Mitigate risks and reap the rewards of the energy transition

November 1, 2021

The world’s leading scientists have again rung the alarm on climate change, warning of a 1.5 degree warming by the next decade and catastrophic consequences without urgent action to curb greenhouse gas emissions.

The UN’s Intergovernmental Panel on Climate Change’s report prompted the UN to declare code red for our Earth and it will set the scene for the world leaders’ meeting in Glasgow in November.

Undoubtedly, it will turbocharge the global shift towards decarbonisation, symbolised by the EU’s new Green Deal, which commits Europe to slashing its emissions, with carbon tariffs on imports that have not paid a carbon tax back home.

Similar measures are being signaled by the US, and John Kerry, special envoy to President Joe Biden, said the IPCC report underscores the “overwhelming urgency of this moment, Glasgow must be a turning point in this crisis”.

Pressure to transition to a low-carbon world will only grow, with calls for stronger action to reduce emissions and slow global warming. Australian industry doesn’t need to read the IPCC report to recognise the environmental and economic risk of climate change — it is already flicking the switch on the energy transition.

Many of our biggest emitters have joined the Australian Industry Energy Transitions Initiative, which aims to eliminate emissions from our five most challenging supply chains; iron and steel, aluminium, liquefied natural gas, other metals and chemicals.

Schneider Electric joined the ETI as an expert adviser, providing guidance, insights and technology to transition to zero carbon.

The 16 participants — including BHP, Woodside, BlueScope Steel, BP Australia, Fortescue and Orica — account for a fifth of Australian industrial emissions and a critical mass of the economy.

We’ve seen a move from “defensive” compliance to a proactive strategy, with a culture shift focusing on the opportunities a net zero market creates.

Public pronouncements include Fortescue and Andrew Forrest’s vision for green and net zero operations by 2040, BHP’s $550 million emissions reduction investment fund and moves to tie climate performance to executive remuneration, and Orica’s emissions reductions target of 40 per cent by 2030.

After one year of intensive research and consultation, the ETI’s just released first report is both encouraging and concerning. It found emissions can be eliminated in Australian heavy industry supply chains by 2050, as many of the technology solutions are available today which would also drive down energy costs.

Australian industry could lead the shift to net-zero emissions and help build an economy that reaps the benefits, the report suggests. But it also warns these major shifts towards the decarbonisation of the global economy present significant risks to Australian exports in energy-intensive supply chains if we do not keep pace.

The scale of the environmental consequences of climate change and urgency of action demanded by the IPCC heightens the likelihood of significant global policy change with economic implications.

Already the EU’s Cbam — the carbon border adjustment mechanism — could signal a hammer blow to Australian industry exports if we don’t embrace the transition to a zero-carbon future, with Japan and Canada already working on similar mechanisms, and US Democrats proposing a “polluter import fee”.

Australia has some intrinsic advantages in this transition, being uniquely placed to exploit renewables, with abundant solar radiation and strong onshore winds. In theory, one 50 sq km solar farm could supply our nation’s entire energy needs.

Renewable energy is already the cheapest form of new electricity generation and is set to become even cheaper, although automated demand response mechanisms and energy storage solutions will be required to balance the load and variable supply.

Electrification, switching from fossil fuels to electricity sourced from renewables, is core to the transition to net-zero emissions. It could cut two-thirds of the emissions across supply chains. More efficient energy use, including greater adoption of digitisation, could reduce emissions in the most emissions-intensive industrial sectors by up to 40 per cent.

The IPCC report demonstrates that we must move towards net zero urgently, and the ETI is developing pathways to net zero for each supply chain, including switching energy sources, process improvements, digitisation, adopting EVs, embracing electrification and zero emissions renewables.

The manner and pace of this transformation will make or break Australian industry’s pathway to net zero, and determine if our industry can compete in a decarbonised global economy.

With clear signs that world leaders are set to heed the code red on climate and accelerate efforts to reduce emissions, Australia needs leadership to speed the transition. But, as Angus Taylor says, overcoming this challenge is a shared responsibility.

We can have a collaborative approach to the energy transition across government and industry if we see leadership, substantial investment, and a commitment to transform our energy system. Australia can then remain an energy and commodity export powerhouse, and help avoid the worst ravages of climate change.

 

Gareth O’Reilly is President, Pacific, of Schneider Electric, a global leader in energy transition, efficiency and Australia’s largest corporate energy adviser.

 

First published in the Australian Financial Review on 21 September 2021.

Previous Article
What’s the Difference Between Carbon Neutral and Net-Zero?
What’s the Difference Between Carbon Neutral and Net-Zero?

Net-zero and carbon neutral. They're seemingly similar terms, but they represent very different approaches ...

Next Article
District Uses $10M in Stimulus to Improve Health and Safety
District Uses $10M in Stimulus to Improve Health and Safety

St. Joseph School District tapped $10M in federal ESSER stimulus funds to improve the air quality and comfo...