MARKET UPDATE: Emissions Policy Confidence, or Complacency?

Given lower than expected historical emissions, Australia will be able to increase its emissions from 2014 levels and still meet its target for the second commitment period (CP2) of the Kyoto Protocol. This has led to confidence that “past practice” will see Australia meet its 2020 emissions reduction task, with Environment Minister Greg Hunt stating that Australia will “achieve if not exceed our targets”.

While economic factors have been the major contributor to Australia’s decline in emissions, it would be complacent for policymakers to assume that ongoing emissions reductions will continue to occur beyond 2020 without effective policy to achieve such an outcome.

While the allowance for Australia’s emissions to rise and still meet the CP2 target will ease some pressure, analysis indicates that confidence in meeting Australia’s post-2020 abatement task may be misplaced, with demand for Australian coal and LNG exports expected to drive growth in direct combustion and fugitive emissions.

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