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APEC Demand and Supply Outlook – 5th Edition AUSTRALIA

 Australia’s new Clean Energy Future package, which includes a carbon trading mechanism, is likely to see an increase in energy efficiency and decrease in overall CO2 emissions in the long term.  Due to its considerable coal seam gas reserves, Australia is likely to become a strategic producer of unconventional gas within the outlook period.

 Annual CO2 emissions from combustion are projected to decrease by 1.4% over the outlook period; this can largely be attributed to Australia’s commitment to increasing the use of , particularly in generation as well as the switch from coal to gas.

ECONOMY Australia is rich in mineral resources and is a major world producer of bauxite, coal, gold, copper, Australia is the world’s largest island economy, nickel, zinc and iron ore—some concentrated in a and the sixth largest economy (in land area) in the particular region, others dispersed across its six states world. It lies in the southern hemisphere, between and two territories. The minerals sector is a the Indian and Pacific Oceans. Its total land area of substantial contributor to the Australian economy, nearly 7.7 million square kilometres is made up of the with minerals production increasing over the past mainland, the major island of , and other decade. Historically, mineral discoveries in Australia small islands. Australia has no land boundaries with have been characterized by high-grade deposits and other economies; its ocean neighbours include surface mineralization (Hogan, 2003); most of the Indonesia, East Timor, Papua New Guinea, the surface mineralization has been developed and future Solomon Islands, Vanuatu, New Caledonia, and mining activities are expected to be more energy New Zealand. intensive. The majority of Australia’s resource The Australian mainland is largely desert or semi- production is exported, accounting for significant arid land. A temperate climate and moderately fertile export earnings. soils are found in the southeast and southwest Australia has developed a world-class minerals corners, while the far north is characterized by a processing industry to complement its mining tropical climate (warm all year) and a mix of industry; the three major areas are alumina refining, rainforests, grasslands and desert. aluminium smelting, and iron-and steel-making. As of June 2011, Australia’s population was 22.6 million people, mostly concentrated along the Australia is one of the world’s largest alumina eastern and south eastern coast, and some on the producers with production estimated at 19.3 million west coast. Across the total landmass the population tonnes in 2011–12 (BREE, 2012e). density (three people per square kilometre) is one of Australia is also a significant exporter of iron ore, the lowest in the world. Nearly 92% of the with the majority of exports going to China. Future population live in urban areas; the average household iron ore production and exports are supported by a is a family of no more than four. number of significant iron ore projects expected to Figure AUS1: GDP and Population be completed in the foreseeable future (BREE, 2012c). Other energy-intensive industries of note in 1800 35 the Australian economy include other non-ferrous 1600 30 metals processing (aluminium), non-metallic mineral 1400 production, and chemical and associated production. Population 25 1200 is a highly 1000 20 GDP commercialized, technology-based, export-orientated 800 15 industry, with exports such as dairy products, grain 600 and live cattle going mostly to Southeast Asia and the

10 (Million) Population 400 Middle East. Agriculture and the associated industries 5

200 of food, beverages and tobacco, wood, and pulp and Real GDP (2005 Billion USD PPP) Billion (2005 USD GDP Real 0 0 paper are important contributors to the economy.

Australia’s harsh and wide-flung geography

1990 1995 2000 2010 2015 2020 2025 2030 2035 2005 Sources: Global Insight (2012) and APERC Analysis (2012) makes road transport a crucial element in the

