This $1 billion energy deal promises to cut emissions and secure jobs. So why on earth is gas included?

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Samantha Hepburn, Deakin UniversityIn case you missed it, a major A$1 billion energy deal between the Morrison and the South Australian government was revealed recently.

The bilateral deal represents a key driver for the national economic recovery from COVID. It promises to provide jobs in the energy sector and contribute to South Australia achieving net 100% renewables by 2030.

But there’s a big caveat: the agreement involves a joint commitment to accelerate new gas supplies into the east coast market.

With so much money on the table and other nations recently doubling down on climate commitments, let’s look at the good and bad bits of this landmark deal in more detail.

A gas-led economic recovery

The agreement was announced ahead of US President Joe Biden’s climate summit last week, which saw Australia spruik technology growth to cut emissions instead of committing to new climate targets.

In total, the federal government will contribute A$660 million and the South Australian government A$422 million towards the new deal.

Both governments have also agreed to a gas target of an additional 50 petajoules of energy per year by the end of 2023, and 80 petajoules by 2030. Their rationale is the need to improve energy security and reliability.

This focus on gas in the agreement stems from the federal government’s much-criticised, gas-led economic recovery plan, which argues new gas supplies are vital for future energy security.

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In February, the Australian Competition and Consumer Commission outlined a potential shortfall of 30 petajoules of gas for the east-coast market leading up to 2024. This shortfall could impact energy supply, and the federal government has used this to help justify opening new gas reserves.

However, nothing is certain — COVID has reduced global demand for gas so any shortfall will likely be deferred. Meanwhile, renewable technology and hydrogen production and use are rapidly advancing.

Bad: investing in gas

With the seismic shift in the economics of renewables over the past decade, investing in new gas supply is unnecessary and retrograde. In fact, it’s now more expensive to transition from coal to gas than from coal to renewables.

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For example, the cost of lithium ion batteries used for battery storage has fallen over the past decade by nearly 90%. But the cost of gas — both economically and environmentally — has steadily risen. This inevitably means means its role in the energy market will diminish.

Eventually, gas generators will be retired without replacement. Victoria’s March quarter data, for example, shows black coal generation volumes dropped by 9.5% and gas generation dropped by 43%. Meanwhile, rooftop solar went up 25%, utility solar up by 40% and wind power by 24%.

Up to $110 million will be spent on solar thermal and other storage projects in South Australia.
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And at the end of the day, gas is still a fossil fuel. There are approximately 22 major gas production and export projects proposed for Australia. A report from The Australia Institute in September 2020 suggested that, if produced, these projects could lead to about half a billion tonnes of emissions.

If all potential gas resources in Australia were tapped, the report indicates it could result in emissions equivalent to three times the current annual global emissions.

Good: investing in critical infrastructure

The energy deal sets aside $50 million towards the new $1.5 billion electricity interconnector between South Australia and NSW. This is critical infrastructure that will allow South Australia, Victoria and NSW to share energy reserves.

Indeed, the Australian Energy Market Operator has reported in excess of 5,000 megawatts of renewable energy projects near the proposed interconnector. This means South Australian wind and solar could contribute more significantly to electricity generation in both Victoria and NSW.

In turn, this will have a positive effect on pricing. Forecasts suggest the proposed new interconnector could reduce power bills by up to $66 a year in South Australia and $30 in NSW.

The energy deal also reserves funding for “investment priority areas”, which include carbon capture storage, electric vehicles and hydrogen. For example, $110 million is allocated for energy storage projects. This level of funding will help develop a world-class hydrogen export industry in South Australia.

The verdict

The energy deal is a funding win for renewable energy and technology, with energy technology advancing much faster than anticipated. However, its focus on gas is environmentally and economically regressive.

It’s completely inconsistent with the powerful climate plan announced by the Joe Biden administration at the Climate Summit last week, which includes a pause and review of oil and gas drilling on US federal land and doubling energy production from offshore windfarms by 2030.

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In March, the European Union’s parliament voted in favour of a Carbon Border Adjustment Mechanism. This will impose a tariff on products being sold into the EU according to the amount of carbon involved in making them. The Biden administration in the US has announced a similar plan.

What’s more, the European Union and the US, as outlined at the recent Climate Summit, are planning to impose fees or quotas on goods from countries failing to meet their climate and environmental obligations. This may mean Australian manufacturers will end up paying for the governments failure to take rapid action to drive down emissions.

