Australia has everything it takes to make renewables dominate the energy mix: sunshine, wind, seawater. Yet fossil fuels dominate: 97 per cent of energy production comes from them, and only a third of electricity generation is renewable. This is because fossil fuel industries are an important part of the Australian economy. The government in power since 2022 has placed more emphasis on the green transition than its predecessors, but has not drastically curbed the extraction of conventional energy sources. The example of Australia illustrates the complexity and time-consuming nature of greening the economy.
The Australian energy mix
You might think that Australia is at the forefront of using renewable energy, since it is a country with plenty of sunshine and windy weather, surrounded by oceans. But this is not the case: according to the International Energy Agency, 91 per cent of Australia’s total energy supply in 2022 (which includes all energy produced in or imported into the country, minus energy exported or stored) came from fossil fuels (coal, natural gas and oil). In terms of Australian energy production as a proportion of total energy supply, coal was by far the most important source of energy in the same year, accounting for 63 per cent, followed by natural gas at 30 per cent and then oil at 4.5 per cent – meaning that fossil fuels accounted for around 97 per cent of Australian energy production. In 2022, renewables accounted for only 32 per cent of Australian electricity generation (compared with 41.5 per cent in the United Kingdom, which has much less favourable natural conditions), while fossil fuels accounted for 68 per cent, with coal 47 per cent, natural gas 19 per cent and oil 2 per cent. Australia has one of the largest per capita carbon footprints on the planet and was the largest per capita greenhouse gas emitter among G20 members in 2021. Fossil fuels are therefore clearly the leading source of energy production in Australia, made possible by huge domestic reserves (although the country also imports oil in addition to exports).
The figure can be referenced here: https://public.flourish.studio/visualisation/17472011/
As for renewable energy sources, of the above categories, they play the most important role in electricity generation: in 2022, the most important renewable energy source was solar energy, which accounted for 14 per cent of total electricity generation, followed by wind (11 per cent) and hydropower (6 per cent). The six states and two territories that make up Australia show great variation in the sources of electricity generation: while data from 2022 shows three eastern states are dominated by coal at around 60 per cent, the Northern Territory gets 86 per cent of its electricity from natural gas and Western Australia 60 per cent. Only two member states have a share of renewables above 50 per cent: 71 per cent of electricity generation in South Australia and 98 per cent in Tasmania comes from renewables (the latter being the only member state where hydropower is a significant source of electricity, accounting for around 80 per cent of electricity generation).
The figure can be referenced here: https://public.flourish.studio/visualisation/17471890/
Interestingly, unlike in many countries, nuclear power is not being considered as an energy source in Australia, for a number of reasons. Nuclear power plants are prohibited by federal law (the only exception is a reactor in Sydney for scientific purposes) and nuclear power would not be considered an economical source of energy in the country compared to wind and solar power. According to Australia’s national science agency (CSIRO), conventional nuclear power plants would not be appropriate in size for Australia’s relatively small electricity grid, and as for small modular reactors, in addition to the economics, the time factor is a major barrier: given the lack of experience with nuclear power plants in Australia, if they were to be introduced, it would take too long for them to make a meaningful contribution to the country’s climate targets (see below).
The importance of fossil fuels
The dominance of fossil fuels is explained by the fact that they are linked to industries (extraction, transport, export etc.) that are important economically and in terms of the labour market (although it is not clear how important they actually are in terms of employment). Greening the Australian economy and reducing the very substantial export of conventional energy sources is therefore a politically risky undertaking. The issue of taking action against climate change is such a dangerous terrain in the ruthless Australian politics – mainly, but not exclusively, for the right because of its electoral base – that it has been a factor in the downfall of four prime ministers in the last decade or so (for example, one of the reasons why Malcolm Turnbull, the right-wing Liberal Party prime minister, was deposed by his own party in 2018 was because he wanted to legislate national emissions reduction targets, which his government’s conservative members opposed).
Political implications
For the economic and political reasons mentioned above, as well as ideological reasons, the conservative governments of 2013-2022 took a rather half-hearted approach to tackling climate change, attracting considerable domestic and international criticism. This attitude has also had foreign policy consequences: relations with the Pacific islands, Australia’s traditional sphere of influence, have been affected, as the islands nations threatened by rising global sea levels due to climate change have accused Australia of failing to take meaningful steps to reduce fossil fuel extraction.
Labour won the last national election in 2022, ending nine years of conservative rule. Their victory was helped by the fact that climate change played a bigger role in this election than in the past, as extreme weather events (droughts, forest fires, heavy rainfall, floods) have become more frequent and intense in Australia in recent years, which most experts attribute to climate change. The changes that everyone is experiencing made the fight against climate change a more prominent issue in the election campaign than before, benefitting Labour (and the much smaller Australian Greens) which promised to take strong action on the issue.