1 APEC Energy Demand and Supply Outlook – 5th Edition Australia economy; Australia has three to four times more road which makes this the largest gas-producing region in per capita than Europe, and seven to nine times more Australia. However, the rise of non-conventional gas than Asia. The rail network is slighter than the road resources in the eastern region, such as coal seam gas system, although train networks are established reserves, means gas production is forecast to increase within cities and between states. significantly in the east in the outlook period. Air travel, domestic and international, has grown On average between 2010–11 and 2011–12 rapidly since the early 1990s, particularly with the Australia’s production of natural gas (including emergence of budget airlines. Generally, while cars natural gas from coal seam methane projects) is are the usual mode of travel between rural centres, estimated to be about 52.7 billion cubic metres and cars or train the mode between rural centres and (BREE, 2012e). About 35% of this production is state capitals, air transport is the most economic form exported as liquefied natural gas (LNG), mostly of travel between state capitals. within the Asia–Pacific region (ABARES, 2011). Environmental concerns about energy use have ENERGY RESOURCES AND provided a boost to natural gas use in Australia. INFRASTRUCTURE Federal and state policy initiatives have encouraged the use of cleaner energy resources, including natural Australia has abundant coal reserves and is one gas, which has a lower CO2 emissions factor than of the world’s leading coal producers and exporters. coal or oil. Combined with its security of supply, At the end of 2011, Australia’s recoverable coal natural gas will be the preferred choice for many reserves stood around 86 billion tonnes (Geoscience Australian energy consumers. The power generation, Australia, 2011b), with estimated production in manufacturing and mining sectors are all expected to 2011–12 of 219.2 million tonnes (BREE, 2012e). significantly increase the share of natural gas in their Australia’s economic reserves are sufficient to sustain energy mix in the medium and long term. current black coal production rates for nearly 100 years. Brown coal economic reserves are estimated to Australia has significant reserves of coal seam gas be able to sustain current production for over 500 (CSG). As at the end of 2010, Australia had years (BREE, 2012a). Coal is the dominant primary economic demonstrated resources of energy source in Australia; in 2008–09, it accounted 35 055 petajoules (PJ), but only produced 175 PJ for 39% of consumption in the (0.5% of the economic demonstrated resources) in economy (BREE, 2011, p. 30). Coal use is heavy in that year (Geoscience Australia, 2011a). Due to the power generation sector, where it currently environmental risks associated with the extraction of accounts for more than 70% of the generation mix CSG, such projects need to undergo a comprehensive (BREE, 2011, p. 30). Over 80% of coal produced in and sometimes lengthy approvals process overseen Australia is exported. by the respective state government. There are three LNG–CSG projects under construction currently, Environmental issues, in particular climate with environmental impact studies being conducted change, are expected to have a strong influence on on two other CSG projects (BREE, 2012b). In 2011, the future of Australian coal exports and domestic CSG was produced only in and New consumption. The industry is focused on the South Wales, where it accounted for the majority of development and deployment of ‘clean and green’ each state’s total gas production. Production of CSG coal conversion and storage technologies. In is expected to strengthen in the future with LNG addition, the ’s efforts in plant plans already in place based on production and promoting coal-to-liquids technology and carbon export from Queensland (BREE, 2012d). sequestration could play an important role in shaping future domestic coal consumption, especially in As of the end of 2010, Australia’s total oil meeting the rising domestic demand for transport economic demonstrated resources were estimated at . 22 161 PJ—made up of 12 413 PJ of condensate, 5685 PJ of crude oil and 4063 PJ of liquefied Natural gas has become the fastest growing fossil petroleum gas (LPG) (BREE, 2012a). Australia’s fuel in terms of production and consumption in proven oil reserves are not as impressive as that of its Australia. According to the CIA’s World Factbook, at coal, accounting for about 2% of the world’s proven the end of 2010 Australia had an estimated 3.115 reserves. Most of Australia’s oil reserves are located trillion cubic metres of proven natural gas reserves, in the Carnarvon Basin, Gippsland Basin, Bonaparte which places it within the top 15 of economies with Basin, Cooper–, and Bass Basin; proven natural gas reserves (USCIA, 2011).The these areas cover the north, west, southeast and majority of Australia’s conventional gas resources are southern regions of Australia. Australia is a net oil located off the northwest coast of , importer, in 2011 Australia’s crude oil and