Bilateral agreements provide critical planning and funding for Australia’s energy progression. However, they should not prolong the use of fossil fuels under the guise of energy security. To do so undermines global climate change imperatives and hinders Australia’s progress in a new energy era.

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Double counting of emissions cuts may undermine Paris climate deal

Ice floe adrift in Vincennes Bay in the Australian Antarctic Territory. There are fears efforts to combat global warming will be undermined by double counting of carbon credits.
AAP/Torsten Blackwood

Frank Jotzo, Crawford School of Public Policy, Australian National University; Lambert Schneider, Oeko-Institut, and Maosheng DUAN, Tsinghua University

In the four years since the Paris climate agreement was adopted, countries have debated the fine print of how emissions reduction should be tracked and reported. One critical detail is proving particularly hard to work out – and a weak result would threaten the environmental integrity of the entire deal.

The sticking point is rules for carbon markets: specifically, how to prevent double counting of emissions reductions by both the country selling and buying carbon credits.

These rules are proving a major barrier to reaching consensus. In December, the negotiations move to Chile for this year’s major climate talks, known as COP25. The double counting issue needs to be resolved. It will not be an easy job, and the outcome matters to many countries, including Australia.

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The Morrison government says Australia will meet the Paris emissions targets by 2030 without international trading – partly by counting old carbon credits towards its Paris efforts. But in future Australia may adopt a stronger target in line with global climate goals. This may entail government and businesses buying carbon credits from overseas.

In an article just published in the journal Science, we and our co-authors* explain why double counting could undermine the Paris goals, and how a robust outcome could be achieved.

The Port Kembla industrial works in Wollongong. Industrial activity is a major contributor to overall global emissions.
AAP/Deal Lewins

What’s the problem here?

International carbon trading allows two or more countries to achieve their emissions targets more cheaply than if going it alone. Countries where cutting emissions is relatively cheap do more than is required by their targets. They then sell the additional emissions reductions, in the form of credits, to countries that find it harder to achieve their targets.

Carbon credits could be produced through activity such as replacing fossil fuels with zero-emissions energy, greater energy efficiency and electrification in transport and buildings, new technologies in industry and better practices in agriculture and forestry.

Rules for carbon trading are defined under Article 6 of the Paris agreement. Trading under the deal could be big: almost half the parties to the agreement have signalled they want to use carbon markets. Airlines might also become major buyers of emissions credits, under rules requiring them to offset increases in carbon emissions from international flights above 2020 levels.

The cost savings from using carbon markets could make it easier for countries to adopt more ambitious targets – ultimately resulting in greater emissions reductions.

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But if trading rules are not watertight then the use of carbon markets could lead to greater emissions, undermining the agreement.

One fundamental risk is double counting: a country selling a carbon credit might claim the underlying emissions reduction for itself, while at the same time the country buying the credit also claims the same emissions reduction.

Obviously any international transfer of emission reductions should not lead to higher total emissions than if participating countries had met their targets individually. This could be ensured through a form of double-entry bookkeeping, wherein the country selling carbon credits adjusts its emissions upwards, and the country acquiring the carbon credits adjusts, by the same amount, downwards.

But the devil lies in the detail – and in the self interest of the parties involved.

Planes lined up at Sydney Airport. The aviation industry will likely buy carbon credits to offset its emissions growth from 2020.
AAP

The bones of contention

Countries are wrangling over what double counting is, how it should be avoided and whether it should sometimes be allowed.

Some countries hoping to sell emissions credits, notably Brazil, propose rules under which emissions reductions sold to another country could effectively also be claimed by the selling country. Such rules existed under the Kyoto Protocol, which came before the Paris agreement. However under Kyoto developing countries did not have emission targets. All major countries have emissions targets under Paris, making the method unsuitable now.

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Another potential pitfall lies in the potential purchase by international airlines of large amounts of credits to offset increases in their emissions. Aviation emissions are not counted in national emissions inventories. So it would be logical to adjust the selling country’s inventory for any emissions reduction sold to airlines.

But some countries, notably Saudi Arabia, argue that this should not be done because the airline industry is governed by a separate international treaty. This approach would allow emissions reductions to be included in both agreements and counted twice.

In a separate point of debate some countries – including Australia, Canada, Japan, and the United States – oppose the idea of a single international body overseeing carbon trading under the Paris agreement, arguing for more national sovereignty and flexibility between nations buying and selling.

