national Policy update

Energy briefing update – September 2022

• Emissions reduction targets become law

• Changes to the Safeguard Mechanism for large emitters

• Vehicle fuel efficiency standards are coming

• Victoria to move away from fossil gas

• NSW pushing for all-electric in new commercial developments

Last week’s passage of the Climate Change Bill 2022 and the Climate Change (Consequential Amendments) Bill 2022 puts emissions reduction targets of a 43 per cent reduction from 2005 levels by 2030, and net zero by 2050, into Australian law.

The Bills demonstrate the Commonwealth Government’s intention to take climate change seriously and provide clear signals for businesses to make the investments needed to achieve a net zero economy.

In support of achieving the ambitious emissions reductions targets, the Commonwealth has opened consultation on its proposed changes to the Safeguard Mechanism. The mechanism applies to 214 of Australia’s largest emitting facilities – primarily in coal mining, oil and gas, other mining, mineral processing, chemicals, cement and manufacturing. It currently requires these facilities keep their emissions under a baseline level. It does not, however, require them to reduce emissions.

Under the proposal, baselines will decline so facilities are required to reduce their emissions over time. Facilities that reduce emissions faster than baselines decline will be issued tradeable credits, which can be bought and used by facilities unable to meet their baseline. There will also be further flexibility measures to allow businesses to meet their obligations.

For a fuller understanding of  the Safeguard Mechanism, we can recommend the latest episode of the Let Me Sum Up podcast with EEC CEO Luke Menzel, Property Council of Australia’s Frankie Muskovic and Ai Group’s Tennant Reed. This episode also features veteran Guardian Australia Political Editor Katharine Murphy, and provides comprehensive context and history of the Safeguard Mechanism in Australia.

The government has also announced consultation on fuel efficiency standards for light vehicles. Currently, Australia is the only OECD nation without a mandatory fuel efficiency standard of some sort, and Australian vehicle fuel efficiency remains relatively high by global standards. Typical mandatory fuel efficiency standards require vehicle suppliers to meet an average fuel or emissions efficiency, and are seen as an important policy to support and accelerate the adoption of low- or zero-emissions vehicles. The Grattan Institute hosted a webinar outlining the benefits of an emissions ceiling to encourage uptake of electric vehicles (EVs) – you can read a summary of the event here.

In July, the Victorian Government launched its Gas Substitution Roadmap, which charts the state’s course away from the use of fossil gas – or natural gas – over coming decades. Victoria is heavily reliant on natural gas for space and water heating, with 61 per cent of the state’s natural gas used for residential and small commercial applications.

The transition away from fossil gas reliance has begun with incentives and support for gas substitution. In residential and small commercial applications, energy efficiency and substitution of gas appliances with electric replacements will be encouraged to take advantage of increasing amounts of renewable energy in the electricity grid.

For larger commercial and industrial users, energy efficiency initiatives will be complemented by a basket of anticipated technologies including renewable gases and hydrogen to support gas decarbonisation efforts, although these changes are further into the future.

Changes to the Victorian Energy Upgrades program will begin to encourage switching to electricity where possible, as well as a range of other government actions to increase electrification.

In August, the NSW Government released the new State Environmental Planning Policy for sustainable residential and non-residential development, which includes energy performance standards for large commercial developments, and requirements for certain developments to be all-electric or capable of converting to operate without fossil fuels by 2035.

The energy performance standards will impact offices with 1000m2 or more of net lettable area, and hotels with 100 or more rooms or serviced apartments. This policy builds upon the existing NABERS Energy rating that supports businesses with leasing energy efficient buildings.

Office-based businesses can check out the Offices sector spotlight to learn more about how they can leverage NABERS Energy ratings now.

So what?

Australian governments are rolling out policies and programs to drive down emissions. Developing an energy strategy enables businesses to make the most of the carrots – incentives – and avoid the sticks – regulation – by proactively managing their emissions reduction strategy.

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About Navigating a dynamic energy landscape

There is an enormous amount of information on energy in the public domain, yet it can be hard for business leaders to extract what matters for their businesses.

Navigating a dynamic energy landscape: a briefing for Australian businesses is an executive-level briefing designed to cut through the noise and help businesses confidently navigate Australia’s dynamic energy landscape.

The sector spotlights and other resources that accompany the briefing exist to support this aim.

This initiative is delivered by the Energy Efficiency Council with the support of industry and government.