2 APEC Energy Demand and Supply Outlook – 5th Edition Australia condensate production was 425 614 barrels per day, The Australian Government released a draft with imports in the year around 554 270 barrels per Energy White Paper (EWP) on 13 December 2011. day (BREE, 2012e). Australia’s oil production has The consultation process included public forums in been declining since 2003—this is due to natural each state capital across Australia and 285 written depletion (especially in the Cooper–Eromanga Basin submissions were received. The final Energy White and Gippsland Basin), lack of new exploration fields Paper is due to be released at the end of 2012. coming online, and higher exploration costs for The EWP promotes well-functioning markets unexplored resources located offshore (in deep supported by efficient and effective regulatory water). There is some export of crude oil, particularly frameworks to deliver competitively priced energy. heavy crude from wells in the northwest. The core objective is to build a secure, resilient and Petroleum products are the main energy source efficient that provides accessible, for the transport and mining sectors in Australia. In reliable and competitively priced energy for all 2008–09, they accounted for 35% of primary energy ; to enhance Australia’s domestic and consumption in the economy, second only to coal. export growth potential; and to deliver clean and Within the transport sector there are a range of . The four key priority areas alternative low-carbon fuels that have the potential to outlined in the draft EWP are strengthening the complement or replace conventional oil, but they resilience of Australia’s framework; need further research, development and delivering better energy market outcomes for demonstration before they can be adopted (BREE, consumers; developing Australia’s critical energy 2011). While hybrid and electric vehicles are available resources—particularly gas resources; and in Australia the price competitiveness of conventional accelerating clean energy outcomes. vehicles generally beats out these forms of automobile transportation. An update to the 2009 National Assessment (NESA) was released in December 2011. Australia has enormous potential renewable The 2011 NESA found that Australia’s overall energy energy resources, especially wind, solar, geothermal security situation is expected to remain adequate and and hydro. While in 2009–10 only 2% of total energy reliable, but it will increasingly be shaped by the produced in Australia was from renewable sources strength of new investment going forward and the (predominantly bio-energy), Australia’s Clean Energy price of energy, which are both materially influenced Future plan and its Renewable Energy Target (both by global trends (DRET, 2011c). The 2011 NESA discussed under ‘Energy Policies’) emphasize was a key input into the development of the draft Australia’s commitment to renewable energy and Energy White Paper. should therefore see its further development (BREE, 2012a). The National Electricity Market (NEM) was On 10 July 2011, the Australian Government established in 1998 to allow the inter-jurisdictional announced the Clean Energy Future plan, which flow of electricity between the Australian Capital makes the move from the previous Clean Energy Territory, , Queensland, South Initiative and other government programs to a Australia and (Tasmania joined the NEM in comprehensive plan to reduce Australia’s greenhouse 2005). Western Australia and the gas emissions. The Clean Energy Future includes: are not connected to the NEM because of their  the introduction of a carbon price distance from the rest of the market. The NEM  the promotion of innovation and investment in comprises a wholesale sector and a competitive retail renewable energy sector. All electricity dispatched must be traded  encouragement for energy efficiency through the central pool, where output from generators is aggregated and scheduled to meet  the creation of opportunities in the land sector demand. to cut pollution. The carbon pricing mechanism establishes a ENERGY POLICIES fixed carbon price of AUD 23 (USD 24) per tonne Australia enjoys a high level of energy security (rising at 2.5% per year in real terms) for the period 1 July 2012 to 30 June 2015. The carbon price will characterized by low-priced, reliable energy supplies apply to around 500 of Australia’s largest greenhouse and a significant natural endowment of energy gas emitters. Around 60% of Australia’s emissions resources, including coal, natural gas, crude oil and will be directly covered by the carbon pricing considerable potential for renewable energy. mechanism, and around two-thirds will be covered by Underpinning Australia’s natural resources are a combination of the mechanism and equivalent extensive infrastructure and well-functioning carbon pricing arrangements. From 1 July 2015, the domestic and international energy markets.

