Australia – an Energy Snapshot

With the world’s third largest coal reserves and extensive natural gas and oil reserves, Australia historically has depended on fossil fuels for its energy needs and economic growth. In 2021, coal, oil, and natural gas accounted for 92% of its primary energy needs, while the country was the world’s largest exporter of both coal and LNG. More than two thirds of Australia’s energy production is exported, with China, Japan and the Republic of Korea the leading destinations for its LNG.

Australia’s long-term plan in recent years had been to grow the contribution of renewable energy, while increasing the use of natural gas as a stable transition fuel with a lower carbon footprint than coal and oil to meet its commitments under the Paris Agreement. Successive 2020-21 and 2021-22 Federal Budgets were focused on a ‘gas-fired recovery’ from COVID-19. Simultaneously, government investment in new technology and efficiency would drive down emissions, while new low-carbon energy sources such as hydrogen were developed.

But a change of government in May 2022 has accelerated timelines for several of Australia’s key climate targets. Under the Climate Change Bill passed by the Labor Government, a 43% reduction target in 2005 emissions levels by 2030 has now been legislated, as has the target of net zero emissions by 2050. The government is also targeting 82% renewable power generation by 2050 and has introduced a AUD20 billion Rewiring The Nation Fund to upgrade the national electricity grid in preparation.

Australia has a difficult balance to achieve. It needs to protect the country’s economic future in the short and medium term, which will depend on fossil fuel exports, while meeting new climate targets and managing strengthening activist pressures to move more swiftly to a carbon neutral future. Prime Minister Anthony Albanese has noted the importance of gas projects – both current and future – to “keeping the lights on”, while also pursuing ambitious renewable energy targets.

Australia had been planning a gradual phase-out of coal-fired power plants, a process that will be accelerated under the Labor Government’s Powering Australia plan (this is already playing out at a State level). The Government’s first Federal Budget in October contained a string of climate-related commitments, including a AUD1.9 billion investment in a Powering The Regions fund to help regional industry access opportunities in decarbonisation, more than AUD300 million in commitments to community batteries and solar banks, more than AUD100 million to develop a ‘new energy’ workforce and a variety of investments in lower-emission transport.

The Labor government is also taking steps to reform Australia’s Safeguard Mechanism, which requires Australia’s largest greenhouse gas emitters to keep their net emissions below a baseline level. The changes, set to take effect in July 2023, reset existing baselines and include the introduction of a 4.9% decline rate each year to 2030, designed to offset economic growth. The reform has been the cause of some industry concerns but Australian resources advocacy organisations have stated their willingness to work with government as the new framework takes shape.

The other key Australian Government changes of note in recent times – and ones of potential consequence for Asian importers – relate to attempts to cap domestic gas prices and ensure adequate domestic supply. The unintended outcomes of these changes could be lack of necessary investment in future gas projects and disruptions to global LNG delivery chains, concerns about which have been raised by ANGEA and other industry bodies.

With its plentiful stocks of sunshine, experience in renewable energies and existing skilled workforce from the resources sector, Australia has ambitions to be a major producer of clean hydrogen by 2030 – as outlined in its National Hydrogen Strategy. It is already collaborating with Asian countries, particularly Japan, around a series of hydrogen and ammonia initiatives.

ANGEA is an industry association representing LNG and natural gas producers, energy buyers, suppliers and companies in APAC. Based in Singapore, it works in partnership with governments and societies across the region to deliver reliable and secure energy solutions that achieve national economic, energy security, social and environmental objectives and meet global climate goals.

Photo of Canberra’s Parliament House by Michael on Unsplash