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The Effect of COVID-19 on Australian Carbon Emissions

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by James Thomson
Jul 14 2020

The COVID-19 outbreak has significantly reduced Australian carbon emissions. However, Australia remains unlikely to achieve its emissions reduction targets by 2030, as outlined in the international Paris Agreement.

Carbon emissions in Australia have fallen since January 2020, as energy consumption has fallen, traffic volumes are down and manufacturing output has weakened. According to the CSIRO, global emissions are expected to fall by 7.5% in 2020 as countries remain in varying levels of lockdown. At the height of the outbreak in April 2020, road traffic volumes in major cities around Australia were down over 50%, while air traffic volumes were down over 95%. According to the International Energy Agency (IEA), weekly demand for energy in countries in partial or full lockdown declined by 18% to 25%.

‘The outbreak of COVID-19 has weighed heavily on energy demand, leading to a reduction in greenhouse gas emissions. However, these reductions are likely to be temporary, with emissions increasing as economic activity recovers,’ said Senior Industry Analyst James Thomson.

Australia’s emissions target

Each Australian state and territory has adopted a target to reach net zero emissions by 2050. Under the Paris Agreement, Australia has pledged to reduce economy-wide greenhouse gas emissions by 26% to 28% below 2005 levels by 2030. This reduction represents a roughly 50% cut in emissions per capita and 65% reduction in emissions per unit of GDP by 2030. In 2019, Australia produced 532.5 megatonnes of greenhouse gas emissions, representing a 13.7% reduction compared with 2005 levels.

‘While Australia has made progress towards its emission reduction targets, a lot of work remains to be done. Based on the latest data, Australia needs to reduce economy-wide emissions by at least 14.2% over the next decade to hit the low end of its Paris Agreement target,’ said Mr Thomson.

 

Australia’s biggest emitters

To meet the Paris target, significant changes will be required across the largest economic sectors in Australia. The largest contributors to Australia’s greenhouse gas emissions are the electricity, transport, agriculture, mining and manufacturing sectors. Electricity generation accounts for over one-third of Australian emissions.

‘Cleaner electricity generation represents the most viable and least costly way to achieve the 2030 Paris target, relative to alternatives such as reducing emissions from the transport and agriculture sectors,’ said Mr Thomson.

Electricity emissions have declined over the past five years, with renewable sources accounting for 24% of Australia’s electricity in 2019. Over the next five years, the Fossil Fuel Electricity Generation industry is expected to decline at an annualised 0.3%, while the Wind and Other Electricity Generation industry is projected to grow at an annualised 3.1%.

‘The outbreak of COVID-19 saw an initial dip in demand for electricity, although the key impact was a shift in demand from commercial to residential customers as employers introduced remote working arrangements and lockdowns reduced commercial activity,’ said Mr Thomson.

COVID-19 is expected to have the greatest impact on emissions from the transport sector, which accounted for 18.9% of emissions in 2019. Jet fuel sales were down almost 80% in April 2020, compared with the previous year, while automotive fuel sales declined by over 40% on the back of sharply lower road traffic volumes.

‘While barriers to both interstate and international travel are detrimental to economic activity, they have a side effect of reducing emissions from the Domestic Airlines, International Airlines, and Water Passenger Transport industries,’ said Mr Thomson.

Overall, emissions from the transport sector are expected to decline by 7.2% in 2019-20 and 5.6% in 2020-21, as a result of lower travel demand associated with the COVID-19 pandemic.

Outlook

To achieve its Paris Agreement target, Australia needs to proactively target emission reductions across all sectors of the economy. The outbreak of COVID-19 has presented an opportunity for Australia to take stock and assess its emission reduction strategy for the next decade and beyond.

‘Going forward, Australia’s energy mix will need to continue shifting towards renewable sources, while increased electrification of transport networks is required. Investment will need to be directed towards developing low-emission manufacturing processes and promoting efficient land use to reduce emissions generated by agricultural production,’ said Mr Thomson.

IBISWorld reports used to develop this release:

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