2023 SWINGS INTO ACTION ON CLIMATE FRONT | GAS BATTLE HOTS UP

21 Jan 2023

Happy New Year!

The year has kicked off with some major developments in climate and energy policy, including the handing down of reviews of the Safeguard Mechanism and Australian Carbon Credit Units. We cover these below, along with a wrap of the news on gas, and the latest in our series on banks' decarbonisation efforts and critical minerals.

If you missed our wrap of 2022's key energy news and 2023 wishlist, find it here.

SAFEGUARD MECHANISM & CARBON CREDITS REVIEWS |

Energy Minister Chris Bowen this month reported on the Federal Government's review of the Safeguard Mechanism (SGM), the central policy driver of scope 1 industrial emissions reductions by Australia's 215 biggest emitting facilities. Also this month, the outcomes of the Chubb Review of Australian Carbon Credit Units were handed down.

The reforms of these key pieces of climate and energy policy architecture can’t come soon enough, after the lost decade of chaos and failure under the Coalition government. Our key takeout: the proposed changes now provide the framework for a credible carbon price in Australia. We need a high, permanent price on carbon to drive decarbonisation. And Bowen’s capping of the carbon price at $75/t is an excellent start, with ratcheting up now built into the mechanism.

 >>> Read our full analysis.

GAS ON THE NOSE, GOING DOWN KICKING & SCREAMING | The new year saw the gas wars escalate on two fronts.

First, there was the predictable beat-up by the war-profiteering gas cartel about the federal government's $12/gj wholesale price cap "paralysing the market" and "stifling investment". Majors alluded darkly to trumped-up supply shortages as they raked in the cash, with, for example, Santos booking 2022 revenues of $11bn, up 65% YoY.

The industry's record take should help salve their pain: as the ACCC boss noted, there's shiploads of capital being generated for reinvestment, and as for paralysing the market, she had received no indications of concern from the industry on new compliance and enforcement guidelines administered by the ACCC that allow them to impose fines of up to $50m for failures to meet the price cap and require producers to maintain supply. 

Second, new peer-reviewed US research showed 13% of childhood asthma cases are attributable to gas cooking in the home, intensifying concerns about the health damage done by the toxic pollutants in methane gas and prompting US government action to regulate gas stoves and fund householders to go electric.

Fortunately, momentum to shut off the gas here is unstoppable, with the ACT's ban on gas in new developments kicking in this month, Victoria's Gas Substitution Roadmap, and the federal government's commitment in May's budget to support households and businesses to "electrify everything" – the only solution to gas price extortion smashing Australians.

These developments complement the Green Building Council's Green Star rating system requiring buildings to be fossil fuel free from 2026, and commitments by developers including Lendlease and Cbus Property to phase out gas from operations, source 100% RE by 2030, and transition to 100% electric property portfolios. It's no surprise the gas lobby reacted with "try and pry the gas stove from my cold, dead hands" hysteria here and in the US. 

>>> See our op ed in The Canberra Times and interview on ABC.

SUN SETS (TEMPORARILY) ON WORLD'S BIGGEST ENERGY CABLE | Reports of the death of the Forrest / Cannon-Brookes joint venture Sun Cable were, in our assessment, greatly exaggerated. The project involves a 20-gigawatt solar farm in the Northern Territory, the world's biggest battery network (36-42GWh), and a massive 4,200 km subsea cable exporting energy to Singapore. 

The vision is unprecedented, innovative, ambitious, and gargantuan in scale, and the path to its realisation inevitably strewn with strategic, geopolitical, technical and financial obstacles. Our view is it can rise again, potentially with a new corporate structure and government co-investment. 

>>> See our take on Sky News, CNN, and ABC.

CEF'S LATEST WORK ON CRITICAL MINERALS & BANKS |

We've launched paper #9 of our series on Australia's extraordinary opportunity to upscale value-added critical minerals and new economy metals mining and refining onshore. Matt Pollard and Tim Buckley take a broad brush this time, looking at our competitive advantage in 'embodied decarbonisation'. They review the efforts of major players in traditional resources, critical minerals, metals and manufacturing (Rio, BHP, FMG, FFI, Alcoa, Sun Metals) to build a sustainable competitive advantage by powering their operations and value chains using our abundant, world-leading firmed renewables potential, decarbonising heavy industry in the process.

 >>> Read the critical minerals paper here.

And Nishtha Aggarwal follows analyses of Westpac, NAB and ANZ with a deep dive into CBA's action on decarbonising its financing activities, finding strong progress on the four key themes we are examining across the reviews – climate solutions financing, financed emissions reduction by sector, customer transition plan engagement, and trends in the bank’s energy loanbook. There's still plenty of room for further ambition – especially given CBA's dominant status as Australia's biggest bank.

>>> Read the CBA analysis here.

MEDIA |

CEF director Tim Buckley has been active in the media with commentary on a range of topics.

>>>  See all our media here.

CEF STAFFING NEWS |

We are delighted to welcome a new team member next week, China policy analyst Xuyang Dong. Xuyang joins us from Influence Map via the Lowy Institute to work with Tim Buckley on China's massively accelerating, world-leading progress on all things decarbonisation related, and the implications for the energy transition both here and globally. See the rest of our team here.

Feel free to get in touch anytime at the email below, and enjoy your weekend!

Tim, Annemarie, Nishtha, Matt

This newsletter is not intended to provide, and should not be relied on for, tax, legal, investment or accounting advice, nor is it an offer or solicitation of an offer to buy or sell, a recommendation, endorsement, or sponsorship of any security, company, or fund. CEF is not responsible for any investment decision made by you. Unless attributed to others, any opinions expressed are our current opinions only. Certain information presented may have been provided by third parties. CEF believes that such third- party information is reliable, and has checked public records to verify it wherever possible, but does not guarantee its accuracy, timeliness or completeness; and it is subject to change without notice.