Acknowledgements We would like to thank Monica Richter (World Wide Fund for Nature and the Science Based Targets Initiative), Anna Freeman (Clean Energy Council), and Ben Skinner and Rhys Thomas (Australian Energy Council) for kindly reviewing this report. We value the input from these reviewers but note the report’s findings and analysis are those of ClimateWorks Australia. We also thank the organisations listed for reviewing and providing feedback on information about their climate commitments and actions. This report is part of a series focusing on sectors within the Australian economy. Net Zero Momentum Tracker – an initiative of ClimateWorks Australia with the Monash Sustainable Development Institute – demonstrates progress towards net zero emissions in Australia. It brings together and evaluates climate action commitments made by Australian businesses, governments and other organisations across major sectors. Sector reports from the project to date include: property, banking, superannuation, local government, retail, transport, resources and energy. The companies assessed by the Net Zero Momentum Tracker represent 61 per cent of market capitalisation in the ASX200, and are accountable for 61 per cent of national emissions. Achieving net zero emissions prior to 2050 will be a key element of Australia’s obligations under the Paris Agreement on climate (UNFCCC 2015). The goal of the agreement is to limit global temperature rise to well below 2 degrees Celsius above pre-industrial levels and to strive for 1.5 degrees. 2 Overall, energy sector commitments are insufficient for Australia to achieve a Paris-aligned SUMMARY transition to net zero. Australia’s energy sector This report finds none of the companies assessed are fully aligned with the Paris climate goals, and must accelerate its pace of most fall well short of these. Of the energy companies featured in this report, our decarbonisation if Australia assessment finds: is to reach net zero • One – ENGIE – is ‘partially aligned’ based on emissions, in line with the its 2030 target covering a small proportion of its total emissions. global climate goals. • Fourteen companies – AGL, APT Pipelines, ATCO, C S Energy, CK William, Delta, This report analyses the 20 highest emitting EnergyAustralia, Origin, Pioneer Sail, Snowy electricity generators and energy (electricity and Hydro, Stanwell, Synergy, Territory Generation gas) retailers in Australia. These companies and TransAlta – are ‘not aligned’ but are taking account for almost one-third of the country’s some steps to reduce their emissions. total emissions. • Five companies – Arrow Energy, Bluewaters Power 1&2, NewGen Kwinana, NRG This assessment considers specific requirements Gladstone Operating Services and OzGen – and opportunities associated with the critical have not disclosed any emissions role the energy sector plays in enabling reduction activities. decarbonisation across all sectors of Australia’s economy. Progress on emissions reduction has been made in recent years. Reported emissions from this It focuses on Australia’s electricity generators and sector have decreased and investment in significant ‘gen-tailers’ – companies that both renewable energy has risen over the past generate electricity and retail energy to decade. The transition to date has been driven by consumers. Collectively, the 20 companies falling renewable energy costs, along with state assessed are responsible for 71 per cent of total and territory government policies, federal national electricity generation and account for renewable energy targets, consumer demand and 89 per cent of Australia’s electricity sector scope pressure from investor groups. 1 and 2 emissions. For these companies, fossil fuels purchased or burnt for the power they Some of Australia’s largest energy companies generate are a material source of emissions have adopted decarbonisation commitments. (scope 1 and 2). Where companies also retail Australia’s biggest electricity sector emitters are gas, we have included this as part of our analysis, AGL, EnergyAustralia, Stanwell and Origin which as gas retail can be a significant source of are collectively responsible for 54 per cent of the indirect (scope 3) emissions when gas is used country’s electricity emissions. Of these, AGL, by their customers. EnergyAustralia and Origin have decarbonisation commitments. Origin has an aspiration to achieve Each company’s decarbonisation commitments net zero emissions by 2050 and has set interim have been assessed against ClimateWorks’ reduction targets for its scope 1, 2 and 3 Decarbonisation Futures scenarios emissions. AGL and EnergyAustralia have (ClimateWorks 2020). These scenarios map committed to achieve net zero operational (scope least-cost sector decarbonisation