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CHAPTER 2-MITIGATING CLIMATE CHANGE
AUSTRALIA’S CLEAN ENERGY FUTURE POLICIES
The objectives of the Clean Energy Future program are to “…support Australian businesses and households to reduce their carbon pollution, to create the new green-collar jobs of the future and to transform our economy.” (footnote 5)
The Clean Energy Future policies aim to achieve this through:
Limiting greenhouse gas emissions into the atmosphere requires broad-based action across many sectors of the global economy. In Australia, it is a major national undertaking that involves households, businesses, communities and governments. There is a demand for reliable statistics that can support the measurement and analysis of the drivers and the social and economic consequences of climate change and the related mitigation (and adaptation) measures.
The statistics required to provide the evidence for policy development and research cover a very wide range of scientific, economic and social data. No one statistical framework can hope to embrace such a range of information needs. The System of Environmental-Economic Accounting (SEEA) can serve as a useful high-level tool for monitoring, measuring and analysing the relationship between climate change policies and the economy because it was specifically designed to highlight the interaction between the environment and economic and human activity more generally.
As a statistical system the SEEA is comprehensive in that it encompasses all known aspects of the environment-economy interaction and uses concepts and classifications consistent with the Australian System of National Accounts and other economic data produced by the Australian Bureau of Statistics (ABS). The Australian implementation of SEEA to date is incomplete, but it already includes a number of key accounts relating to aspects of climate change including, energy, water and land use. Many of the primary data for these accounts are collected by other government agencies and assembled in SEEA accounts by the ABS.
This chapter focuses on the environmental-economic accounts that can help inform the Australian Government's climate change mitigation policies, namely: emissions accounts, energy accounts and environmental expenditure accounts. It also briefly touches on carbon accounts which are in development in Australia and around the world. Chapter 3 explores environmental-economic accounting in the context of climate change adaptation policies.
WHAT CAN ENVIRONMENTAL-ECONOMIC ACCOUNTS DO?
SEEA accounts can be used to help measure and inform research and policies on mitigation activities from various vantage points. Examples of questions the accounts can help answer include:
The data presented below are taken from the ABS system of environmental-economic accounts. They complement data produced by the Department of Climate Change and Energy Efficiency and the Bureau of Resources and Energy Economics.
DECOUPLING GHG EMISSIONS
A carbon price is the first element of the Government's plan for a clean energy future, and is expected to trigger a broad transformation of the economy by breaking the link between greenhouse gas emissions and economic growth. Greenhouse gases (GHG) include carbon dioxide, methane, nitrous oxides and fluorinated gases.
In Australia, total emissions of GHG, excluding changes due to land use and land use change and forestry (LULUCF), have increased by 33% between 1989-90 and 2008-09(footnote 6) (see Figure 2.1). During the same period, economic activity as measured by gross domestic product (GDP) increased by 83%. The phenomenon, where the economy grows at a rate faster than the related pollution or resource use (e.g. water or energy) is known as decoupling. This can be caused by either a structural change in the economy (for instance, that the service industries have grown more strongly than higher emitting industries) or by the adoption of technological innovations by businesses and/or a combination of both. Overseas this type of analysis has been undertaken, for example by the statistical office of the Netherlands(footnote 7) .
In the case of Australia, the decoupling is relative, as greenhouse gas emissions are increasing but at a lower rate than economic activity (as measured by GDP). Absolute decoupling would require greenhouse gas emissions to be stable or to decrease while economic activity increases.
Data from the National Inventory by Economic Sector(footnote 8) show that, in 2008-09, the Electricity, gas, water and waste services industry had the highest greenhouse gas emissions of any industry, followed by Agriculture, forestry and fishing and Manufacturing (see Figure 2.2). These three industries together account for 75% of emissions but around 15% of total gross value added and employment in the Australian economy. The Commercial and services industries account for 70% of all employment and about 55% of gross value added (see Figure 2.2). However, these and other industries, as well as households, can be seen as indirectly responsible for the emissions of the electricity industry. In view of this, various techniques have been used to apportion emissions from electricity generation to the industries using electricity, since the electricity produced is ultimately consumed by industries and households. This has been done in the National Inventory by Economic Sector Gas Accounts produced by the Department of Climate Change and Energy Efficiency, but is not presented here.
It should be noted that industry gross value added and employment data presented in the industry profiles are fully consistent with the System of National Accounts (SNA 2008). However, the estimate of GHG emissions is based on Kyoto Protocol Accounting (excluding land use, land use change and forestry (LULUCF). The Kyoto reporting follows the territorial principle while the National Accounts follows the resident principle. In particular, GHG emissions from international transport and CO2 emissions from biomass used as fuel are excluded from the data on a Kyoto Protocol basis. There are also some differences with the national accounts in the assignment of emissions to individual industries (e.g. transport).