3 APEC Energy Demand and Supply Outlook – 5th Edition Australia carbon price will become flexible under a ‘cap and BUSINESS-AS-USUAL OUTLOOK trade’ emissions trading scheme, with the price largely determined by the market. Emissions units will be FINAL ENERGY DEMAND able to be traded from 1 July 2015, and a lower and Final energy demand under business-as-usual upper limit of emissions unit prices will apply for the (BAU) assumptions is expected to grow at an annual first three years beyond 1 July 2015 (DCCEE, 2011a). average rate of 1% over the outlook period. Most of this growth can be attributed to increases in energy The Australian Government does not undertake consumption across all sectors, especially in the or finance energy resource exploration or industrial and ‘other’ (residential, commercial and development. In the petroleum sector, the agricultural) sectors. government relies on an annual acreage release to create opportunities for investment. The release, Figure AUS2: BAU Final Energy Demand distributed worldwide, is a comprehensive package Industry Other Non-Energy Domestic Transport International Transport that includes details of the acreage, bidding 120 requirements and permit conditions. All foreign investment proposals in Australia are subject to 100 assessment and subsequent government approval 80 through the Foreign Investment Review Board. 60

The approvals process for unconventional gas MTOE exploration is overseen by each responsible state 40 government, under the Environment Protection and Biodiversity Conservation Act 1999. In this process 20 each state assesses applications from each company 0 looking to explore in their area, and then declines or 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 grants access; this can be quite a lengthy process. Source: APERC Analysis (2012) Similarly, the assessment of safety requirements and Historical Data: World Energy Statistics2011 © OECD/IEA 2011 environmental regulation for the coal industry is Despite this increase in final energy demand, carried out by the state in which each project is final energy intensity (as shown in Figure AUS3) is based. expected to decline by 39% between 2005 and 2035. The Australian Government has a number of Figure AUS3: BAU Final Energy Intensity policies and programs in place to capitalize on the potential economic growth and emissions reduction Total Final Energy Demand Index GDP Index Final Energy Intensity Index resulting from improved energy efficiency within the 250 industrial, transport, and residential and commercial sectors. There is also a suite of policies and initiatives 200 introduced over the last few years to increase the role 150 of renewable energy. This includes the Renewable Energy Target, which requires 45 000 GWh of 100

to be sourced from renewable Index (2005 = 100) = (2005 Index energy by 2020. The Renewable Energy Target has 50 been separated into a Large-scale Renewable Energy 0

Target (LRET) and the Small-scale Renewable

2000 2005 2010 2015 2020 2025 2030 2035 1995 Energy Scheme (SRES), to provide greater certainty 1990 for households, for large-scale renewable energy Source: APERC Analysis (2012) projects and for installers of small-scale renewable energy systems. Combined, the new LRET and SRES Industry are expected to deliver more renewable energy than Energy demand in the industrial sector is the overall Renewable Energy Target (DCCEE, projected to grow at an average annual rate of 1.6% 2011b). Other measures promote low-carbon energy between 2010 and 2035. This reflects the steady but research, development, demonstration and relatively slow growth of Australia’s industrial sector deployment including the Global Carbon Capture in general, along with Australia’s focus on the and Storage Institute. services sector. However, given that Australia is experiencing a mining boom, in this sector is expected to increase (on average 2.2% a

4 APEC Energy Demand and Supply Outlook – 5th Edition Australia year over the outlook period) in tandem with the Figure AUS4: BAU Primary rapidly growing industry. Coal Oil Gas Hydro NRE Nuclear Electricity-Net Import Combustible fuels are expected to account for 180 the majority of industrial energy demand, with 160 consumption increasing by more than 45% over the 140 outlook period. 120 100

Transport MTOE 80 Vehicle ownership in Australia has very nearly 60 reached saturation level. The transportation energy 40 demand of Australia is projected to grow by 10% 20 over the outlook period. 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Given the lack of incentives for consumers to shift to vehicles using alternative fuels, virtually all Source: APERC Analysis (2012) transport-based energy consumption will be of oil Historical Data: World Energy Statistics2011 © OECD/IEA 2011 products. Conventional gasoline vehicles will account Coal will dominate energy supply in most of the for a greater proportion of vehicles, comprising more first part of the outlook period (2010–2027), with an than half of the light vehicle fleet by 2035. average share of 37% over those years. Although Conventional diesel vehicles will make up the second much of the gas produced will be exported as LNG, highest share of the light vehicle fleet (17%), while predominantly to economies in the Asian region, gas vehicles using alternative fuels will account for only a is expected to overtake coal in domestic energy small share. supply in the latter half of the outlook period, accounting for 36% of primary energy supply in Other 2035.

