Australia's “Low Carbon Growth Plan”: the business opportunity for GHG abatement cost curves

29 Mar 2010Archived News Climate Change Matters

A Greenhouse Gas (GHG) Emissions Abatement Analysis provides a thorough understanding of the range of greenhouse gas abatement options. This approach provides an excellent tool to improve the decision making process for sequencing potential carbon mitigation investments.

ClimateWorks' Low Carbon Growth Plan for Australia

In Melbourne on Friday, 19th March, ClimateWorks released its Low Carbon Growth Plan for Australia. The Plan is intended to: “provide the first comprehensive economy-wide blueprint for how Australia can achieve an ambitious reduction in greenhouse gas emissions, whilst also building a growing low carbon economy.”[1]

The conclusions outlined in the ClimateWorks’ Low Carbon Growth Plan were drawn from the application of a methodology known as a Greenhouse Gas Emissions Abatement Cost Curve. This showed that the implementation of 54 savings opportunities could achieve a reduction in emissions of 249 MtCO2e (million tonnes of carbon dioxide equivalent) or 25% below 2000 emissions levels. Furthermore, this reduction could be achieved using available technologies at an annual cost of AU$185 for every Australian household in 2020.

Energetics recommends the use of abatement curves to assist in making decisions of least cost abatement for the country and for large emitters.

Does your business have a Low Carbon Growth Plan?

In examining potential investment options, such as energy efficiency projects, renewable energy, fuel switching or cogeneration, process or product change and buying carbon offsets, businesses can prioritise projects based on an economic analysis with a consistent set of base assumptions. The cost curve developed shows abatement options ranked in increasing cost order, and the size of the greenhouse gas savings that can be achieved.

This type of analysis is frequently used to assess the range of carbon mitigation opportunities available to major businesses in the commercial, mining and manufacturing sectors. Some of the most common reasons for why companies are applying this analysis are to:

  • Define a realistic carbon abatement target,
  • Determine the most economical way to meet an existing abatement target,
  • Collate and compare many different types of mitigation projects on a common basis, and
  • Make informed decisions about the sequence and timing of abatement investments.

GHG Emissions Abatement Analysis is known to have been used as a decision making framework to assist:

  • A large water utility to identify long term greenhouse gas mitigation options, and prioritise their research and development efforts;
  • A power utility to identify, quantify and rank various energy efficiency programs that could be implemented at a state level. By developing abatement cost curves for a range of opportunities bundled under different utility-sponsored demand management initiatives, this orgsnisation achieved a better understanding of the cost effective programs that could be implemented over the next ten years;
  • A nationwide logistics company with large buildings, a retail network and vehicle fleet to define the most appropriate greenhouse gas emission reduction target by 2020;
  • A major bank to identify and assess abatement measures and quantify the cost impact of their commitment to an aggressive carbon reduction target through technical projects. The procurement of GreenPower and carbon offsets was also included.

The process for assessing abatement opportunities

The first step is a framing stage which determines the objectives of a project and its expected outputs. Within this step time horizons, the scope of emissions, system boundaries and key project assumptions are set.

A reference baseline projection is then developed. The baseline quantifies the forecast emissions level in the absence of taking GHG mitigation measures.

A detailed analysis is then conducted to define abatement opportunities. This analysis typically considers technology upgrades, end-of-life technology replacement, operational improvements, product mix change, fuel switching and energy supply options. Technologies that are expected to reach commercial maturity within the project’s time horizon can be included and costed based on learning cost curves.

This methodology allows alternative technologies to be compared where different scales of operation, different investment and operating time periods exist. An assessment is undertaken of emission reduction measures that are mutually exclusive and the inter-relationships between opportunities.

The robustness of the abatement strategy is then determined through a sensitivity analysis on key parameters such as energy price projections.

Finally, the results are used to structure an action plan to initiate development and/or implementation works with an optimal and thoroughly considered sequence of investments.

GHG abatement options assessments should then be conducted on a regular (e.g. annual) basis in order to update a businesses carbon strategy with the most recent information about the baseline, energy/carbon markets, the costs and abatement potential estimates. This process has proven to be very useful in driving GHG abatement strategies in a highly uncertain business environment.

In its Low Carbon Growth Plan, ClimateWorks stated the benefits of a thorough assessment of greenhouse gas abatement opportunities: “There are a variety of adjustments… businesses can make to their …work patterns to reduce carbon emissions, many of which would also save money…” The report also stated: “Australia can reduce its emissions by 25% below 2000 levels, without changing the mix of businesses in the economy and at a low cost to society.”[1]

Development of abatement cost curves allows companies to assess greenhouse gas abatement options and to update this analysis over time. This is essential to identifying "no regrets" initiatives (those that are cost effective whatever the cost of carbon), reduce exposure to a future price on carbon and to take advantage of new business opportunities in a carbon constrained economy. 

Link to ClimateWorks website and report
[1] ClimateWorks Australia: Low Carbon Growth Plan for Australia: March 2010.
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