trajectories for 1 and 2) emissions by 2050, but have no interim Australia. This modelling indicates that for emissions reduction commitments. Stanwell, scenarios in line with Australia’s share in limiting which operates two of Queensland’s largest global emissions, the electricity sector should coal-fired generators, has no emissions achieve at least 64 per cent in emissions reduction targets. reductions by 2030 (from a 2017 base year), reach near zero emissions by 2040 and zero Of the remaining 16 companies, three – APT emissions by 2050. Pipelines, ENGIE and TransAlta – have decarbonisation commitments. ENGIE has an aligned 2030 target which covers its scope 3 3 emissions from use of sold gas. APT Pipelines This includes the production of renewable ‘green’ has a net zero by 2050 operational target but no hydrogen, which can be used to decarbonise interim reduction commitments. TransAlta has a some hard-to-abate sectors, such as freight and global target to reduce operational emissions by heavy industry. Replacing gas use in buildings 60 per cent by 2030 (2015 baseline) and reach and industry through electrification or use of low- net zero emissions by 2050, but it has no current emissions fuel is also key for Australia to align plans to transition the gas-fired plants it operates with global climate goals. Therefore, early in Australia in line with these goals. decarbonisation of the energy sector is fundamental. Strategies reported by companies to address their operational (scope 1 and 2) emissions Recent analysis shows shifting from fossil fuel include increasing renewable generation, generation to renewables would lower average improving power plant efficiency and retiring system costs (e.g. AEMO 2020). This shift is coal-fired power plants early. Efforts to disclose feasible for Australian energy companies using and reduce scope 3 emissions are limited among existing technologies. Indeed, some energy energy companies. companies are already adopting business models that rely on renewable energy. This is a critical decade for climate action, during which global emissions must fall by at least Companies have started to move, but they can 45 per cent from 2010 levels to limit global and must set a faster transition pace. A strong temperature rise to 1.5 degrees Celsius (United national energy transition strategy with emission Nations 2021). The IEA says the energy sector, reduction targets would drive greater ambition as the major source of emissions, holds the key among power companies. This ambition would be to responding to the world’s climate challenge bolstered if other levels of government match the (International Energy Agency 2021). strong state and territory policies, which are already driving change in many areas. These The energy sector plays a crucial role in Australia government policies would enable electricity achieving the Paris climate goals. Zero emissions market operators and investors to plan an orderly electricity is fundamental to achieving zero transition aligned with the Paris climate goals. emissions in sectors such as transport and buildings, and net zero emissions in industry. 4 5 This transition is reflected in a 19 per cent decrease in emissions since the peak in 2007 Context (Australian Government 2020b) driven largely by an increase in renewable energy in Australia’s This section presents the context in which the electricity supply. However, electricity generation featured companies have been assessed, remains Australia’s largest source of greenhouse including their current emissions sources, why gas emissions, contributing to 33 per cent of the the energy sector is so important and the factors country’s emissions in the year to June 2020. influencing why this sector’s transition is not Coal-fired generation is responsible for more than currently aligned with what is needed for Australia 80 per cent of this proportion, or approximately to support the Paris climate goals. one quarter of all Australian emissions (Clean Energy Regulator 2021; Australian Australia’s electricity generation is dominated Government 2020b). by fossil fuels. The most material source of emissions for The energy generation and retail sector (hereafter companies that generate and retail electricity are referred to as the ‘energy sector’ or ‘sector’) is a direct (scope 1) and indirect (scope 2) emissions key component of Australia’s economy, powering from fossil fuels combusted to produce the energy homes, businesses and industries. they generate or purchase. In comparison, indirect value chain emissions (scope 3) – such The sector is dominated by fossil fuels. In 2020, as those from upstream activities including fossil fuels were used to generate 72 per cent extraction, production and transportation of fuel