Emissions trends and electricity sector

With the Federal Government’s Net Zero Plan soon to be released, the latest greenhouse gas emissions data has served to reinforce that it will require all sectors of the economy to reduce their emissions if Australia is to hit its 2030 target of a 43 per cent reduction on 2005 levels.

Snapshot of Latest Emissions Trends

The March 2024 Greenhouse Gas Inventory Quarterly Update (which also includes preliminary data through to the end of June) shows overall emissions only fell by 0.6 per cent in the 12 months to March, compared to the corresponding period a year earlier. This change means overall economy-wide emissions in the year to March 2024 were 28.2 per cent below the emissions for the baseline year of June 2005.

A key driver of emissions reductions has again been the electricity sector, with further renewable penetration seeing electricity’s emissions fall by 2.7 million tonnes of CO₂ , down 1.7 per cent over the course of the year[i]. This means emissions from the electricity sector have decreased 23.2 per cent, or 45.6 Mt CO₂, since June 2005 and after peaking in June 2009, emissions have been steadily falling (they are 28.6 per cent or 60.5 Mt CO₂ lower than that peak).

Partly offsetting these reductions has been the transport sector increasing its emissions by 2.6 per cent, continuing its upward trend since pandemic restrictions were lifted.

The graph below shows the percentage changes in sectoral emissions since 2005, excluding land use, land use change and forestry (LULUCF) which has seen dramatic falls in emissions and is considered a net carbon sink.

 Figure 1: Percentage change by sector (excluding LULUCF)

Other sectoral trends against 2005 levels are:

• Stationary energy[ii] (excludes electricity) – an increase of 22.4 per cent (largely as a result of increased LNG production).
• Transport – an increase of 19.7 per cent. After a brief pause because of Covid restrictions, transport emissions, since December 2020, have continued to grow steadily (although they remain slightly below pre-Covid levels).
• Fugitive emissions – an increase of 10.0 per cent. Emissions rose from 2015 with increased LNG exports but since 2019, emissions have seen substantial reductions, with stabilisation of flaring activity at LNG facilities and declines from underground mining.
• Agriculture – emissions are down 4.3 percent, attributed to falling livestock numbers.

Electricity Emissions

Despite the good overall decline in electricity sector emissions, the sector actually saw its quarterly emissions in March 2024 increase by 1.7 percent. This stemmed largely from the biggest jump in demand seen in a March quarter for the National Electricity Market (NEM) since 2020 and consequently an increase in the use of fossil fuel generation to help meet it. Generation in the NEM in the first quarter of 2024 was up 3.1 per cent. The key factor behind the higher NEM operational demand – demand for electricity from the grid rather than rooftop solar – was warmer than average weather early this year in Queensland and New South Wales. As a result, Queensland saw record demand of 11,005 MW on 22 January, up 9.3 per cent on the previous record. During the first quarter, operational demand in Queensland went past the previous record on three occasions.

Similarly, but separately, the Wholesale Electricity Market (‘WEM’) in Western Australia was also under strain due to multiple heat waves, which saw several operational demand records be set.   For example, WA reported record maximum operational demand of 4,233 MW on 18 February 2024.

While there has been an ongoing increase in the electricity generated by renewables, the uptick in emissions in the latest report reflect the fact that when there is not sufficient renewables in the system to meet the extra demand, coal and gas-fired generation step in. We saw a good example of this earlier this year when there was a wind drought.

The quarterly report includes preliminary data up to June 2024 (shown below), which shows that in the second quarter generation from black coal was up 7 per cent, brown coal generation increased by 4 per cent, and gas generation was up 16 per cent. The quarterly report includes preliminary data up to June 2024 (shown below). In the second quarter, generation from black coal was up 7 per cent, brown coal generation increased by 4 per cent, and gas generation was up 16 per cent. This increase in higher emissions plant was required to compensate for a substantial decrease in wind and hydro output during the second quarter.  Wind generation was 20 per cent lower in Q2 2024 compared to the corresponding period a year earlier, and hydro generation was down 18 per cent, which was attributed to lower rainfall in catchment areas.

