Australia’s heavy industry can decarbonise 92% of its emissions by 2050, says a major report released today from a collaboration between academia, industry, finance and the government.

The modeling estimates it will need investment of some $20 billion a year over 30 years to get there, plus, it would create 1.3 million jobs. 

The ‘Pathways to industrial decarbonisation’ report came from a complex collaboration led by ClimateWorks, Climate-KIC and Monash University. It brought together CSIRO, investors AustralianSuper and CBUS, industry groups like AiG, as well as BHP, BlueScope, Orica, Wesfarmers Chemicals and Woodside Energy – to name just a few of the contributors. 

Plus, support from the government came through collaboration with the Australian Renewable Energy Agency (ARENA), which supported the launch of Australian Industry Energy Transitions Initiative (ETI) with $300,000 for its establishment and a further $2 million towards delivery of phases 2 and 3 of its research.

The Chairman of Australian Industry ETI is Simon McKeon AO, he’s Chancellor of Monash University, former CSIRO Chairman and former Australian of the Year. He knows all too well both the costs of inaction, as well as the huge opportunities around leading the transition. 

“Commitment from industry to the long-term transition is a positive step towards developing the

capabilities needed, avoiding the risk of stranded assets and higher long-term energy costs, and for ensuring a future in which Australian energy-intensive industries are competitive in a decarbonised world,” says Simon McKeon.

“With strong ambition, coordinated action and government support, industry emissions could be

reduced by up to 92 per cent by 2050, based on 2020 levels. This, with high quality and verifiable offsets for the remaining 8%, would transition industry to net zero emissions in   support of the ambition to limit warming to 1.5ºC.”

The Transition is Vital to Remain Competitive

In essence, the report and its proponents argue the pragmatic view that Australian industry has no choice but to act. Beyond the well-recognised physical risks of climate change, the simple economics of the transition mean that a heavily trade-exposed country like Australia must adapt to a carbon constrained world. 

The readers of OnImpact know this well, and the focus here is most often on the opportunities of leading this change, through investing in the most exciting clean energy and climate tech companies that this smart country has to offer. 

While startup innovation is one thing, it needs to operate in unison with a system-wide approach to the clean energy (and indeed clean industry) transition, and this is where this report steps in. 

With scenario modeling and a refreshingly ‘science-based’ approach to this vital issue, it shows a pathway towards net zero, but at the same time, it lays bare how difficult it will be. 

The research lays out three core scenarios: Incremental Scenario, Industry-Led Scenario, and Coordinated-Action Scenario. 

The energy and direction of the report is focussed on the latter as it’s the surest path to keep warming below 1.5°C, it looks at the importance of ‘coordination’ across a range of industries, as well as the need for government support. 

“The scale of emissions reductions needed in this scenario will require a transformational

shift in Australia’s energy system.” the report says.

The modeling suggests the transition will require investment in the vicinity of $625 billion by 2050. It’s an eye-watering figure, but it is brought into perspective when compared to some of Australia’s other recent major investment projects: $305 billion invested in new LNG projects (over 13 years), while the economic response to COVID-19 has pushed to $291 billion since the start of the pandemic.

The Pathway to Get There

The review covered Australia’s five major supply chains: iron and steel, aluminium, other metals, chemicals, and LNG; as a whole they generate around 44% of total national emissions. It covered 18 industry partners that represent approximately 22 per cent of Australia’s industrial emissions and approximately 32 per cent of the market value of the ASX100.

The group argues that the government’s net zero goals, and our country’s commitment to the Paris Agreement, can be met as long as they are given the right support. 

It identifies five objectives to enable heavy industry to transition to net zero emissions consistent with global efforts to limit warming to 1.5ºC. They are for Australia to: 

  • Set a strong, clear, enduring framework with a net zero emissions goal to align industry, finance and government 
  • Transition to the large-scale, cost-competitive, renewable energy system of the future 
  • Accelerate development and demonstration of the emerging technologies needed 
  • Drive deployment of low-carbon solutions, reduce barriers and support investment towards the transition 
  • Develop integrated net zero emissions industrial regions, supply chains and energy network solutions.

“This three-year program has shown that transitioning heavy industries in a carbon intensive

economy, like Australia’s, is a challenge that will require a transformational shift in the energy

System,” says Anna Skarbek, CEO, Climateworks Centre, which is based at Monash University. 

“This includes accelerated action on technology and investment, especially in targeted place-based approaches focused on common net zero goals.”

To get there, it highlights four core enablers to reach the goal:

  • Investment in technology and infrastructure
  • Continued action by the financial sector to support the significant capital investment needed, 
  • Partnerships and collaboration to solve problems that can’t be solved alone, 
  • An alignment of public policy and regulation

There’s a lot here – the data is impressive, and the collaboration between so many groups has given rise to a long series of recommendations that are focussed on reasonable. But of course, as with all long form reports, the focus must turn from ideas into action. 

Industrial companies don’t want to be first movers as they fear being uncompetitive, so coordination is vital. It’s a systems problem, so policy support will help. And there are gains from collective action, which means identifying net zero industrial precincts will help to drive innovation and coordinated action. 

It’s not a new economic challenge, Australia has always been an industrial heavy-weight, but also a climate laggard as the global trade incentives did not favor decarbonisation. But that’s now changing, and this research report is a valuable baseline for action. 

As the report says, we cannot afford to fail. 

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