The ABS intends to use the greenhouse gas emissions data from the Department of Climate Change and Energy Efficiency to create a SEEA-style account for greenhouse gas emissions in the future. The SEEA-style accounts will also include the conceptual adjustments to the data to align it as closely as possible with the economic concepts and industries in the Australian System of National Accounts. A table reconciling the two accounts (i.e. the ABS SEEA based accounts and Department of Climate Change and Energy Efficiency's Kyoto protocol based accounts) will be produced as part of the set of environmental-economic accounts planned by the ABS.
GREENHOUSE GAS INDUCED BY FINAL DEMAND
The measure of greenhouse gas directly emitted by Australian industries and households and the changes in emissions levels over time is a key data source used to develop and analyse policy. This is often referred to as the production approach as it measures emissions that occur directly from Australian production and directly from Australian households (e.g. the combustion of fossil fuels in private vehicles).
It is also possible to look at emissions occurring through the final consumption of goods and services by Australian households and governments. For example, the cumulated emissions from the production of manufactured food products, including from agricultural production, manufacturing processes, transport and retailing is attributed to the final consumer. This shifts the focus of the analysis to the emissions resulting from producing goods and services to meet final demand, including emissions embodied in imports and exports. Ultimately, industries exist to satisfy consumption in Australia and abroad. The international transfer of environmental costs by a country can be addressed by considering its environmental balance of trade.
Figure 2.3 illustrates the relationship between the production and consumption approaches to measurement.(footnote 9)
The ABS is investigating the possibility of identifying and measuring emissions according to the consumption approach using environmentally extended input output analysis. What the analysis would show is how much greenhouse gas emissions are produced by Australian resident businesses and households, how much of these emissions are associated with goods and services leaving the country through exports, how much emissions are generated elsewhere through imports and how much emissions are occurring both nationally and internationally in order to meet the demands of Australian consumption. The ABS has published a similar analysis in the past.(footnote 10)
ENERGY USE AS A MAJOR DRIVING FACTOR OF GHG EMISSIONS
Energy derived from the burning of fossil fuels contributed 67% of Australia's greenhouse gas emissions in 2008-09 and fugitive emissions (e.g. gas escaping from coal mines and oil wells) from fuels contributed a further 7% (Kyoto Protocol basis including LULUCF). Given the dominance of fossil fuel combustion as a source of emissions, energy policy and research is directed at a re-engineering of industry production processes to be more energy efficient and to rely more on renewable sources of clean energy. In addition, there are policy issues around the future availability and prices of petroleum products.
The SEEA Central Framework allows the compilation of energy accounts and air emissions accounts on a consistent basis. In practice, however, the data for energy and air emissions may come from different sources which are prepared using different concepts to meet different regulatory needs of governments. In this case, the SEEA has a role as a data integrating framework. Experience has shown that the resolution of inconsistencies is often a difficult and time consuming process, but it can be done. The process can have positive benefits for the producers and users of data. The confrontation of data from different sources and the resolution of inconsistencies is an ongoing process in the ABS and other agencies.
The following information is drawn from the SEEA-based Energy Account Australia (ABS cat. no. 4604.0). It can be used for monitoring the overall development of the Australian energy industry and tracking the progress of policies to support clean technologies.
DOMESTIC CONSUMPTION OF ENERGY
In relation to Australia's greenhouse gas emissions, the main drivers are Australia's domestic consumption of energy and the sources from which that energy is derived.
Total domestic energy consumption in 2008-09 was 8,207 PJ, up nearly 5% from 2001-02. The main consumers of energy(footnote 11) in 2008-09 were Manufacturing (35%), Electricity, gas and water supply (32%) and households (12%).
In order to better understand the impact on greenhouse gas emissions from energy consumption, it is helpful to break total energy consumption further into its primary and secondary energy components. Primary energy products are forms of energy obtained directly from nature, including coal, natural gas, solar and wind energy, crude oil, uranium and biomass. Secondary energy products are derived from primary energy sources and include refined products (e.g. petrol, diesel and aviation fuels), electricity, liquid/gas biofuels and coal by-products. Greenhouse gas emissions from the direct combustion of primary fuels, notably coal and gas, are classified as scope 1 emissions, while emissions from the generation of purchased electricity are classified as indirect emissions. While the consumption of electricity is clean at the point of use, it is not at the point of generation (from combustion). Therefore, the greenhouse gas intensity of generation is highly dependent on the primary energy source used. In Australia, coal is still the principal primary energy source, accounting for 76% of electricity generation in 2008-09.
