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Australia’s big emitters could cut CO2 by 90% by 2050 without offsets, report finds

Australia’s big emitters could cut CO2 by 90% by 2050 without offsets, report finds

Some of Australia’s largest heavy industrial companies have backed a report that says they could cut direct greenhouse gas emissions in their supply chains by more than 90% by 2050, and not have to rely heavily on carbon offsets.

The report, by the Australian Industry Energy Transitions Initiative (ETI), prepared over three years by Climateworks Centre and the CSIRO, found the industrial transition would cost the equivalent of $21bn a year over three decades if Australia were to play its part in trying to limit global heating to 1.5C.

It has landed during a political debate over the safeguard mechanism, the Coalition policy that the Albanese government says it wants to revamp to reduce the CO2 emitted by Australia’s 215 biggest polluting industrial facilities. The Greens have offered to support Labor’s plan if it agrees not to approve any more coal and gas mines, a step the government says it will not take.

The report, Pathways to industrial decarbonisation, looked at five major supply chains for industries – including iron, steel, aluminium, chemicals and liquified natural gas (LNG). It found they could cut annual CO2 from 221m tonnes in 2020 to 17m tonnes by mid-century while steel and iron production rose by nearly 20% and aluminium production by more than 30%.

While major gas companies have flagged continuing LNG expansions, the report estimated its production would slump after 2025 to little more than 20% of today’s levels in 2040.

Anna Skarbek, the chief executive of the Climateworks Centre, based at Monash University, said about two-thirds of the estimated required – equivalent to $20.8bn a year over a 30-year period – was needed in the energy system as it shifted to renewable sources, the rest in technology for industrial, electrification and energy efficiency.

While large, she said the investment was equivalent to just a tenth of the $236bn a year export value of the five supply chains examined and was comparable to other major investments.

“The transition is an investment in modernising Australia’s industrial regions and energy system,” she said.

The industry initiative worked with companies responsible for about a fifth of the country’s industrial CO2 and a third of the market value of the ASX100. Its report included supporting statements from the Australian Industry Group, BHP, Orica, Rio Tinto and some major banks and super funds.

Woodside Energy, which is planning a large fossil fuel expansion, was also involved. It said it was pleased to receive the report and the recommendations “deserve careful consideration”.

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Simon McKeon, the chair of the ETI, a businessman and former Australian of the Year, said the report found a combination of “strong ambition, coordinated action and government support” could lead to industrial emissions being cut by up to 92% by 2050 compared with 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,” he said.

The use of offsets in the proposed safeguard mechanism changes has become a contentious issue after criticism of carbon credits created through forest regeneration projects. The government has proposed allowing unlimited offsets under the scheme.

The report was to be launched in Sydney on Monday by the climate change minister, Chris Bowen, and the Lord Adair Turner, a former chair of the UK Financial Services Authority.

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