(UK) (AU) Net-Zero Emissions Drive Puts Australian Industry On Notice

Sydney Morning Herald - Llewelyn Hughes

Author Llewelyn Hughes is associate dean for research at the College of Asia and the Pacific, Australian National University, and an associate professor at the ANU's Crawford School of Public Policy.

The pressure on Australia is indisputable. In a Tuesday night call, British Prime Minister Boris Johnson reportedly called on Scott Morrison to "act boldly" on climate change and stressed the need for ambitious targets to reach net-zero carbon emissions. 

But closer to home this week there was a strong indication the government will have to move quickly to take advantage of the energy transition being embraced elsewhere.

A pile of coal for export at Newcastle this month ... for how long will those markets last? Bloomberg

Major trading partner Japan has struggled to overcome the malaise in climate policy that set in after the 2011 Fukushima nuclear disaster. Carbon emissions have slowly fallen since 2013, thanks in part to growth in renewable power generation. Almost a decade after the accident, most nuclear units remain shuttered, and restarts remain contentious. A new pipeline of coal plants has been under development.

But in his first speech to Parliament this week, Japan’s new Prime Minister, Yoshihide Suga, announced Japan would aim to achieve a net-zero carbon emissions target by 2050. It has huge implications for Australia as well as Japan.

The announcement underlines that major importers of Australia’s energy commodities are beginning to leave us behind. In 2019 Japan imported $9.6 billion (13 per cent) of Australia’s thermal coal. Suga’s declaration signals thermal coal exports to Japan have already peaked.

A critical question is what role natural gas will play in Japan’s future in the electricity sector and in heating. In 2019 Japan imported 22 per cent of Australia’s natural gas. But to get to net-zero emissions, gas will have to play a substantially lower role in its electricity sector, and a reduced role in heating.

It is crucial that Australia begins to recognise the implications of this announcement.

While mid-century seems a long way off, Japan's move will have immediate bite. A 2050 net-zero target already sends a strong policy signal that investing in new coal generation, for example, will not pay. And it shows Japan’s business community has shifted in favour of energy transition after years of prevarication. This means there is little chance that Japan will reverse course.

Japan’s cabinet is also required to review its mid-term energy policy settings every three years, and the next review must occur by the middle of next year. Work began within government last month on designing the new policy settings, and the 2030 power generation targets to be released next year are going to need to reflect this aggressive new goal.

Japanese industry already has plans to develop 10 gigawatts of offshore wind by 2030 and Japan’s former power utilities, trading companies and others are investing heavily in the area.

In his speech, Prime Minister Suga highlighted the importance of technological innovation. Japan – supported by government investment in research and development – has long been a technology provider to the world, through hybrid and electric vehicles, lithium ion batteries, energy-efficient products and advanced boilers and turbines.

In particular, Suga noted next-generation solar cells and carbon capture and use. But Japan is also investing heavily in hydrogen and associated vectors such as ammonia. Expect billions of yen of public and private research and development funding to supercharge Japan’s efforts across these areas.

Suga also specifically referred to fundamentally transforming coal policy. In some areas of Japan, coal plants are already operating less because of increased renewables integration. We can now expect cancellations of coal plants in the planning stage.

Earlier this month JERA, one of Japan’s largest owner of thermal coal plants, announced it would replace retiring older-generation coal plants with a mix of renewables and battery storage. It is also experimenting with the co-burning of green ammonia in its coal. Together this means new energy capacity will not be a new coal pipeline.

Australia is well placed to benefit from Japan’s energy transition. We are already positioning as a key exporter of low-carbon hydrogen and ammonia to Japan.

Japan’s green innovation drive means there are also opportunities for joint collaboration in research and development. We have a lot to share with Japan about integrating renewable electricity into competitive electricity systems. And, with the right policy settings, Australians will benefit from lower-cost and better-performing products – such as electric vehicles – that Japan will export.

It is no surprise Suga’s announcement was made with such fanfare so soon after China’s declaration that it would seek to achieve net-zero emissions by 2060. While Japan faces enormous challenges to reach its 2050 target, its new leader has made clear that his nation is serious about energy transition. Federal and state governments in Australia should work to identify how we can ride the wave.

Links

• Boris Johnson asks Scott Morrison to take 'bold action' on climate change
• New deal between Australia and Singapore on low-emissions technology
• Australia defies international pressure to set emissions targets
• Australians have spoken on climate, so there's no excuse to look backwards
• Australians massively overestimate role of oil and gas in economy
• Japan will become carbon neutral by 2050, PM pledges
• Multinationals, farmers take emissions targets into their own hands
• 'Divorce papers': Japan's net-zero goal a new threat to Australia's coal and gas exports