out opportunities
Is the opportunity
poorly understood?
Does the structure of
the market prevent
pp
y from
the opportunity
being captured?
18
In regional areas, SMEs dominate the commercial, industrial and
agricultural sectors and face additional challenges in reducing
emissions
Reducing emissions in
the SME sector is critical
to regional success
• The City of Greater Geelong is
home to 10,000 SMEs (small to
medium sized enterprises) employ
70% of the local workforce.
• The Gippsland region has 23
23,000
000
SMEs who control most of the
abatement potential identified in
commercial buildings, industry
and agriculture
Additional challenges
g for SMEs
•
SMEs face higher borrowing rates than
large businesses, reducing the financial
benefits of energy efficiency.
efficiency
•
SMEs incur higher transaction costs
project
j
than large
g
relative to the size of a p
organisations.
•
It is more difficult for SMEs to balance
pursuing energy efficiency opportunities
with core business, and energy
efficiency can be a low priority.
•
Unlikely to have dedicated energy
management staff
19
In Gippsland the carbon price package would make a further 21% of
opportunities profitable for households and businesses.
Cost to investors of emissions reduction with carbon price
A$/tCO2e
200
Before carbon price package
Profitability improved by carbon price package
150
Profitability unchanged by carbon price package
100
50
0
-50
-100
-150
0
200
400
600
800
1,000
1,200
1,400
1,600
Emissions reduction potential
MtCO2e per year
-200
-250
-300
-350
-400
-450
-500
-550
20
Overcoming barriers to emissions reduction actions in regions
requires innovative thinking and increased collaboration
Barrier type
Example ways to overcome barriers
Profitability

A carbon price will improve the profitability of some opportunities

Grants, loans, equity investments or loan guarantees can improve profitability

Government has a role to play a role in overcoming capital constraints
through grants, loans, equity investments or loan guarantees

Innovative financing structures such as ‘pay-as-you-save’ through LCA in
partnership with traditional lenders

IIndustry/business
d t /b i
networks,
t
k local
l
l govtt can work
k with
ith llocall b
business
i
tto share
h
relevant information re. financial or productivity benefits

Recruitment of central resource to aggregate projects, develop business
case RFQs
case,
RFQs, identify funding/financing

Education providers can develop tailored training to address local needs

Environmental Upgrade Agreements help to overcome split incentives

Aggregating opportunities can enable more cost effective access to
professional services and non-standard equipment, and provide incentive for
local
oca bus
businesses
esses to
o de
develop
e op required
equ ed sskills/expertise
s/e pe se

Coordination of waste streams between industrial and commercial sites can
reduce the supply constraint on alternative energy sources.
Capital constraints
IInformation/skills
f
ti / kill
barriers
Market structure
21
THANK YOU
Questions?
meg.argyriou@climateworksaustralia.org
www climateworksaustralia org
www.climateworksaustralia.org