Victorian Climate Change Green Paper
Part 3 - Complementing the CPRS: a new world of opportunities

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A low carbon future - attracting green investment and creating green jobs.

3.1 The stationary energy sector
3.2 Energy efficiency
3.3 Transport
3.4 The built environment
3.5 Solid waste management
3.6 Land use and forestry
3.7 Agriculture


Our climate change goals
Two of the Government’s proposed long term goals are relevant to Victoria’s efforts to reduce emissions.

Goal 1 - Contribute to global and national emissions reductions
Goal 2 - Develop a portfolio of energy options for a low carbon future

The establishment of a carbon price at the national level will be the key driver for emissions reductions across the Victorian economy. With the expected introduction of the national Carbon Pollution Reduction Scheme (CPRS), the Victorian Government has a key role to play in helping the State capitalise on the opportunities created by the transition to a carbon constrained economy, attracting green investment and creating green jobs. The Government can help make Victoria a leading green economy by funding research and development, assisting the take-up of emissions abatement opportunities in sectors not covered under the CPRS, encouraging innovation, supporting the take up of new technologies, and providing modern, Efficient energy and transport infrastructure.

The role for government in reducing emissions

The commitment to the introduction of the CPRS, the setting of a national target for emissions and other actions being taken by the Commonwealth Government have significantly reduced the scope for action by Australia’s state and territory governments in reducing emissions. In many areas, national collaboration by the Commonwealth, state and territory governments through the Council of Australian Governments offers the best prospects for success in reducing Australia’s overall emissions. However, action and leadership by the Victorian Government will still be critical to success in a number of areas.

Complementing the CPRS
Once established, the CPRS will be the key driver of reductions in emissions across the Australian economy. Large carbon emitters will trade the right to pollute within an overall cap set at the national level. Individual firms will decide the best course of action for reducing their carbon costs. This will spur innovation. However, in some circumstances, governments may need to intervene even after the CPRS is in place, where circumstances prevent the take-up of inexpensive opportunities to reduce emissions.

Extra measures to ‘complement’ the work being done by the CPRS in a limited number of areas may include:

The Commonwealth, as the level of government introducing the national emissions reduction target and the CPRS, has the primary responsibility to ensure that policy action in these areas is sufficient. However, collaboration between the Victorian and Commonwealth governments will be critical in identifying the particular measures required in Victoria under each of these areas and ensuring that they do not undermine the effectiveness of the CPRS, are monitored carefully and meet Victoria’s specific needs and circumstances.

Victorian Government's role in complementing thr CPRS and moving to a low carbon economy

MitigationAdjustment
  • Drive cost effective mitigation not covered by the CPRS in cooperation with the Commonwealth
  • Address market failures not addressed by the CPRS in secotrs covered by the scheme where these will lead to cost effective abatment (such as by providing lower cost energy efficiency options in support of Commonwealth programs)
  • Provide incentives in R&D in areas specific interest to Victoria
  • Provide leadership by demonstrating ways to reduce emissions from government buildings, services and operations
  • Design and implement adjustment and behaviour change policies that smooth the introduction of a carbon-price
  • Ensure dynamic and flexible economy through good regulation
  • Enusre good economic fundamentals (such as skills, education and infrastructure)
  • Ensure that arrangments in areas of state responsibility (for example, transport and urban planning) support a low emissions future

The likely effect of introducing a carbon price through the CPRS

At any given point in time, there are a multitude of abatement opportunities available across the economy, ranging from very cheap ones (such as householders turning appliances ‘off at the wall’) to very expensive ones (such as some renewable generation technologies). Not all abatement opportunities will be used up at the same time. The CPRS works by setting a target for emissions reductions and then using up abatement opportunities from the cheapest to most expensive in turn until the target is reached.

This means that it will make sense to delay taking up some abatement opportunities until the emissions reduction target is tightened. While there are many good ideas around about how to reduce emissions, not all of these will ‘make the cut’ in the early days of the CPRS. This does not mean that relatively expensive abatement options will never be feasible; rather, from a mitigation perspective, that it does not make economic sense to take up relatively expensive options at an early point in the overall abatement ‘journey’.

