What policy is needed to get Australia to net zero by 2050?

With a new federal government comes a fresh approach to Australia’s energy and climate policy. We now have the opportunity to identify a clear pathway to net zero emissions by 2050.

As the Albanese Labor Government locks in a 43% reduction target, state and territory governments are embracing more ambitious renewable targets and technologies.

So what policies are required to help us reach our climate goals – particularly in hard to abate, high-emissions industries?

Industry figures sat down to discuss the issue in a lively panel discussion at the recent Industrial Net Zero Conference:

• Pauline Kennedy, Low Carbon Policy and Advocacy Manager at BP Australia
• Brian Morris, Division Director of the Green Investment Group at Macquarie Capital
• Abhi Nithyanand, Head of Advisory Sustainability and Energy at the Renewable Energy Hub
• Mel Rohan, Senior Public Affairs Officer Australia at the Royal Institution of Chartered Surveyors (RICS)

The session was moderated by Jackie McKeon, Program Director at the Business Renewables Centre Australia (BRC-A).

Here's an overview of what they had to say.

Policies to provide the certainty needed to justify investment

As companies like BP pursue their own customer-centric, net zero roadmap, government action is critical to support business. Pauline Kennedy pointed out that policy needs to be "credible and aligned, stable and enduring".

"With lots of long-lived assets in the room, with really sizable investments, we need stability and confidence in the direction we’re travelling,” she said.

Policy needs to be unified, rather than ad hoc.

“With a fragmented policy so far, we need a centralised framework to give consistency on both the supply and demand side,” Abhi Nithyanand said.

Investment is also needed across new renewables, wind, solar, storage and transmission.

The question of market-based mechanisms and carbon prices

The market is already dealing with its own carbon pricing, however there is still scope for action.

“Not every sector can get to zero emissions, so credible certificates are part of the decarb solution. We need clarity around the process, to ensure companies don’t purchase certificates that aren’t credible. Not all offsets are created equal,” Brian Morris said.

Pauline said the corporate sector had done a "pretty good job on its own".

"But policy-based incentives could be very valuable to support emissions reductions across multiple areas to provide a level playing field."

Abhi agreed, saying market-based pricing is already happening.

"I’m not sure we need central government policy here. Just support for existing market-based mechanisms."

Can carbon reduction mandates drive innovation?

Mandates or not, companies are driving technological innovation themselves, spurred on by stakeholders and customers.

"We all want commercially viable solutions to climate challenges, and this push will continue, driven by entrepreneurial spirit and competitive advantage,” Brian said.

Pauline said corporates want market-based approaches to carbon pricing, but mandates can be complementary.

"Other countries are using mandates which are quite targeted, in hard to abate sectors, like aviation. By creating demand to help scale production, the sector then has viable medium to long term options that are cost effective."

Are there levers that won't drive manufacturing offshore?

Panellists noted that specific action was helpful, with business already undertaking decarbonisation and dealing with its consequences.

Mel Rohan said it was important that Australian businesses are allowed the time to re-engineer; “Investment can provide intelligent direction and breathing room. We need solutions to balance things out while waiting for important technological changes. We also need greater transparency about what people are doing, and methodologies to optimise the materials and tech we do have.”

Pauline agreed that remaining competitive was a key issue; “We want policy to help local manufacturers remain competitive in a decarbonising global economy. All economies are having to address carbon leakage. With everyone in the same boat, the risk of carbon leakage is likely to be lower over time,” she said.

Sharper government emissions reports

Clarity and credibility have emerged as essential elements in emissions reporting, going forward. A simpler reporting framework is required to help reduce confusion and inconsistency.

“International consistency of reporting is important, particularly relating to exports. Credible data is needed for any market based approach, to provide the incentive,” Pauline said.

According to Mel, the federal government could play a greater role in this.

“The federal government could fund a central carbon database, paying to create the data rather than relying on private enterprise to do it. This would offer consistency in embodied carbon reporting.”

The panel want future policies to support businesses to decarbonise, offering certainty without overburdening.

It’s a delicate path to tread.