Making things even more complex, the Paris agreement allows each country to determine how to frame their emissions target. Some countries frame them as absolute emissions, others as a reduction relative to business-as-usual, or as a ratio of emissions to gross domestic product. Some countries’ targets are simply unclear.

A deforested area in the Amazon forest in Brazil. Carbon credits can be earned by nations that retain forest rather than cutting it down.
Marcelo Sayao/EPA

Letting each country determine its own ambitions and approach was key in making the Paris agreement a reality. But it makes accounting for carbon markets more complex.

There are also questions over whether a portion of carbon trading revenue should be allocated to help pay for climate change resilience in developing countries, and whether old credits from a trading scheme under the Kyoto Protocol, the Clean Development Mechanism, should be tradable in the new scheme.

The way forward in Chile

The solutions to all these issues will be nuanced, but will require that governments agree on some fundamentals.

The first is that a single set of common international accounting rules should apply, irrespective of which carbon market mechanism is used by countries or groups of countries.

The second is to ensure robust emissions accounting, regardless of how mitigation targets are expressed.

The third is that over time, all countries should move toward economy-wide emissions targets, as the Paris Agreement foresees.

The need to reach a political deal in Chile must not result in loopholes for international carbon markets. The rules must ensure environmental integrity and avoid double counting. If this is achieved, emissions reductions can be made more cheaply and global ambition can be more readily raised. If not, then the accord could be seriously undermined.

The article in the journal Science “Double counting and the Paris Agreement rulebook” is authored by Lambert Schneider, Maosheng Duan, Robert Stavins, Kelley Kizzier, Derik Broekhoff, Frank Jotzo, Harald Winkler, Michael Lazarus, Andrew Howard, Christina Hood. See here for the full manuscript.

Frank Jotzo, Director, Centre for Climate and Energy Policy, Crawford School of Public Policy, Australian National University; Lambert Schneider, Research coordinator for international climate policy, Oeko-Institut, and Maosheng DUAN, professor, Tsinghua University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The world would be better off if Trump withdraws from the Paris climate deal

Secretary of State Rex Tillerson has argued the US should stay in the Paris climate agreement. But for the rest of the world, a US exit is better than staying reluctantly.
Carlos Barria/Reuters

Luke Kemp, Australian National University

The conventional wisdom that the United States should remain under the Paris Agreement is wrong. A US withdrawal would be the best outcome for international climate action.

With Trump set to decide on the matter after this week’s G7 meeting, his aides are split on the issue. Chief strategist Steve Bannon heads the faction pushing for an exit. Secretary of State and former ExxonMobil chief executive Rex Tillerson has argued for the US to retain a “seat at the table”.

It is within the president’s power to withdraw from the Paris Agreement and perhaps even the United Nations Framework Convention on Climate Change (UNFCCC), which has overseen global climate diplomacy for some 25 years.

In a commentary published in Nature Climate Change today, I argue that a US withdrawal would minimise risks and maximise opportunities for the climate community. Simply put: the US and the Trump administration can do more damage inside the agreement than outside it.

There are four key, interconnected risks related to US participation in the Paris Agreement: that the US will miss its emissions target; that it will cut climate finance; that it will cause a “domino” effect among other nations; and that it will impede the UN negotiations.

Money and emissions are all that matter

The first two risks are unaffected by withdrawal. The Paris Agreement doesn’t require the US to meet its current emissions reduction pledge, or to provide further climate finance to developing countries. The agreement is procedural, rather than binding; it requires a new, tougher climate pledge every five years, but actually hitting these targets isn’t mandatory.

The US will probably miss its climate target regardless. It would need more than just Obama’s Clean Power Plan to hit its goal of reducing emissions by 26-28% on 2005 levels by 2025. And now that Trump has decided to roll back those policies too, US emissions are set to increase through to 2025, rather than decrease.

The same goes for international climate funding, which will be cut under the “America First” budget plan. That includes funds previously earmarked for the Green Climate Fund, which has so far raised US$10 billion in climate aid. The US was to provide US$3 billion but has donated just US$1 billion so far. The remaining money is almost certainly not coming.

Domino effect?

The third risk is the domino effect: that US actions could inspire others to delay climate action, renege on their targets, or withdraw. But there is little evidence to suggest that the US dropping out will trigger other nations to follow suit.