Options such as cost effective energy efficiency in households and buildings are likely to be viable in the early days of the CPRS because they offer inexpensive opportunities to reduce emissions that will compare well with the CPRS carbon price. Other options, such as carbon capture and storage or electric cars, are unlikely to be economically viable until the carbon price rises in the later years of the scheme.

For Victoria, modeling undertaken by the Commonwealth Treasury on the likely economic impacts of introducing the CPRS suggested that both Victoria’s and Australia’s aggregate economic costs of mitigation are small and similar. Although the costs to sectors and regions vary, emissions prices are generally found to be insuf. cient to induce significant industry relocation. As the following table shows, under both a 5 per cent and 15 percent emission reduction
target through the CPRS, our economy will continue to grow strongly. On average, the CPRS will reduce the rate of growth of GDP by only about 0.1 per cent per annum.

Victoria is relatively reliant on emission-intensive industries - coal-. red generation, aluminium and gas. However, Commonwealth Treasury found that adverse impacts on these industries are, at least partially, offset by improvements in export-oriented or import-competing manufacturing.

CPRS-5
CPRS-15
Permit price at 2011
$10 / t Co2-e
$10 / t Co2-e
Possible permit price at 2020
$35 / t Co2-e
$50 / t Co2-e
Average annual reduction in GDP growth to 2020
0.11 % per annum
0.15 % per annum
Average Victorian household electricity price increase 2010-2015
$5 per week
$5 per week
Permit price at 2050
$115 / t Co2-e
$158 / t Co2-e
Average annual reduction in GDP growth to 2050
0.09 %
0.13 %

It should be noted the above modelling was undertaken prior to the Commonwealth’s recent changes to the scheme. However, the changes announced are not expected to change the above figures significantly.

Setting emissions targets

In 2006, the Victorian Government set a long term target to reduce greenhouse gas emissions by 60 per cent by 2050, compared to 2000 levels. This target was based on the best available scientific evidence at the time and - when introduced - was a world-leading initiative to tackle climate change.

In 2008, the Garnaut Climate Change Review proposed that Australia should undertake its proportionate share as part of any effective international agreement to reduce emissions. Depending upon the success and scope of international negotiations, this would require Australia to commit to a reduction of net emissions of between 5 and 25 per cent by 2020 and a reduction of between 60 and 90 per cent by 2050 (relative to 2000 levels).

Based on the most recent science, some countries have increased their targets - including the United Kingdom and the United States, which have announced their intention of reducing emissions by 80 per cent compared to 1990 levels.

These developments mean that Victoria’s target of reducing emissions by 60 per cent by 2050 should now be seen as the absolute minimum target for Australia. The Victorian Government considers that Australia should actively pursue a robust agreement to stabilise atmospheric concentrations of greenhouse gases at a level to avoid dangerous climate change.

If a satisfactory global agreement to combat climate change post­2012 is reached, the Victorian Government will strongly urge the Commonwealth Government to place Australia on a trajectory to achieve a reduction in Australia’s emissions of at least 80 per cent by 2050.

While Victoria has been a leader in setting emissions targets, the introduction of the CPRS means that a binding emissions reduction target set by the Victorian Government would distort the operation of the scheme by mandating that a set level of reductions should take place within the state, regardless of the Efficient allocation of national emission reductions that should be achieved through the CPRS market. Accordingly, the Government does not see any benefit in legislating for a state-based emissions reduction target that is inconsistent with a national target.

Questionable value in state emission targets

The introduction of the CPRS means that there is no longer any value in state and territory governments setting their own binding targets for reducing statewide emissions. Because circumstances vary across Australia, meeting national targets will be most Efficiently achieved by allowing some states to make greater cuts than others. This is a major advantage of implementing a flexible policy tool like an emissions trading scheme.