Australia has many policies promoting energy Figure AUS5: BAU Energy Production and Net Imports efficiency within the residential and commercial sectors. Through building codes and standards Coal Oil Gas Coal Imports Oil Imports Gas Imports Australia promotes energy efficiency within 600 commercial buildings. In the residential space the 400 government has retrofit programs promoting initiatives such as installation of energy-efficient 200 lighting. 0

However, such efforts will be offset by a growing -200 population and an increasingly consumer-driven

society, which is likely to result in the use of more -400 Production and Import (MTOE)Importand Production electrical gadgets and home appliances. Energy -600

demand in the ‘other’ sector, which includes

1995 2000 2005 2010 2015 2020 2025 2030 2035 residential, commercial, and agricultural demand, is 1990 expected to grow at an average annual rate of 1.1% Source: APERC Analysis (2012) over the outlook period. Electricity is expected to Historical Data: World Energy Statistics2011 © OECD/IEA 2011 continue to dominate the fuel mix in this sector, ELECTRICITY accounting for 55% of ‘other’ energy consumption in 2035. Australia’s coal reserves mean this fuel will dominate the electricity generation mix in the outlook PRIMARY ENERGY SUPPLY period. However, the Australian Government’s Australia’s primary energy supply between 2010 commitment to energy efficiency and the promotion and 2035 is projected to grow at an average annual of renewable energy makes it highly likely that the rate of 0.8%. economy will at least very nearly achieve its goal of 20% electricity sourced from renewable energy by Given the potential for significant production of 2020. This will bring about a reduction in the role of natural gas from unconventional sources, Australia is coal in the electricity generation mix over the outlook expected to increase its production of gas in the period, as with increased contribution from natural outlook period. Primary supply of gas is projected to gas and NRE (predominantly wind). nearly double between 2010 and 2035.

5 APEC Energy Demand and Supply Outlook – 5th Edition Australia

Figure AUS6: BAU Electricity Generation Mix Table AUS1: Analysis of Reasons for Change in BAU

CO2 Emissions from Fuel Combustion Coal Oil Gas Hydro NRE Nuclear Import (Average Annual Percent Change) 8% 6% 9% 9% 9% 1990- 2005- 2005- 2005- 2010- 18% 21% 8% 22% 22% 9% 9% 13% 15% 2005 2010 2030 2035 2035 Change in CO Intensity of Energy 17% 2 0.4% -1.7% -0.8% -0.7% -0.5% Change in Energy Intensity of GDP -1.2% -0.9% -1.9% -1.9% -2.2% 20% Change in GDP 3.4% 2.7% 2.7% 2.7% 2.7% 24% 30% Total Change 2.6% 0.2% 0.0% 0.0% 0.0% 36% Source: APERC Analysis (2012) 83% 79% 80% 79% 77% 69% 58% CHALLENGES AND IMPLICATIONS OF BAU 51% 43% 38% Under business-as-usual, the Australian energy outlook is steady. However, as demand for cleaner sources of fuel such as natural gas increases globally 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 over the outlook period, Australia may wish to Source: APERC Analysis (2012) expedite regulation and exploration processes in Historical Data: World Energy Statistics2011 © OECD/IEA 2011 order to maximize its sizeable natural gas resources.

CO2 EMISSIONS ALTERNATIVE SCENARIOS Over the outlook period Australia’s total CO2 emissions from fuel combustion are projected to To address the energy security, economic decrease by 0.3 million tonnes from 2010 to 2035, to development, and environmental sustainability 412.3 million tonnes. This decrease in emissions can challenges posed by the business-as-usual (BAU) be attributable to Australia’s policies promoting outcomes, three sets of alternative scenarios were renewable energy in the household and commercial developed for most APEC economies. sectors. Most notable, however, is Australia’s push to HIGH GAS SCENARIO increase use of renewable energy sources in electricity generation; in particular capacity is To understand the impacts higher gas production expected to increase by 30–35% over the outlook might have on the energy sector, an alternative ‘High period. This structural change will be a key factor in Gas Scenario’ was developed. The assumptions emissions reduction. behind this scenario are discussed in more detail in Volume 1, Chapter 12. The scenario was built around Figure AUS7: BAU CO2 Emissions by Sector estimates of gas production that might be available at

