Australia’s progression towards a low carbon future is gaining momentum, with the latest government estimates showing that emissions reduction schemes are on track to deliver bumper growth this year.
The Clean Energy Regulator’s latest Quarterly Carbon Market Report predicts that the schemes will provide 57.1 million tonnes of emissions savings in 2021. That figure would represent an increase of more than 7% on the result delivered in 2020, when the schemes produced 53.1 million tonnes of emissions savings. The “conservative” estimate is based on the average emissions intensity of generation from all fuel sources.
However, the report notes that this emission intensity from all fuel sources is falling as the country continues to move towards more renewables. The March Quarter 2021 report also shows the continuing success of the Emissions Reduction Fund (ERFThe Emissions Reduction Fund is a voluntary scheme that aims to provide incentives for a range of organisations and individuals to adopt new practices and technologies to reduce their emissions. More).
Key Takeaways from the quarterly report are:
- Auction 12, held on 12 and 13 April 2021, contracted 6.8 million tonnes of forward carbon abatement from 10 contracts at an average price of $15.99 per tonne, for a total commitment of $108 million.
- The Regulator expects the ERF to deliver Australian Carbon CreditA certificate that is equivalent to 1 tonne CO2-e. Credits often refer to instruments issued under a cap and trade scheme, where companies are allocated credits up to their emission cap. If they exceed the cap they need to purchase more credits. More Units representing 17 million tonnes this year, an increase of more than 6% on the record 16 million tonnes of 2020
- The Large-scale Renewable Energy Target (LRETThe Large-scale Renewable Energy Target (LRET) incentivises the development of renewable energy power stations in Australia through a market for the creation and sale of certificates called large-scale generation certificates (LGCs). More) is on track to drive down emissions by 24.3 million tonnes – also an increase of 6%
- The third key pillar of the government programs – the Small-scale Renewable Energy Scheme (SRESSmall-Scale Renewable Energy Scheme More) – is expected to provide the largest growth in emission reductions, with its 15.8 million tonnes of savings representing a 12% increase from 2020
- Rooftop solar was the strongest growth area under the SRES umbrella, with 792 megawatts (MW) worth installed in the first three months of 2021 – up 28% on the same period last year
- A total of between 3.5 and 4 gigawatts (GW) of rooftop solar capacity is now expected to be added across the country this year
The report also showed the Large-scale Renewable Energy Target of 33,000 gigawatt hours (GWh) was met by the end of January and that Australia has added a record 7.0 GW of renewable energy capacity in 2020. This is expected to result in an increasing oversupply in Large Scale Generation Certificates (LGCs) and may result in a softening of the LGCLarge-scale Generation Certificate under the Australian Renewable Energy Target. wholesale price over time.
No major large-scale renewable energy projects reached final close in the first quarter of the calendar year, but the Regulator expects between 2 and 3 GW of capacity will come online by the end of 2021 amid strong indications of healthy investment.
Voluntary private and state and territory demand for Australian Carbon Credit Units (ACCUs) and large-scale generation certificates (LGCs) reached record highs, rising 39% compared to the same quarter last year to 532,000 units and certificates.
Part of this was attributed to significant corporate commitments, with Coles Group becoming the latest major supermarket to commit to a target of net-zeroNet-zero is a term meaning to get to zero emissions, there is no current standard on what getting to net-zero means. For governments a net-zero target is one that covers all scope 1 emissions in their jurisdiction. For business it usually covers scope 1 and 2 emissions, although some companies also include some scope 3 emissions. The Science Based Targets Initiative is currently working on a standard for companies. More emissions by 2050, joining Woolworths Group and ALDI.
The three major supermarket chains were responsible for a combined 1% of Australia’s reported emissions in 2019-20.
The Clean Energy RegulatorThe Clean Energy Regulator is the Australia Government body responsible for accelerating carbon abatement for Australia through the administration of the National Greenhouse and Energy Reporting scheme, Renewable Energy Target and the Emissions Reduction Fund. More is now assessing expressions of interest for the development of an Australian carbon exchange, with predictions that the implementation of such a program could slash business costs by as much as $100 million by 2030.
The exchange would make trading of Australian carbon credit units simpler and reduce transaction costs to support the rapidly increasing voluntary demand from the corporate sector.
More information on the Clean Energy Regulator’s March Quarter 2021 Quarterly Carbon Market Report can be found in the highlights video below or here.