It may still be feasible to stimulate commercial efforts aimed at reducing emissions by announcing indicative goals for specific activities or sectors. However, I would advise caution in how such policies are designed. Any intent to apply penalties for not meeting them should be avoided and any pressure to turn voluntary targets into mandatory targets be guarded against.

The CPRS should be the main instrument for reducing emissions in Australia. Supplementary policies should be about reducing the cost to the economy of complying with the carbon emission trajectories that are part of the scheme.

Anything else is problematic.

Professor Ross Garnaut
Professor of Economics, Research School of Pacific and Asian Studies, Australian National University and author of the Garnaut Climate Change Review

The opportunities to reduce emissions in Victoria

Victoria’s emissions stem from a number of different sectors across the economy, with stationary energy, transport and agriculture being the largest contributors.

To understand where emissions reductions might be found in Victoria, the Government commissioned a study that looked at practical options to reduce emissions and examined the impact of these options acting together.

The study found that, even when restricting analysis to known or likely technologies, a large number of opportunities are available to reduce emissions across the economy. The study revealed considerable scope for reducing emissions over short, medium and long term time horizons, but found that no measure alone could deliver the scale of reductions required.

The graphs below show how some of these options contribute to long term emissions reductions. Each coloured ‘wedge’ represents the amount by which emissions could be reduced.

Emissions reduction opportunity

Policies to achieve reductions

Graph of emission reductions due to coal drying and carbon capture and storage
Coal drying and carbon capture and storage
There is significant scope for reducing emissions by pursuing policies in this area.

There are two clear issues relevant to clean coal technologies. The first relates to the need for a carbon price, without which carbon capture and storage (CCS) and coal drying will never be economic. When CCS becomes a preferred technology due to higher permit prices under the CPRS, the market will naturally move in this direction. However, the high carbon price required for the uptake of clean coal technologies (especially CCS) means that the Victorian Government, at least in the short to medium term, may need to consider extra measures to ensure the uptake of these technologies.

The second issue relates to positive spill overs from research and development into new technologies such as CCS and coal drying. This can be boosted by Government policies directed towards increasing spending on clean coal research, development and demonstration, and making sure all regulatory barriers are removed. Further work will be needed to identify potential storage sites in Victoria and to assess whether there is a role for the Government in facilitating investment in CCS infrastructure.

Graph of emission reductions due to alternative sources of electricity
Alternative sources of electricity
(new gas, renewables, small scale renewables,
waste to energy)
This area will be addressed by the CPRS, allowing the market to determine how best to generate electricity. However, as with CCS, there may be a need to support R&D or demonstrate the application of new technologies to local conditions. This could be achieved through government funding or regulatory options.

Governments can also seek to stimulate an industry before a carbon price makes it viable, as in the case of Victoria’s Renewable Energy Target. Actively stimulating the development of renewable energy technologies in the short term will enable Victoria to realise the long term benefi ts (clean, commercially viable and unlimited energy supply) of these technologies sooner. This investment will give renewable technologies access to larger markets, helping reduce their costs. It will also assist with the orderly integration of renewable technologies into the energy system.

Governments can also make sure that regulations are not acting as a barrier to new technologies.

Demonstration projects at Government facilities can also be used to encourage the take up of alternative electricity sources.

Graph of emission reductions due to building efficiency
Building effeciency
Many studies show that signifi cant low cost emissions can be achieved through improved building effi ciency. Studies of residential buildings suggest cost-effective emission reductions of 20 to 30 per cent in this sector. While it is likely that a CPRS will cause some people to look more closely at their energy use, a number of complicating factors mean that a carbon price alone will not capture all the benefits.

The owners and operators of buildings can be different people - especially in commercial settings. This means there are ‘split incentives’ between the people who need to undertake improvements (owners) and the people likely to benefit from them (tenants).

It is also difficult to for owners or tenants to determine accurately the potential savings from building improvements as they accrue over long periods and the information specific to their circumstances may not be easily accessible.