Coal Oil Gas BAU prices or below, if constraints on gas 450 production and trade could be reduced. 400 The High Gas Scenario for Australia assumed the

2 350 production increase shown in Figure AUS8, which 300 equals 3% by 2035. This was based on expanding 250 Australia’s current unconventional and conventional 200 gas development given its strong customer base in 150 the Asia–Pacific region.

Million Tonnes CO Tonnes Million 100 Figure AUS8: High Gas Scenario – Gas Production 50 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 BAU Scenario High Gas Scenario

250 Source: APERC Analysis (2012) Table AUS1 indicates that emission increases due 200 to GDP growth will be offset by a reduction in both 150

the CO2 intensity of energy (contributed by fuel MTOE switching from coal to gas and NRE) and energy 100 intensity of GDP from effective energy efficiency measures, which will lead to a modest reduction in 50 total CO2 emissions over the outlook period. 0

2010 2020 2035 Source: APERC Analysis (2012)

6 APEC Energy Demand and Supply Outlook – 5th Edition Australia

Even under BAU assumptions, Australia’s gas Figure AUS10: High Gas Scenario – CO2 Emissions production is expected to increase significantly over from Electricity Generation the outlook period. The slight additional increase in gas production under the alternative scenario can be BAU Scenario High Gas Scenario attributed to the assumption that the sometimes cumbersome and lengthy approvals processes will be 250 improved and expedited to allow more gas projects

2 200 to become operational. Additional gas consumption in each economy in 150 the High Gas Scenario depends not only on the 100 economy’s own additional gas production, but also on the gas market situation in the APEC region. CO Tonnes Million 50 Given the perceived environmental benefits of gas over coal, a portion of the gas produced will be 0 consumed locally. However, given Australia’s modest 2010 2020 2035 population in terms of its gas reserves, the majority Source: APERC Analysis (2012) of the additional gas is expected to be exported. ALTERNATIVE URBAN DEVELOPMENT Figure AUS9 shows the High Gas Scenario SCENARIOS electricity generation mix for Australia. This graph To understand the impacts of future urban may be compared with the BAU scenario graph in development on the energy sector, three alternative Figure AUS6. It can be seen the gas share has urban development scenarios were developed: ‘High increased by 3% by 2035, while the coal share has Sprawl’, ‘Constant Density’, and ‘Fixed Urban Land’. declined by 4%. It is interesting to note that under The assumptions behind these scenarios are the alternative scenario gas has a greater share than discussed in Volume 1, Chapter 5. coal in the electricity generation mix by 2035. However, even under the BAU case, gas would only Figure AUS11 shows the change in vehicle be 2% shy of the share of coal in the generation mix ownership under BAU and the three alternative by 2035, a substantial change from 2010. urban development scenarios. If Australia’s cities were to stay at a constant population density it is Figure AUS9: High Gas Scenario – Electricity expected that there will be a decrease in vehicle Generation Mix ownership of 10% in 2035 compared to the BAU Coal Oil Gas Hydro NRE Nuclear Import case. The High Sprawl case would result in an expected 15% increase in vehicle ownership by 2035 9% 9% 8% 6% 9% 18% 21% 8% 22% 22% 9% 9% 13% 15% compared to BAU.