Australian domestic primary energy consumption in 2008-09 was 5,325 PJ which was virtually unchanged from 2001-02. However, there were significant changes in the use by industry and sector and the types of energy used. For example, large rises in energy consumption by Mining (88%), households (32%) and Electricity, gas and water (13%) were largely offset by falls in Manufacturing (7%). The use of natural gas rose 46%, while black coal fell nearly 10%. The use of biomass and solar energy rose 13% and 667% respectively (the latter from a very low base).
Figures 2.4 and 2.5 show the amount of energy consumed by selected Australian industries. Manufacturing was the largest consumer of primary energy in 2001-02 but the Electricity, gas and water industry was the largest consumer of primary energy in 2008-09.
Households accounted for 26% of secondary energy consumption in 2008-09. The major industry consumers of secondary energy were Manufacturing (20%), Transport (17%) and Mining (8%).
Considerable energy losses occur in the transformation of primary energy into secondary energy. This applies particularly to electricity supply, where losses occur at the power station and in distribution. This is reflected in the data for secondary energy use by the Electricity, gas, water and waste industry in Figure 2.5.
AUSTRALIAN ENERGY SUPPLY
In 2008-09 Australian energy supply comprised of domestic production of 17,822 PJ and energy imports of 1,915 PJ. Over 77% or 13,803 PJ of domestic production (in energy terms) was exported in 2008-09. In particular most black coal and uranium is exported.
Over the period from 2001-02 to 2008-09, Australia's primary energy supply (domestic production plus imports) grew by an average of nearly 3% per annum. While Australia is more than self-sufficient for most energy products, a considerable proportion of crude oil and refined products supply is met by imports. Over the period crude and refined petroleum imports grew 36%(footnote 12) .
Figure 2.6 shows a relatively consistent energy mix over this period. Coal accounts for 50% of energy production, a proportion that has changed little over the last decade. Petroleum's (crude oil, condensate and liquefied petroleum gas (LPG) proportion of energy production has decreased from 9% to 6%, while natural gas has slowly increased from 9% to 11%. In terms of energy content uranium accounts for approximately one quarter of total primary energy supply. Renewable energy has increased by 24% over the period but still represents just over 1% of total primary energy supply.
Energy intensity - the use of energy per unit of economic production - is shown in Figure 2.7 below. The energy intensity of Australian industries has decreased by nearly 40% during the period from 1978-79 to 2008-09, indicating a more energy-efficient economy. Industries with high energy intensity would be expected to be most affected by increases in the cost of energy, including those resulting from the introduction of a carbon price.
ENERGY AND FOREIGN TRADE
Overall, Australia is a net energy exporter of fossil fuels(footnote 13) , driven mainly by the export of coal and gas. In monetary terms in 2009-10, the net balance was $29b, that is, Australia exported more fossil fuel energy than it imported.
Coal, coke and briquettes were the most valuable energy export at $37b in 2009-10, representing over 64% of the total value of exports in that year. Since 2000-01, the value of exports of coal, coke and briquettes has increased by 236%. Over the same period, the value of gas exports has risen by 154% to reach $8.9b. The value of crude oil and refined products exports was $11.4b in 2009-10, a similar value to 2000-01. These data are in current price terms, and therefore reflect changes in commodity prices as well as underlying volumes.
While Australia is a producer of crude oil, it consumes a significant proportion of imported crude and refined products (especially diesel and petrol). In 2009-10, crude oil and refined products accounted for over 94% of total energy imports. Crude oil and refined products imports over the 10 year period have grown by 150%, highlighting Australia's dependency on imported petroleum. The greater Australia's dependency upon imported energy, the more exposed Australia becomes to changes in global availability of petroleum.
Figure 2.8 shows the time trend in the trade balance for fossil fuel energy products.
Promoting innovation and investment in renewable energy is a key part of Government policy to reduce Australia's greenhouse gas emissions. Figure 2.9 to 2.11 use data from the ABS energy account to produce measures of the Australian energy industry as it progresses through this structural change.
Figure 2.9 presents Australian energy supply split by fossil fuel and renewable energy sources. Between 1989-90 and 2009-10, total energy consumption in Australia rose over 50% and while the energy sourced from renewables increased significantly, the growth in fossil fuel use was the main driver of the change.
Figure 2.10 shows the change in the use of fossil fuels versus renewables between 1989-90 and 2009-10. Over the period the use of energy sourced from fossil fuels jumped 52%.