Policies in this area could include strengthened building standards, minimum performance standards for heating or cooling appliances, mandatory disclosure of building energy efficiency performance and incentives to undertake retro-fits. Incentives could also be provided through the Victorian Energy Saver Incentive scheme for activities that improve building efficiency, such the installation of double glazing and insulation.

Graph of emission reductions due to fuel efficiency
Fuel effeciency
Fuel efficiency has the potential to provide very low cost emissions reductions. This is because there are a variety of ways of performing the transport task with much lower average emissions than is currently the case. However, for a variety of reasons, people will not necessarily change their preferences based on a carbon price alone.

In some instances, this is because it is not easy to make the link between the purchase cost of a vehicle and the running cost. This could be addressed through improved information provision or additional incentives at the time of purchase.

Additional support could also be given for development of next generation fuels and low emissions technologies. The Government could also promote supply side change by setting targets for the effi ciency of the overall vehicle fleet.

Graph of emission reductions due to changing transport modes
Changing transport modes
While the CPRS will impose an additional cost on more carbon-intensive travel, our transport choices are also influenced by a number of non-price factors including availability, convenience and safety of alternatives.

The Victorian Government can influence some of these factors, acting alone or in partnership with private operators or the Commonwealth or local government.

The frequency and reliability of public transport can be improved through infrastructure provision. Greater traffic priority can be given to trams and buses and more walking and cycling paths can be provided. The Government can also promote the use of sustainable transport through behaviour change programs.

Note: The wedges are presented as reductions in emissions from within their appropriate sectors: as a result, the scale for each of the charts varies. For more details on how the reduction potential of activities was determined, see Nous Group (2007) Understanding the Potential to Reduce Victoria’s Greenhouse Gas Emissions, available at www.climatechange.vic.gov.au.


3.1 The stationary energy sector

As the major contributor to Victoria’s overall greenhouse gas emissions, the stationary energy sector will need to undergo a major transformation to make the transition to a lower emissions future.

A climate change priority for action
Promote low emissions energy technologies as the key to Victoria’s energy future.

Victoria’s stationary energy sector covers the production, supply and use of energy that is not transport-related, including electricity and gas, and liquid and solid fossil fuels. In 2006, the stationary energy sector contributed 67 per cent of Victoria’s net greenhouse gas emissions - by far the largest contributor to the state’s overall emissions profile. The key contributor to emissions in the stationary energy sector (79 per cent of emissions) is electricity generation - due to Victoria’s heavy reliance on brown coal to generate electricity. Brown coal is the highest greenhouse gas emitting form of electricity generation in Australia’s National Electricity Market. In 2007, around 95 per cent of Victoria’s electricity generation was provided by brown coal fired generation capacity.

What we need to do

Achieving substantial emissions reductions from the generation of electricity will require investment in lower emissions generation technologies. These technologies may include renewable capacity (such as wind, solar, geothermal and biomass), combined cycle gas fired capacity and cleaner coal technologies. Shifting to these technologies in Victoria will require a large scale investment of resources - physical and financial - and will likely take several decades to complete.

The introduction of the CPRS will be the key driver of emissions reductions in this sector over the longer term, because it will create incentives to shift away from higher emitting sources of electricity generation (such as brown and black coal fired capacity) to lower emitting sources of generation (such as more efficient gas fired capacity and renewable energy sources). The carbon price generated by the CPRS makes it highly unlikely that there will be any new brown coal generation capacity without carbon capture and storage, clean coal and other new technologies.

However, no single technology will provide sufficient capacity to meet Victoria’s total energy needs in the future. For example, the output from wind generation capacity can decline in periods of light or excessively high winds; solar power generation relies upon the availability of sunlight; and carbon capture and storage will require technological advances and secure storage sites. All of these forms of energy generation are also considerably more expensive than existing forms. We will need to adopt a diverse portfolio of technologies to reduce our emissions and secure our energy future.

What we’ve already done

The Government wants to establish Victoria as a global leader in clean energy technology. The Government is taking action to develop a mix of energy options that will support the stationary energy sector’s transition to a low carbon future: While making this shift poses many challenges for Victoria, it will also deliver new opportunities - including major technological advances, new jobs, increased capital investment and a diversification of electricity supply.

