Guidance on the EUAA’S Position on the
Post- 2020 Target for Greenhouse Gas
Emissions
Draft Prepared by Energy Users Association of Australia
May 2015
May 2015
Executive Summary
The Energy User Association of Australia (EUAA) has prepared this submission for the
Department of the Prime Minister and Cabinet Taskforce for the United Nations
Framework Convention on Climate Change (UNFCCC) as part of the consultation
process on post 2020 greenhouse gas emissions targets.
The EUAA is the peak industry body for Australia’s energy users including
manufacturers, retailers and resource-based industries. EUAA members typically
provide employment to over 1,400,000 Australians. Our members seek competitive,
reliable and sustainable energy supply as a means of running their operations. The
EUAA remains the only organsiation singularly focused on representing the needs of
large energy users in our rapidly evolving volatile energy markets whether it be on
electricity, gas, as well as climate change and energy efficiency policy issues.
With the complexity of the issue currently before us, this document aims to
circumvent the lengthy discussions around the minutiae of the climate change debate
and the almost unquantifiable variations and permutations of the various inputs
before government policy makers. We have chosen to restrict our consideration to
three key questions.
However the findings and recommendations within this document are based on
substantive reviews of existing submissions provided to; the Department of the Prime
Minister and Cabinet UNFCCC Taskforce; the Climate Change Authority (CCA), and; the
UNFCCC itself. Predominant consideration has been given to the publicly known
positions of EUAA members.
For ease of reference, Appendix 1 provides a table of summarised positions of
sovereign nations and domestic entities with regard to the UNFCCC’s objective to
stabilise greenhouse gas concentrations in the atmosphere at a level that will prevent
dangerous human interference with the climate system. It is important to note that
this is not an exhaustive summation, but rather a selective sample to illustrate
comparative and relative positions.
The EUAA position can best be summarised as:
1. Target to be based on 2005 start year with 2030 end year - however no specific
reduction target is suggested.
2. Economic impact on domestic manufacturing and EITE’s to be given foremost
attention because of risk of carbon leakage, and resulting structural
adjustments that will have an impact on competitiveness and economic growth.
3. Global solution is still an overriding consideration. Increasing multi-lateral and
bi-lateral trade agreements have not relieved the pressure on the Australian
commercial and industrial sector.
4. The mechanism used to achieve Australia’s emissions targets should be marketbased, preferably with international linkages.
5. Schemes such as the Renewable Energy Target (RET) and Energy Efficiency
Schemes should be reviewed and a long-term course set in place to integrate
them into the overreaching policy.
6. Irrespective of the specific policy or mechanism employed, it should have bipartisan support in order to provide the long-term certainty required for it to be
effective.
7. Australia’s climate change policy should be implemented at the federal level,
and state based schemes be disbanded.
8. The fundamental objective of a climate change policy should be to limit global
greenhouse gas emissions to a level that will avoid catastrophic effects of
climate change.
May 2015
EUAA Position on the Post-2020 Emissions Targets
The Energy Users Association of Australia appreciates the importance of the Federal
Government’s consideration of post-2020 emission targets, and acknowledges the
complexity of the issues.
What should Australia’s post-2020 target be and how should it be
expressed?
The EUAA believes there are only two possible choices for base year calculations –
either 1990 or 2005. Thus far the European Union, the United Kingdom, and Russia
(whom collectively represent a significant portion of global emission emitters) have
used 1990 as the base year in their Intended Nationally Determined Contributions
(INDC) which have been submitted to the UNFCCC. However, the United States and
China (whom collectively represent another significant portion of global emission
emitters) have chosen 2005 as the base year in their joint announcement on climate
change, and this was used in the United States’ subsequent INDC submitted to the
UNFCCC.
Australia needs to align its commitments to those of our major trading partners,
accordingly a 2005 base year should be used in the setting of future emissions
reduction targets.
The EUAA also believes there are only two possible choices for end year calculations –
either 2025 or 2030. Logically the longer timeframe gives more opportunity to meet
any post-2020 target, as such, the 2030 end year is far more appropriate and gives
greater long term investment certainty to the industrial sector.
Before setting a post-2020 target, it is important for Australia to consider the risks to
our trade exposed industries, and also to seek acknowledgment from the UNFCCC and
the international community that a large proportion of Australia’s emissions are
created for the benefit of other nations. The question of end user emissions needs to
be resolved. By way of example, the EUAA asks the question, “Where should the
emissions from cattle reared in Australia but consumed in Asia be attributed? Further,
does Australia have the right to curtail the export of our emissions heavy and energy
intensive resources to the world markets to meet our own post-2020 target, but
thereby deny the world of the opportunity those resources present for their
development? A more equitable accounting for end user emissions might transfer the
burden of decision making with regards to the consumption of Australian resources.
The EUAA is of the view that “headline” reduction numbers need to be taken in
context –there are many ways to analyse and conduct comparative studies, but
ultimately each country’s emissions should be standardised as best as possible to
ensure a fair analysis. One such example is population – in Graph 1 below, Australia’s
population growth over the 1990 to 2012 period can be seen to have outstripped that
of many of our comparative nations.
Graph 1: Population Growth 1990-2012
Source: World Bank - http://data.worldbank.org/indicator
To extrapolate that point, if Australia’s emissions in 2012 were the same as 1990
levels, then accounting for the 33% growth in population would have equated to a
25% reduction in emissions. Therefore, looking forward at population growth
projections should be incorporated into any post-2020 target, but Australia needs to
encourage the UNFCCC to assess all countries future results against actual population
growth at that time.