The consumption of energy from renewable sources increased by 23% between 1989-90 and 2009-10. However, its proportion of Australia's total net energy consumption remained largely unchanged, at around 5%. The largest source of renewable energy supply is biomass and biofuels, collectively accounting for 74% of renewable energy supply in 2009-10, followed by hydroelectric power at 16%. While biomass is the majority of total renewable energy supply, hydro energy is the largest contributor to renewable electricity generation.
Figure 2.11 shows the amount of electricity generated from each renewable source as well as the percentage of total electricity generated from renewable sources. Historically, renewable electricity production has fluctuated based on the supply of hydroelectric power. In recent years wind energy has grown as a source of electricity, accounting for 24% of renewable electricity in 2009-10.
MONETARY FLOWS OF ENERGY
Both energy and environmental expenditure accounts can be used to highlight the potential of environmental-economic accounts for analysing the impacts of a carbon price (on both pollution levels and economic activity), including providing baseline data for the time before the introduction of carbon pricing. Among other things, these accounts can identify the expenditures and the mix of energy products used in the main industry groups and households of the Australian economy.
In 2008-09 expenditure by industries was $87b(footnote 14) . While not covering the entire economy, Figure 2.12 shows that the industries spending most on energy were: Manufacturing, Commercial services and Transport and storage.
Renewable energy represented less than 0.1% of the total expenditure (much being self-sourced). Diesel (26%), electricity (16%), gas (7%) and petrol (6%) are the key energy expenditures for Australian industries.
In addition to tracking expenditure on fuels and energy, a more complete suite of environmental-economic accounts could also track expenditures by various sectors of the economy on efforts to reduce carbon pollution. The ABS is investigating new statistics on emission trading and emission certificates under the framework of the System of National Accounts and the SEEA.
ENVIRONMENTAL EXPENDITURE ACCOUNTS
Environmental protection and natural resource expenditure accounts track financial transactions related to activities aimed at reducing environmental impacts or protecting our natural resources. Environmental expenditure accounts are not currently produced for Australia, but have been in the past (see ABS cat. no. 4603.0 Environmental Protection, Mining and Manufacturing Industries, 2000-01). Expenditures related to greenhouse gas mitigation would be an important component of these costs. Some energy reduction and energy efficiency measures employed by Australian industry are reported in Figure 2.13 below.
ENERGY AND TRANSPORT-RELATED TAXES IN AUSTRALIA
Taxes on energy products and transport are one way for governments to influence the use of fossil fuels. The SEEA defines an environmental tax as a tax:
Energy and transport-related taxes in Australia are in two main groups:
Figure 2.14 presents data for energy and transport-related taxes in Australia according to the SEEA. The largest contributors are taxes on crude oil and LPG. The monitoring and analysis of energy-related taxes, as well as subsidies and other transfer payments can help monitor Government policies and provide consistent time-series information for analytical purposes.
LAND AND REDUCING GREENHOUSE GAS EMISSIONS
The Carbon Farming Initiative (CFI) allows farmers, forest growers and land managers to earn carbon credits by storing carbon or reducing greenhouse gas emissions on the land.
The ABS has been funded by the Department of Agriculture, Fisheries and Forestry (DAFF) to undertake a biennial Land Management Practices Survey (LaMPS) to support evidenced-based policy and decision making in relation to the CFI. Outputs from the survey will be used along with other information in making common practice assessments under the CFI and will also contribute to an improved information base on management of Australia's agricultural land.
The first LaMPS will provide baseline data for 2011-12, with two subsequent surveys to be undertaken for 2013-14 and 2015-16. Outputs from the LaMPS will include data on on-farm land management practices such as livestock manure management, fertiliser management, feedstock management for intensive and extensive livestock operations, and pasture and cropping practices at regional levels.
While the survey has not been designed to produce environmental accounts, the results could be incorporated into SEEA accounts that could potentially be developed in the future, including accounts for forest and other wooded land, timber resources and carbon.
The initial focus of the United Nations Framework Convention on Climate Change (UNFCCC) was to reduce fossil fuel emissions, this being the single biggest source of human induced greenhouse gas emissions. Under the guidance of the Intergovernmental Panel on Climate Change (IPCC), a flows based global accounting system was established(footnote 15) . Since the initial global climate change negotiations, land-based mitigation opportunities have received increasing attention by policy makers and researchers, for example the Australian Government's Carbon Farming Initiative.
A more comprehensive view of carbon accounting could extend the current flows-based accounting to cover both stocks and flows of carbon, and in particular consider the characteristics of different carbon stocks.