Our Focus

Actions taken by the Commonwealth Government (including the CPRS, the Renewable Energy Target and direct investment in renewable energy) are the key measures to reduce emissions from this sector, however, complementary policies will be needed at the state level. These policies may include funding for research and development in areas of vital importance to the Victorian economy, investment in network infrastructure and technologies (such as carbon capture and storage and large-scale solar), support for skills and training, and measures to overcome the regulatory barriers to reducing emissions or shifting to renewable energy.

The Victorian Government’s main objectives for the stationary energy sector into the future are to: These objectives will be re.ected in the policies adopted through the Climate Change White Paper and the forthcoming Future Energy Statement, which will guide the transformation of the State’s energy sector.

Meeting the energy challenges ahead will require a comprehensive, systematic response. While some renewable and low emission energy technologies are already available and others are under development, integrating these technologies into our energy system, market and regulatory framework will require careful planning and design. The scale of the task facing Victoria means that we cannot succeed by acting alone: all Australian governments will need to work with industry and other stakeholders to ensure that measures are put in place to deliver effective, long-term solutions for our energy needs.

The Victorian Government has a range of measures available to it to enable the transformation of Victoria’s energy sector under the CPRS, including:
A question to consider
What actions are required to enable Victoria to develop a diverse portfolio of low emissions energy sources to ensure supply, create jobs and attract investment and minimise costs?

What might Victoria’s energy system look like in 10 years?

Victoria’s supply of energy will still be secure and reliable in 10 years, but it will be much more sustainable.

While rising carbon prices will have increased energy costs, the more Efficient use of energy - and a greater awareness about the benefits of energy efficiency - will make the increase more manageable. Energy efficiency will be a natural part of our daily lives and simple measures (such as using energy Efficient appliances and washing clothes in cold water) will have significantly reduced greenhouse emissions from Victorian households. Smart metering means that households will better understand their energy use and every new home or renovation will incorporate state-of-the-art energy efficiency features.

Small and large business will also be much more energy efficient. In 10 years, the Carbon Pollution Reduction Scheme will be transforming our energy sector - with a clear limit on the amount of carbon emissions industry can emit and companies actively trading permits for emissions. Many companies will have taken action to reduce their emissions, rather than buy permits. The investment of billions of dollars in innovative low emission energy technologies will be reducing greenhouse gas emissions, maintaining a secure energy supply and creating thousands of ‘green’ jobs. Government will have clearly articulated a strategy to ensure that future infrastructure investment in response to the CPRS is efficient from an economy wide perspective and to facilitate appropriate investments through a stream-lined planning and approvals framework. While there will still be concerns about new energy developments, most Victorians will welcome the use of more sustainable energy generation - generation that is taking place, in some cases, closer to communities.

The national Renewable Energy Target scheme will have driven investment in renewable energy generation. Almost 20 per cent of Victoria’s electricity consumption will come from renewable sources (up from less than 5 per cent in 2009). Although many different technologies will be in use - or being trialled - most new renewable energy supply will be from wind, with supply from bagasse, waste, geothermal and large-scale solar energy plants also expanding. Renewable energy will be more competitive with coal and gas-fired generation technology, and research and development into energy generation and efficiency will be opening up exciting new options. Even if there are substantial advances in the storage of renewable energy, there will also be investment in gas-. red generation to ensure continuous supply when there is insuf. cient wind or sun.

Coal-fired generation will still provide the majority of our electricity. But new generators will be much more Efficient, often emitting less than half the emissions of old generators. With carbon capture and storage (CCS) becoming a proven and well understood technology, millions of tonnes of CO2 from power stations will begin to be safely injected into permanent storage sites deep underground. The complete transformation of Victoria’s energy supply will still take several more decades. But in ten years’ time, the foundations for a secure, reliable and sustainable future will have been laid.


3.2 Energy efficiency

Energy efficiency is an area with the potential to achieve significant cost effective reductions in greenhouse gas emissions.