With those brief caveats, the EUAA advocates that the post-2020 target should be
absolute and as transparent as possible to reduce skepticism from the Australian
public with regards to their perception of the Governments commitment to address
climate change. In order to meet the objective of a 2°C temperature rise, this needs
to be translated into emissions targets for Australia as a whole. It is not the intention
of the EUAA to stipulate the targets required, however, any targets set should be
clear, long-term and binding. Australia’s target should be proportionate in the
international context. The targets and their trajectory should be established for a 30year timeframe and rolled-forward every year.
While it is acknowledged that such long-term targets cannot be fixed, they should be
adjusted in a way that is predictable and well understood by the sector. By way of an
example only, the initial 30-year target trajectory could be split into 3 lots of 10
years. The first 10 years would be fixed, the second 10 years with a plus-and-minus
of 20% and the third 10 years with a plus-and-minus of 50%. This would then be
rolled-forward each year with the targets never going outside the boundaries
May 2015
stipulated in the second and third lots of 10 years. This may not create certainty,
however it will create predictability, which is essential for businesses to make longterm investments.
The post-2020 target should include projected sequestration programs without overt
reliance on unproven sequestration techniques, and it is also essential in providing a
policy that it is technology neutral in order to avoid picking winners and potentially
shifting away from the lowest-cost solution.
The post-2020 target should also include the use of internationally accepted emissions
trading and offset programs. The mechanism used to achieve Australia’s emissions
targets should be market-based, and it should be flexible enough to integrate with
international schemes. In order to create international linkages it needs to consider a
mutual recognition system of carbon credits. International credits (provided they are
verifiable) should be permitted to achieve Australia’s targets in order to provide the
lowest cost solution. Climate change is a global problem that can only be met by a
global solution, hence, location of carbon mitigation is irrelevant.
Finally, the post-2020 target should be unconditional and form the basis of the
nation’s agenda to tackle climate change moving forward. Despite the brief points
made above, the level of complexity behind setting a post-2020 target can not be
underestimated, as such, the EUAA does not offer up a specific target.
What would the impact of a target be on Australia?
Although the EUAA has not stipulated a post-2020 target, it is expected that for any
emissions reduction target to be reached, there will be an impact on Australia. The
question of whether the impact will be negative or positive ultimately depends on the
target level chosen and the methods to reach that target. Various studies and
projections as to the cost to be borne by Australia have been made by other entities,
including the Australian Treasury, and whilst not seeking to dispute any of those
projections, the EUAA respectfully suggests that the ultimate cost of a post-2020
target will never truly be known. Ultimately Australia must set a sensible path to
address climate change, and be prepared to bear the associated cost.
It should be remembered that taking no action to address climate change may also
have an impact and a financial burden for Australia. In their March 2015 submission
to the Climate Change Authority and the Australian Medical Students’ Association
makes the point that negative health impacts as a result of climate change have an
associated economic burden.
The EUAA also believes that in the absence of a global market-based mechanism,
there is the risk of carbon leakage from Australian Emissions Intensive-Trade-Exposed
(EITE) Industries –this would result in emission heavy industries within Australia being
shut-down only to be re-opened overseas with equal or greater emissions. As such
the EUAA believes that assistance should be provided to Australia’s EITE industries to
avoid carbon leakage impacts.
Ultimately in setting any target it is imperative that there is an understanding that
resulting structural adjustments will have an impact on competitiveness and economic
growth. The EUAA is in favour of encouraging technological advancements and driving
efficiency.
Finally, the EUAA believes that to reduce the impact on Australia, our post-2020
target should have bi-partisan political support in order to provide the long-term
certainty required for it to be effective and to give businesses the confidence to make
long-term investment decisions to assist in meeting the objectives of the post-2020
target.
Which further policies complementary to the Australian Government’s
direct action approach should be considered to achieve Australia’s
post-2020 target and why?
The EUAA recognises that Australia is significantly dependent on fossil fuels and that
an international goal of 2°C temperature rise has been set. Although the
Government's policy is to work towards this this limit, future policy should be adjusted
to match international consensus of the appropriateness of this limit as it changes
over time. This careful transition will assist in the reliable and affordable supply of
electricity within Australia.
The EUAA believes it is important that policy sets clear, long term and binding
emission reduction targets. This predictability is key for business stability. Marketbased policy mechanisms can deliver the required emission reductions and it is
essential bi-partisan support can be reached, irrespective of the specific policy or
mechanism employed. This will enable business to have the confidence to make the
long-term investment decisions required to meet the policy objectives.
Australia’s climate change policy should be implemented at the Federal level, be broad
reaching and include all sectors of the economy with a level playing field sanctioned
by a common level of carbon constraint. The potential for multiple overlapping and
inconsistent policies across different jurisdictions would reduce the effectiveness of
this endeavour. This means that in the presence of an effective national policy, statebased schemes such as emissions trading or energy efficiency are redundant and
should be disbanded to reduce further red tape and regulatory costs.
Schemes such as the Renewable Energy Target (RET) and Energy Efficiency Schemes
should be reviewed and a long-term course set in place to integrate them into
the overreaching policy. The aim would be to provide the lowest cost solution whilst
avoiding sovereign risk created with these existing schemes running independently.
May 2015
According to The Department of Finance over 200 programs from the Federal,
State and local levels have been set up to address climate change.
The EUAA has long maintained in various other submissions the need to remove any
duplication of state and federal regulations and overlapping programs. We are
concerned that recent announcements from State governments indicate they will be
either re-introducing or amending previous emissions abatement programs thereby
creating an unnecessary burden on industry.
It is imperative that the federal government co-ordinate a national approach to
climate change otherwise economic activity could be further stymied forcing further
closure of an already stressed domestic manufacturing sector.
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