The closest historical parallel is the Kyoto Protocol, which the US signed but never ratified. When President George W. Bush announced that the US would not ratify the treaty, others rallied to the protocol’s aid and pushed through the Marrakech Accords in 2001, to strengthen Kyoto’s rules.

What’s more likely to cause a domino effect is US domestic behaviour, rather than any potential withdrawal from the Paris deal. Other countries are more likely to delay or free-ride on their pledges if they see the US miss its target, revealing how weak the Paris Agreement really is.

Paris has little aside from inspiring public pressure and long-term low-carbon investment patterns. Neither pressure nor the “investment signal” is likely to work if a renegade US shows that Paris is an empty global show-and-tell regime. Investors and the public are likely to lose faith in an agreement that can visibly do nothing to constrain a climate laggard.

The fourth risk is that the US will act as a spoiler in international climate talks. This requires membership. If the US remains in the agreement it will retain a veto in the negotiations.

The negotiations are at a crucial juncture. The so-called “Paris Rulebook”, which details how exactly the agreement will be fulfilled, is being negotiated, with plans for it to be adopted in 2018.

The US could use its voice and veto to water down the rules. It might even stall and overload negotiations by demanding amendments to the Paris Agreement, as Energy Secretary Rick Perry has suggested. A US that has credibly threatened to withdraw may have even more diplomatic clout going forward.

Considered in this light, giving the former head of ExxonMobil a “seat at the table” is a terrible idea.

New opportunities

A US withdrawal, on the other hand, could create new opportunities, such as renewed European and Chinese leadership. In the wake of the 2016 US election, former French presidential nominee Nicholas Sarkozy raised the idea of applying a carbon tax of 1-3% on US imports. In a time of rising protectionist policies, particularly in the US, carbon border tariffs may become more politically palatable.

A US dropout would also be an ideal opportunity for a rising China to stamp its mark on an international issue. It would give both China and the European Union a chance to jump even further ahead of the US in the renewable energy markets of the future.

The EU previously showed leadership in the absence of the US to revive the Kyoto Protocol and forge ahead with renewable energy. This time Europe could do so with the support of another great power.

Such cooperation could take numerous forms. One simple way would be for the two to put forward a stronger joint climate pledge. This could be strengthened by uniting their respective carbon trading schemes and applying a common border carbon tariff.

Trade measures and an EU-China climate bloc will be far more effective than Paris ever could have been. Yet none of these possibilities is likely to become reality without the diplomatically drastic move of US withdrawal. On balance, it is clear that a US climate exit is preferable to remaining.

It is worth stressing here the difference between pulling out of the Paris Agreement and withdrawing from the UNFCCC. The latter is far more dramatic, and more likely to trigger a domino effect. It would also mean the US would no longer be legally bound to report on its emissions and actions to the international community. It would become a complete climate pariah.

A future president could easily rejoin Paris through an executive agreement. In contrast, re-ratifying the UNFCCC might require a vote in the US Senate, which has become more partisan and divided since the convention was first ratified in 1992. However, withdrawal from the UNFCCC would lessen the threat of US obstruction, as it would lose its veto in the wider negotiations and be even more politically ostracised.

Despite this, the same basic risk-opportunity calculus applies. The domino effect may be more likely, but overall a withdrawal is still preferable.

Participation is a red herring

Wanting the US to remain is a short-sighted, knee-jerk reaction. The international community should be much more worried about the real domestic actions of the US, rather than whether it is symbolically cooperating internationally.

The international community appears to be mortally afraid that the US will make the largely symbolic gesture of quitting Paris. Yet there was less concern when Trump rolled back domestic climate measures.

EU Climate Commissioner Miguel Arias Cañete recently stated that Paris allows for the continued use of fossil fuels and provides the flexibility for a “new US administration to chart its own path”.

Is this really a worthwhile message to send to the White House: that blatantly violating the purpose and spirit of the Paris Agreement is fine, as long as you are still cooperating on paper? It is disturbing that symbolism has apparently become more important than action.

Policy, not participation, needs to be the focus of criticism. Otherwise Paris will prove itself to be nothing more than a diplomatic fig leaf.

While Paris may be weak, international climate action can still be strong. The shock of Trump’s withdrawal could make international action stronger by allowing emboldened leadership to blossom elsewhere.

Luke Kemp, Lecturer in International Relations and Environmental Policy, Australian National University

This article was originally published on The Conversation. Read the original article.

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