All Victorians - individuals, households, businesses and government agencies - can contribute to reaching our national emission reduction targets by using energy more Efficiently: from relatively simple household actions, such as replacing inEfficient light globes or turning off appliances when they are not in use, through to making major changes in commercial and industrial practices.

What we need to do

The CPRS will result in higher energy prices, encouraging many of us to think more carefully about our energy use and become more energy Efficient as we seek to manage these rising costs. However, historic evidence indicates that electricity prices do not have a major impact on the demand for electricity, suggesting that the introduction of a carbon price is unlikely to drive the necessary energy savings - especially in the early stages of the scheme.

Where there are issues the CPRS will not address, complementary action may be needed at the state level to drive greater energy efficiency and to assist households and businesses to minimise their energy costs as the price of carbon rises.

Our Focus

Due to the considerable scope to improve energy efficiency and due to Victorian expertise in delivering energy efficiency programs, action by the Victorian Government is likely to be most effective in the following areas: The Victorian Government acknowledges that some areas of energy efficiency policy are best advanced at the national level. Recently, the Commonwealth Government announced a $3.9 billion Energy Efficient Homes Package to substantially improve the energy rating of Australian homes. However, there is still scope for greater improvements in energy efficiency. While taking action at the state level to improve energy efficiency, the Government will continue to work with the Commonwealth Government in developing the National Strategy for Energy efficiency, which will propose a single overarching framework for accelerating energy efficiency reforms and assist households and businesses to adjust to the impacts of the CPRS.

The Victorian Government has a range of tools available to enable households, businesses and community organisations to become more energy Efficient, including:
What we’ve already done

The Victorian Government already has a number of programs in place to improve energy efficiency in households and businesses, including:

Questions to consider
3.3 Transport

There is no simple, single solution to reducing transport emissions.

A safe and Efficient transport system is vital to Victoria’s future. As well as moving people, Victoria’s transport network meets the needs of business and industry by moving goods around the state, and to and from national and international markets.

What we need to do

Transport is the second largest producer of greenhouse gas emissions in Victoria after stationary energy production, with almost 90 per cent of transport emissions coming from road transport - private vehicles, trucks, buses and commercial vehicles.

Transport emissions are influenced by the total demand for travel. Substantial growth in the demand for travel in Victoria is predicted over the coming decades, including forecasts of a significant increase in motor vehicle travel. If this growth in the demand for travel is not accompanied by a shift to low emissions modes of transport or improvements in vehicle fuel efficiency, it will result in a significant increase in emissions.

The combination of a carbon price and volatility in the global price of oil means that transport emissions are likely to become a financial issue as much as an environmental one in the years ahead. While the Commonwealth Government has indicated that motorists will be protected from the impacts of the CPRS on fuel prices for the . rst three years of the scheme, it remains vitally important to begin moving to low carbon forms of transport sooner rather than later. This will be as relevant to households as it will be for businesses relying upon transport for the movement of freight.

Figure 4 - Melbourne's annual metropolitan train patronage growth to 2008

Figure 4 - Melbournes annual metropolitan train patronage growth to 2008


A climate change priority for action
Establish future-focussed transport, planning and building systems to support a low emissions future and accommodate a changed climate.

What we’ve already done

The Victorian Government is delivering record levels of investment in the state’s transport system and is driving the take up of low emission transport choices. Research by the National Transport Commission has found that a carbon price alone will not lead to a significant short to medium term reduction in emissions from transport, especially freight transport. Additional measures will be needed, including a more integrated freight network, the greater use of high productivity road vehicles, more rail freight services and innovative applications of new technologies within the freight supply chain.

Our Focus

There is no simple, single solution to reducing transport emissions. This conclusion is echoed in a wide range of studies from Australia and overseas, which indicate that there are three broad options for reducing emissions from the transport sector. These options represent potential areas for further action through the Climate Change White Paper. The Victorian Transport Plan outlines the Government’s vision for Victoria’s transport system to 2020 and beyond. Consideration of the need to reduce emissions and support communities and businesses in adjusting to the CPRS has been integral to the development of the Plan.