The current government’s measures and concepts
The incoming Labor Party promised that Australia would join the global effort to tackle climate change by cutting greenhouse gas emissions, requiring the biggest emitters to cut their emissions and becoming a centre for renewable energy. A few months after taking office, the new government signed into law a target for Australia’s greenhouse gas emissions to be 43 per cent below 2005 levels by 2030, compared to the previous target of 26-28 per cent, and to achieve carbon neutrality by 2050. The safeguard mechanism to gradually reduce emissions from the largest industrial producers, in line with the 2030 national target, was reformed in 2023. The government also plans to increase the share of renewables in electricity generation to 82% by 2030.
According to a CSIRO report last December, Australia will be able to halve its 2020 emissions by 2030 with current technologies. The flagship of this process is expected to be the renewable electricity generation sector. However, achieving net zero emissions by 2050 after 2030 will require technologies currently in the early stages of development to be in widespread use by the 2030s and 2040s, for which investments from the financial sector will be indispensable. Overall, the idea in Australia is that the green transition requires allowing the market economy utilising existing and yet to be developed technologies to prevail, i.e. that market actors have a vested business interest in the green transition.
In parallel with decarbonisation, Australia aims to become a renewable energy superpower, contributing to regional and global greening through green energy exports. Key to this, according to the government’s plans, will be, among other things, carbon capture and storage as well as domestically produced clean hydrogen (produced using zero or low CO2 emission technology), which Australia is ideally placed to produce because of its abundant sunshine and wind. The country has had a national hydrogen strategy in place since 2019, and as of November last year, A$127 billion worth of hydrogen-related investments have been publicly announced so far. The Australian government will also support domestic hydrogen production with a A$2 billion programme. The government envisages Australia becoming a global centre for hydrogen production. This is in line with the International Energy Agency’s 2022 projection that Australia is expected to be the second largest exporter of low-carbon hydrogen (after Latin America) by 2030 and the first by 2050.
The Australian government has also established partnerships with several countries (including Germany, India, Japan and the Netherlands) to promote clean energy, including clean hydrogen. The objectives include deepening joint action on climate change, expanding and diversifying clean energy supply chains, and creating clean energy trading opportunities for Australian companies.
Fossil fuels remain important
Australia has made significant strides recently, but it still has a less ambitious 2030 target than many other countries, such as the US and the UK. The economic and political constraints mentioned above remain, therefore the current government has not halted or substantially restrained the opening or expansion of new coal, oil and gas sites. Oil and gas projects accounted for the majority of the 86 resource and energy projects under implementation and with a final investment decision in Australia as of October 2023. In addition to the opening of additional oil and gas sites, 42 new coal projects are among the announced resource and energy projects without a final investment decision. According to November 2023 data from the Australian Conservation Foundation, the current government approved or supported 16 new fossil fuel extraction projects (seven coal and nine oil or gas) during its one and a half years in power, which they calculate means that the resulting emissions and other pollution will be many times greater than the emissions reductions promised by the government’s pledged measures.
This also has an impact on global emissions, as Australia is one of the world’s largest exporters of fossil fuels. According to the Australian Climate Council think tank, Australia is the world’s second largest exporter of coal and LNG and the third largest exporter of fossil fuels, exporting nearly three times as much fossil fuel annually as the United Arab Emirates. In 2021/2022, coal, natural gas and oil were among the top six Australian exports, with coal ranking second, gas third and oil sixth. Together, the three energy sources accounted for a third of total Australian exports. In the 2022/2023 financial year, around 90 per cent of the black coal mined and 75 per cent of the natural gas extracted in the country was exported. At the same time, Asian countries (Japan, China, South Korea, Taiwan, India and Vietnam), which are Australia’s main markets for LNG and coal exports, are trying to reduce their fossil energy use in line with the global trend and will thus buy less fossil fuels from Australia over time, which is a further argument from Australia’s perspective that the green transition cannot be delayed.
Summary
The example of Australia shows that it is not enough in itself for a country to have favourable natural conditions in terms of renewable energy to green its economy. The green transition will inevitably occur at the expense of fossil fuel industries, which is politically risky for the governments of the day. This is particularly the case in Australia, where conventional energy sources play a major role not only in domestic energy supply but also in exports. It is therefore not surprising that while the left-wing government that has been in power for almost two years has been more active than its predecessors in tackling climate change, at the same time it has permitted a number of new and expanded fossil fuel projects. The pace and ambition of the green transition can be and are debated both in and outside of Australia, but the country’s example shows beyond dispute that greening the economy is a complex and time-consuming process that cannot ignore economic and political realities.
