This week the federal government is expected to release its 2035 greenhouse gas emissions target. However, more important than the target itself are policies needed to achieve substantial, effective, rapid emission reductions.

So far, federal governments have introduced only few such policies, relying on vegetation regrowth and popular measures such as support for renewable energy. Examples include: allocation of $20 billion for concessional loans and equity in new and enhanced electricity transmission; discounts for home batteries; the Safeguard Mechanism for large industrial emitters; funding the Clean Energy Finance Corporation and Australian Renewable Energy Agency. Also, the large-scale and small-scale Renewable Energy Targets have made valuable contributions, but are phasing down. Although each policy is important, together they form just a small step towards net-zero emissions by 2050.

And time is of the essence. Already the Earth’s temperature is higher than the previous target of 1.5ºC above the pre-industrial level and the impacts — droughts, heatwaves, wildfires and floods — have increased significantly in frequency and severity; sea-level rise has accelerated. The risk of crossing climate tipping points increases with every year of abnormal global temperature.

To energy policy researchers not committed to fossil fuel or nuclear industries, the most effective, least-cost strategy is clear: the simultaneous phaseout of fossil fuels; greatly improved energy efficiency, especially in buildings; electrification of most transportation and combustion heating; much more rapid growth in renewable electricity and energy storage; assistance to workers in fossil fuel and related industries being phased out; and incentives for education and training of workers in emerging, ecologically sustainable industries.

Within this strategy, this article outlines key policies, additional to existing ones, needed to drive substantial reductions in Australia’s emissions in the energy sector. Several must be implemented by state, territory and local governments, and funded, at least partially, by the federal government.

Key policies if the government got serious

The favourable economics of energy efficiency and renewable electricity are already encouraging the phaseout of fossil fuels, but much too slowly. In Australia, coal and gas consumption have been decreasing gradually in recent years; oil consumption has been increasing, apart from a dip during the pandemic. The phaseout can, and must, be accelerated by a combination of pricing, regulation and other policies.

The principal policy needed to discourage fossil fuel consumption is a carbon tax. Revenue would be distributed annually to adult citizens. Overall, most people would be better off financially. A tax is preferable to an emissions trading scheme because it’s less complicated.

A carbon price alone, although valuable, would be insufficient. It fails to drive new essential infrastructure, to deal with split incentives (e.g., between landlord and tenant), to identify optimal design solutions (e.g. for transport, urban and transmission planning), and is generally too slow. Pricing must be supplemented.

Specifically, in the phaseout of fossil fuels, we require:

• Bans on new coal or gas mines and exploration for fossil fuels within Australia;
• Bans on gas connections to new homes, as implemented in the ACT and progressing in Victoria; and
• Gas phaseout schedules for all states and territories, already progressing in ACT and in some Victorian country towns.

The market is particularly weak in fostering energy efficiency. Energy audits should be mandatory for all habitable buildings before sale and rental, with results listed prominently in contracts. The ACT Government leads this approach in the residential sector. Mandatory commercial building disclosure has been phased in nationally since 2010.

Energy efficiency standards should be strengthened for new buildings and appliances. Carefully supervised attic insulation by trained workers should be mandatory for all existing homes. To reduce electricity demand for air conditioning, white, heat-reflecting roofs should be required for all new houses and subsidised for existing houses. Time-of-use pricing should be mandatory, with off-peak electricity pricing shifted from night-time to 10am to 3pm when ample solar energy is generally available.

Many households, businesses and industries have previously invested in expensive gas-fired heating systems with lifetimes of a decade or more. Government incentives are needed to encourage rapid replacement of combustion heating with electric heat pumps and, where high temperatures are required for industrial purposes, direct electrical heating combined with thermal storage. Some states offer limited rebates for air-conditioners and/or heat-pump hot water systems.

To speed up the transportation transition, the federal government must increase funding to state, territory and local governments for urban/suburban public transport, cycleways and pedestrian areas. It should also supplement the private sector’s rollout of EV charging stations. As the air travel link between Sydney and Melbourne has one of the highest demands in the world, a high-speed rail link via Canberra is long overdue.

States and territories must reduce the roadblocks to approval for wind and solar farms. To ensure that large-scale renewable energy projects in rural areas are wins for the local community and local environment as well as developers and the climate, governments should foster partnerships between the interested parties.

Government investment is needed in technologies, processes and business development for a circular economy, including the reuse and recycling of renewable energy and battery components and raw materials.

To overcome shortages of skilled workers during the energy transition, the federal government should fund free TAFE training for home energy auditors and electricians, and free short certificate courses for existing electricians on installation of rooftop solar and home EV chargers. Fees for university degrees in electrical engineering should be reduced until the current shortage has been overcome.

Workers in fossil fuels and related industries, who lose their jobs due to the energy transition, should be assisted with funding for retraining, relocation, pensions where necessary, and the creation of new clean, green industries in regions largely dependent on the old industries. We can learn from a partially successful scheme in Spain.

Funding the transition

The federal government has monetary sovereignty and so has no financial limits on the money it creates by spending. However, total (public + private) spending beyond the nation’s economic capacity — existing workforce, education and training, physical resources, industries and infrastructure — leads to inflation. The government can manage this by (1) devoting part of government spending to increasing national economic capacity and (2) by withdrawing money from the economy by taxation (both general and on polluting activities), savings bonds, etc. Contrary to conventional “wisdom”, a monetary sovereign government (unlike a household or state government) does not need to balance its budget.

The federal government would place a tax on all coal and gas exports, and direct an equivalent amount to states and territories for climate policies needed in their jurisdictions. It would also offer climate savings bonds to the public for the same purpose and to reduce excess private spending. It could, of course, dramatically reduce its spending in other areas to resource its own commitment, e.g. by withdrawing from the AUKUS agreement and instead building low-cost drones and improved detection technologies for air and sea defence.

These are the kinds of key policies that a federal government would implement if it were serious about climate mitigation in the energy sector.

The views expressed in this article may or may not reflect those of Pearls and Irritations.