Meanwhile the heatwaves experienced by WA also drove an increase in average operational demand and in the first quarter gas generation met around 40 per cent of the rise.

The trendline for coal and gas-fired generation in the GHG inventory has been a steady decline, but for the March quarter 2024 there was a noticeable uptick in coal generation and slight upturn in gas (figure 3).  

Figure 2: NEM emissions by Quarter, including preliminary June 2024 data

Figure 3: Cumulative change in generation in NEM (trend by fuel, by quarter)

Despite the increase in emissions from electricity, the actual emissions intensity in the NEM reached a new March quarter low of 0.62 tonnes of CO₂ per megawatt hour, reflecting the growth in the amount of renewable generation in our energy mix.

Despite the slight increase in emissions in the March quarter, electricity sector emissions will continue to fall as more renewables enter the grid.  Electricity emissions were estimated to be 152 Mt CO₂ in 2023 and projected to fall by 46 per cent to 81 Mt CO₂ in 2030, which would see stationary energy and transport become the highest sources of emissions. And by 2035, emissions are expected to fall by 75 per cent to 37 Mt CO₂-e in 2035 placing it well below all other major emitting sectors.

Electricity still doing heavy lifting

One thing the data highlights is that Australia remains very dependent on ongoing emissions reductions in the electricity sector to meet its climate targets.  This was most noticeable through the impact of transport emissions on Australia’s performance, which is expected to see emissions increase to become the major contributor by 2030.  The expectations are that transport emissions will peak at 103 Mt CO₂ in 2027, before coming down to 95 Mt CO₂ in 2035.

Transport includes road, domestic aviation, rail, domestic shipping, off-road recreational vehicle activity, and gas pipeline transport. Road transport includes cars, light commercial vehicles (LCVs), articulated trucks, rigid trucks, buses, and motorcycles. Electricity emissions from generation to supply EVs and rail are accounted for in the electricity sector figures.

Figure 4: Transport sector emissions actual and trend

The main contributors to transport emissions in Australia are light duty vehicles, which includes cars and LCVs. According to the most recent emission projections in 2019, light duty vehicle emissions accounted for 62 Mt CO₂-e or 62 per cent of all transport emissions, and 10 percent of Australia’s total emissions. In 2030, emissions from light duty vehicles are expected to barely decline to 61 Mt CO₂-e, which by that time would represent closer to around 16 per cent of Australia’s total emissions.

Light duty vehicle activity is expected to increase because of population growth and with the appetite for larger passenger cars, like SUVs (Sport Utility Vehicles), it is expected to mostly offset the effects of fuel economy improvements and technology switching over the next few years. As a result, transport emissions are expected to remain stable in the near term. As uptake of electric and hybrid vehicles increases, emissions in the light duty vehicle fleet segment begin to decline from around 2026.

While there are measures under the National Electric Vehicle Strategy, including introduction of the fuel efficiency standard, it is not yet clear how quickly this will increase the uptake of EVs and hybrids in the light duty vehicle segment, as well as improve the efficiency of internal combustion engine vehicles.  For example, the Australian Energy Market Operator in its most recent Electricity Statement of Opportunities assessment has reduced its operational consumption compared to 2023 predominantly because of expectations that EV uptake will be slower than previously thought.

Conclusion

What is clear from this quarterly update is the need for economy-wide integration in Australia’s decarbonisation policies. While the electricity sector will continue to do much of the heavy lifting leading into 2030, having other sectors on board will help keep momentum and minimise any short-term bumps along the way.

The Climate Change Authority’s sectoral pathways report released at the time of publication appears to highlight the central role of electricity in decarbonisation efforts, but also points to the importance of other parts of the economy playing their role if Australia is to meet its Paris targets.

[i] In the period gas and coal generation in the National Electricity Market fell 23 per cent and 1.4 per cent respectively, compared with the year to March 2023.

[ii] Emissions from the combustion of fuels to generate steam, heat or pressure, other than for electricity generation and transport.