Large amounts of carbon flow naturally and continuously between the geosphere (e.g. fossil fuels), biosphere (e.g. plants and animals), and the atmosphere. This is commonly called the global carbon cycle, and it includes many complex interactions, with different types of carbon cycling at different speeds.
Within the biosphere, different ecosystems vary in their longevity and capacity to build and maintain carbon stocks. This presents a significant set of choices for decision makers. In relation to land, this could be competing claims for agriculture, settlement or preservation of ecosystems. Some ecosystems, if removed, may not have the capacity to regenerate and return to their earlier carbon stock levels. A set of carbon stocks accounts can provide policy makers with important information for making such decisions.
An experimental framework for a carbon asset account is presented in the Appendix. It is based on the carbon accounting being developed as part of the SEEA ecosystem accounts(footnote 16) . This account provides comprehensiveness in the recording of the opening and closing stock of carbon with the various changes between the beginning and end of the accounting period recorded as either additions to the stock or reductions in the stock. Carbon reservoirs are disaggregated to two levels to enable reporting of the stock levels and changes for different types of geocarbon (Oil, Gas, Black coal, Brown coal and Other) and to identify biocarbon (carbon in biomass) stocks in terrestrial and marine ecosystems by type (Natural, Semi-natural and Agricultural). There is potential to disaggregate further geocarbon and biocarbon. 'Accumulations in economy' are the stocks of carbon in products such as refined oil in storage, concrete, wood products, steel, bitumen and landfill.
Researchers and policy makers can use carbon stock accounts together with measures of carbon carrying capacity(footnote 17) and land use history to:
Using available data for Australia a partial carbon asset account may be produced. More research is necessary to provide estimates of carbon in terrestrial and marine ecosystems. Disaggregating biocarbon stocks into Natural, Semi-natural and Agricultural also presents some methodological challenges that could possibly be addressed through a linked land cover account.
The development of a more comprehensive set of carbon accounts provides the opportunity for the statistical, economic and scientific communities to work more closely together on consistent standards, definitions, coverage and reporting periods across Australia and for the rest of the world.
1 CSIRO/Bureau of Meteorology, 2010. State of the Climate; H. Cleugh, M. Stafford Smith, M. Battaglia and P. Graham, 2011. Climate Change: science and solutions for Australia. CSIRO Publishing, Collingwood. <back
2 National Research Council of the National Acadamies, 2009. Restructuring Federal Climate Research to Meet the Challenges of Climate Change, National Academy of Sciences, Washington D.C.; Royal Society, 2010. Climate Change: a summary of the science: Royal Society, 2009. Preventing Dangerous Climate Change: The need for a global agreement. <back
3 Different greenhouse gases have different global warming potentials. A greenhouse gas equivalent measure (CO2 equivalent) is used to enable aggregation of different gases to obtain a total global warming potential. <back
4 Australian Government, 2012. Working together for a Clean Energy Future. Accessed 4 April 2012. <back
5 Department of Climate Change, 2012. Reducing Australia’s Emissions. Accessed 4 April 2012. <back
6 Based on data published by the Department of Climate Change and Energy Efficiency. <back
7 Statistics Netherlands, 2011. Environmental Accounts of the Netherlands 2010. <back
8 Department of Climate Change and Energy Efficiency. <back
9 Diagram based on Swedish Environmental Protection Agency report 5992, 2010, The climate impact of Swedish consumption. <back
10 ABS, 2001. Energy and Greenhouse Gas Emissions Accounts, Australia, 1992–93 to 1997–98 (ABS cat. no. 4604.0). <back
11 Domestic energy consumption includes energy consumed by Australian industry, households and government. <back
12 While Australia is a net importer of crude and refined petroleum, it exports large quantities of crude and some refined products. <back
13 Fossil fuels defined by the Standard International Trade Classification categories 32, 33 and 34. <back
14 Industry expenditure data from Energy, Water and Environment Survey (EWES) survey does not cover all industries see Energy, Water and Environment Management (ABS cat. no. 4660.0) for details.<back
15 IPCC 2006, 2006 IPCC Guidelines for National Greenhouse Gas Inventories. <back
16 Expert Group Meeting on Ecosystem Accounts, London 5–7 December 2011. <back
17 The mass of biocarbon able to be stored in the ecosystem under prevailing environmental conditions and natural disturbance regimes, but excluding anthropogenic disturbance (Gupta, R.K. and Rao, D.L.N., 1994, Potential of wastelands for sequestering carbon by reforestation. Curr Sci 66:378–380). <back
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