UPDATE: The Price of Emissions Growth – Accounting to 2020

The government’s revised emissions projections, to be released next week, are expected to indicate that Australia’s abatement challenge has again fallen, with Greg Hunt commenting that Australia’s abatement task is expected to fall “below zero”.

We continue to estimate that more than 200 million tonnes (Mt) may be removed from Australia’s 2020 abatement task (June Market Update) driven by reduced industrial activity. This is expected to create a shortfall of under 50 Mt to the 2020 target, which Australia will be able to overcome by utilising an “accounting benefit” for past performance earned under the first period of the Kyoto Protocol (2008-12).

While Australia will meet its 2020 target, absolute emissions will not reach minus 5 per cent by 2020. We project that national emissions will increase from minus 2 per cent on 2000 levels to 4 per cent above 2000 levels by 2020.  Emissions growth will be driven by increased activity in the land-clearing, generation and export sectors, with new LNG and Coal facilities – including Gorgon, Wheatstone, APLNG, Maules Creek and Grosvenor – becoming operational between 2015 and 2017.

While immaterial to Australia’s 2020 Kyoto commitment, short-term growth will place significant pressure on Australia’s 2030 emissions target, given