Today’s decisions block industry emissions for decades – here’s how to do them right


The Intergovernmental Panel on Climate Change has made it clear that there is little time left to achieve net zero emissions and keep the global temperature rise at 1.5 ° C.

If Australia is to do its part, emissions must fall across the economy.

States and territories all have net zero targets for 2050, and the prime minister has said the national target is also net zero emissions, preferably by 2050.

2050 seems far away. It’s ten electoral cycles for prime ministers, seven for state prime ministers. Does this mean that there is a lot of time to find mechanisms to get us there?

Unfortunately no. Here’s why.

For net zero, 2050 is sooner than you think

About 30% of Australia’s emissions come from the industrial sector – facilities such as coal mines, liquefied natural gas platforms, steel smelters and zinc processing plants.

These installations have a long lifespan – up to 30 to 40 years, sometimes more.

This means that installations that start tomorrow will probably still be operating in 2050. Older installations only have one replacement cycle by 2050.

Companies don’t have ten chances to engage properly. They have one.

Read more: IPCC says Earth will reach a temperature rise of about 1.5 ℃ in about a decade. But limiting any global warming is what matters most

Planning to replace an aging asset begins long before the end of its useful life, and companies can only consider realistic options.

They cannot assess the costs and risks of technologies still in the laboratory.

If low-emission technologies are not available or commercially feasible when decisions are made, what companies install will block decades of future emissions.

Decisions taken today will extend beyond 2050

Consider a coal-fired cement plant that will reach the end of its expected life in 2030. The owner is considering three options

  • identical replacement that still uses carbon but is slightly more efficient, with costs and risks well understood

  • a new plant that uses gas as well as coal, the costs and risks of which can be predicted with some certainty

  • a very low-emission experimental technology, which should be commercially ready by 2040, with costs and risks that are difficult to quantify, and a higher initial cost

Taking the third option (wait) may mean removing another 10 years from an aging plant, with the risk that it will not go the distance.

This graph shows the emissions by the end of the life of the new plant for each option.

Grattan’s analysis of public data from various Australian cement plants.
Towards Net Zero: Practical Policies for the Industrial Sector

The alike locks in considerable emissions between 2030 and 2050, and the risk of having to buy carbon offsets between 2050 (when Australia goes to the next zero) and the end of the plant’s life in 2070.

A modified fuel mixture reduces lock-in and the likely burden of offsets, but they are still important.

Waiting until 2040 (and running the risk that the old plant won’t have an additional 10-year lifespan) will mean less emissions after 2040 and less liability for carbon offsets, but a lot more issues before that date.

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From an emissions perspective, the best decision may be a halfway house – run the old factory for another five years and install the new technology before it goes fully commercial, if someone else is ready. to share the risk.

Without a signal from a state or federal government, the cement plant owner will likely go for option one or two.

The government can help

Our report, Towards Net Zero: Practical Policies for the Industrial Sector, outlines three things the federal government can do now to sway corporate decisions in favor of something like option three.

First, it can signal that it expects all new installations to avoid getting locked into long show queues.

The best way to do this would be to follow through on its 2015 commitment to establish best practice benchmarks for new facilities. They were to be in place by 2020.

Second, it should set up a Fund for the Future of Industrial Transformation to share the risk of new technologies with industry.

Read more: Australia’s economy can support the carbon tariff proposed by the EU

Third, it should adjust its safeguard mechanism whereby large emitters must declare and adhere to emission intensity standards to require them to start reducing their emissions immediately.

This would equalize the field between new and old installations. This would mean that some older facilities would close earlier than expected, but it would mean they would be replaced with cleaner facilities.

It is important that these policies start now. Every decision we make from now on will affect our chances of reaching net zero and escaping catastrophic climate change.


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