20% Figure AUS11: Urban Development Scenarios – Vehicle 22% 29% Ownership 36% 39%

83% BAU High Sprawl Constant Density Fixed Urban Land 79% 80% 79% 77% 67% 1000 56% 46% 38% 800 34% 600 400 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 200 Source: APERC Analysis (2012) 0 Historical Data: World Energy Statistics 2011 © OECD/IEA 2011 Vehicles/1000 People Vehicles/1000 2010 2020 2035 The additional domestically-consumed gas in the High Gas Scenario was assumed to replace coal in Source: APERC Analysis (2012) electricity generation. Since gas has roughly half the Figure AUS12 shows the change in light vehicle CO2 emissions of coal per unit of electricity oil consumption under BAU and the three alternative generated, this had the impact of reducing CO2 urban development scenarios. The High Sprawl emissions in electricity generation by nearly 5% in scenario is likely to see 33% more light vehicle oil 2035. Figure AUS10 shows this CO2 emission consumption in 2035 compared to BAU. Under the reduction which is significant given Australia’s GDP Constant Density and Fixed Urban Land scenarios, growth. there were reductions in light vehicle oil consumption

7 APEC Energy Demand and Supply Outlook – 5th Edition Australia of 19% and 26% respectively in 2035 compared to Figure AUS14: Virtual Clean Car Race – Share of BAU. This demonstrates the benefits of better urban Alternative Vehicles in the Light Vehicle Fleet planning. BAU Hyper Car Transition Electric Vehicle Transition Hydrogen Vehicle Transition Figure AUS12: Urban Development Scenarios – Light Natural Gas Vehicle Transition Vehicle Oil Consumption 80%

BAU High Sprawl Constant Density Fixed Urban Land 60% 25 40% 20 20%

15 of Fleet Share 0% 10 2020 2035 MTOE 5 Source: APERC Analysis (2012) 0 Figure AUS15 shows the change in light vehicle 2010 2020 2035 oil consumption under BAU and the four alternative Source: APERC Analysis (2012) vehicle scenarios. Oil consumption drops by 50% in the Electric Vehicle Transition, Hydrogen Vehicle Figure AUS13 shows the change in light vehicle Transition, and Natural Gas Vehicle Transition CO2 emissions under BAU and the three alternative scenarios compared to BAU by 2035. The drop is urban development scenarios. The impact of urban large as these alternative vehicles use no oil. Oil planning on CO2 emissions is similar to the impact of demand in the Hyper Car Transition scenario is also urban planning on energy use, since there is no significantly reduced compared to BAU—down 35% significant change in the mix of fuels used under any by 2035—even though these highly efficient vehicles of these scenarios. still use oil. Figure AUS13: Urban Development Scenarios – Light Figure AUS15: Virtual Clean Car Race – Light Vehicle Vehicle Tank-to-Wheel CO Emissions 2 Oil Consumption

BAU High Sprawl Constant Density Fixed Urban Land BAU Hyper Car Transition 80 Electric Vehicle Transition Hydrogen Vehicle Transition 2 Natural Gas Vehicle Transition 60 20

40 10

20 MTOE Million Tonnes CO Tonnes Million 0 0 2010 2020 2035 2010 2020 2035

Source: APERC Analysis (2012) Source: APERC Analysis (2012) Figure AUS16 shows the change in light vehicle VIRTUAL CLEAN CAR RACE CO2 emissions under BAU and the four alternative To understand the impacts of vehicle technology vehicle scenarios. To allow for consistent on the energy sector, four alternative vehicle comparisons, in the Electric Vehicle Transition and scenarios were developed: ‘Hyper Car Transition’ Hydrogen Vehicle Transition scenarios the change in (ultra-light conventionally powered vehicles), ‘Electric CO2 emissions is defined as the change in emissions Vehicle Transition’, ‘Hydrogen Vehicle Transition’, from electricity and hydrogen generation. The and ‘Natural Gas Vehicle Transition’. The emissions impacts of each scenario may differ assumptions behind these scenarios are discussed in significantly from their oil consumption impact, since Volume 1, Chapter 5. each alternative vehicle type uses a different fuel with Figure AUS14 shows the evolution of the vehicle a different level of emissions per unit of energy. fleet under BAU and the four ‘Virtual Clean Car In Australia, the Hyper Car Transition scenario is Race’ scenarios. By 2035 the share of the alternative the clear winner in terms of CO2 emission reduction, vehicles in the fleet reaches around 58% compared to with an emission reduction of 33% compared to about 11% in the BAU scenario. The share of BAU in 2035. This is probably because hyper cars do conventional vehicles in the fleet is thus only about better in economies like Australia where coal is more 42%, compared to about 89% in the BAU scenario. likely to be the marginal source of electricity generation. To facilitate fair comparisons, the Electric

8 APEC Energy Demand and Supply Outlook – 5th Edition Australia

Vehicle Transition scenario assumes no additional DCCEE (Department of and Energy non-fossil electricity. The Electric Vehicle Transition Efficiency) (2011a), , scenario would rate second, offering a reduction of www.comlaw.gov.au/Details/C2011A00131/Ht 9% compared to BAU in 2035. The Natural Gas ml/Text - _Toc308513393. See also Vehicle Transition scenario offers emission www.climatechange.gov.au/government/submiss reductions of 8%, while in the Hydrogen Vehicle ions/closed-consultations/clean-energy- Transition scenario, emissions increase by 11% legislative-package/clean-energy-bill-2011.aspx compared to BAU. This is likely due to the emissions –– (2011b), Renewable Energy Target, associated with converting natural gas to hydrogen to www.climatechange.gov.au/government/initiativ fuel these vehicles. es/renewable-target.aspx Figure AUS16: Virtual Clean Car Race – Light Vehicle DRET (Department of Resources, Energy and CO Emissions 2 Tourism) (2011a), Australia’s Coal Industry, BAU Hyper Car Transition www.ret.gov.au/resources/mining/australian_mi Electric Vehicle Transition Hydrogen Vehicle Transition Natural Gas Vehicle Transition neral_commodities/Pages/australia_coal_industr

2 100 y.aspx –– (2011c), National Energy Security Assessment 50 (NESA), December 2011, www.ret.gov.au/energy/energy_security/national 0 _energy_security_assessment/Pages/NationalEn Million Tonnes CO Tonnes Million ergySecurityAssessment.aspx 2010 2020 2035 Geoscience Australia (2011a), Australian Atlas on Source: APERC Analysis (2012) Minerals Resources, Mines and Processing Centres: Coal REFERENCES Seam Gas, www.australianminesatlas.gov.au/aimr/commodi ABARES (Australian Bureau of Agriculture and ty/coal_seam_gas.html - resources Resource Economics and Sciences) (2011), Australian Commodities June Quarter 2011, –– (2011b), Minerals – Australia’s Identified Mineral http://adl.brs.gov.au/data/warehouse/pe_abare Resources Table 1, s99010609/AC11.2_June_highres_REPORT_11 www.ga.gov.au/minerals/mineral- b.pdf resources/aimr/table-1.html BREE (Bureau of Resources and Energy Economics) Global Insight (2012), World Industry Services, retrieved (2011), Australian Energy Projections to 2034–35, from IHS Global Insight Data Service. www.bree.gov.au/documents/publications/ener Hogan, L. (2003), Public Geological Surveys in Australia, gy/Australian-Energy-Projections-report.pdf ABARE eReport 03.15. Prepared for the –– (2012a), Energy in Australia, Australian Government Department of Industry, www.bree.gov.au/documents/publications/ener Tourism and Resources, Canberra, gy-in-aust/energy-in-australia-2012.pdf www.abare.gov.au/publications_html/energy/en ergy_03/er03_geologicalsurveys.pdf –– (2012b), Mining Industry Major Projects, April 2012, www.bree.gov.au/documents/publications/mim IEA (International Energy Agency) (2011) World p/Mining-Industry-Major-Projects-.pdf Energy Statistics 2011, retrieved from OECD/IEA CD-ROM Service. –– (2012c), Resources and Energy Quarterly, March 2012, USCIA (United States Central Intelligence Agency) www.bree.gov.au/documents/publications/reso (2011), The World Factbook, urces/REQ-Mar-2012.pdf www.cia.gov/library/publications/the-world- factbook/rankorder/2179rank.html –– (2012d), Resources and Energy Quarterly, June 2012,

www.bree.gov.au/documents/publications/reso urces/REQ-Jun-2012.pdf –– (2012e), Resources and Energy Quarterly, September 2012, www.bree.gov.au/documents/publications/req/ BREE_REQ_Sept2012.pdf

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