The Plan includes more than $38 billion in projects to integrate transport and land use planning to link our jobs, services and homes, minimising the need for trips and enabling efficient movement of people and goods. The Plan aims to: Future policies will need to complement the new infrastructure investment being delivered under the Plan by encouraging more sustainable travel habits and improving the overall fuel efficiency of the State’s vehicle fleet. Any future reviews of the State’s transport and land use plans will also need to have a strong focus on addressing climate change and reducing emissions from the transport sector.

Questions to consider
What might Victoria look like in 10 years with much lower carbon emissions from the transport sector?

On the surface Victoria could look very similar to how it does today. We could still get around as quickly and safely as we currently do, but our approach to how, when and why we travel may be different.

Advances in telecommunications and more . exible working conditions may mean that we have fewer journeys to make. Those trips we do make will be shorter due to the changes in urban landscape of our cities and towns.

We may still see small white vans moving around the city and large freight vehicles on our highways, but thanks to a more integrated freight system, every one of these vehicles will be at or near maximum capacity for every load. These vehicles may also be powered by different fuels or technologies - beyond those currently in use.

When we do need to move around, we are likely to have the ability on our mobile phones to access all the different transport options at our disposal. We will be able to assess the best mode of travel to use, based on the cost, the time it will take and the health benefits of using each mode.

As we move around, we may see that public transport has become more prevalent and is used by more people at all times of the day. When combined with more car pooling, we will notice that one person per vehicle has become the exception rather than the rule.

Private motor vehicles will appear more 'fit for purpose'. Larger cars will be filled with more people or goods, with those travelling by themselves are more likely to be using small vehicles or on motorbikes and scooters.

While not noticeable on the outside, if we look under the hood we will see that almost all new cars have smaller, very fuel Efficient engines. There will be many more hybrid-electric or fully rechargeable 'plug in' vehicles in cities and more Efficient diesel vehicles in rural areas - some of which will be Victorian made. We may also notice that petrol stations have evolved to cater for the different fuels required, including battery replacement terminals.

Interspersed with cars and public transport, there will be a much greater presence of people moving under their own power. More cyclists will be taking advantage of dedicated lanes or roads as part of a fully interconnected cycling network. The footpaths will be full of people, not just sitting at café tables, but getting to where they need to be. All these small changes may come together to give us much better places to live and a better quality of life. In just a decade, we may find ourselves moving around a state that has much lower transport emissions, less congestion and a more physically active and socially integrated population.


3.4 The built environment

Victorians are now much more conscious of the .nancial and amenity bene.ts of improving the energy performance of our homes and other buildings, but this knowledge is not always translated into action - for a variety of reasons.

Much more can be done to reduce emissions from the built environment, although we may need to think differently about the shape, nature and appearance of our cities, towns and neighbourhoods. Traditionally in Australia, relatively low prices have meant that energy considerations have not been a major factor in how settlements or developments are planned or how buildings are designed and constructed. This has been a significant factor in the built environment being a major contributor to Victoria’s greenhouse gas emissions.

What we need to do

Residential and non-residential buildings, their operation and the activities that occur within them, account for around 33 per cent of Victoria’s greenhouse emissions. While emissions from these areas are growing signi.cantly, there is great potential for improving their energy performance. Many studies have shown that the building and construction sector can deliver some of the most substantial emissions reductions at the least cost of any sector, mainly through improvements to new and existing buildings. Analysis undertaken for the Victorian Government shows potential for a nine per cent reduction in emissions from a selected range of energy efficiency measures in buildings. Other research has indicated the potential to reduce emissions by 20 to 30 per cent across the sector.

In particular, there is considerable scope to reduce emissions by making improvements across the ‘lifecycle’ of buildings - in the design, operation, refurbishment and demolition of buildings, in the occupants’ behaviour and in the appliances, .ttings and energy sources used in the building.

Planning and urban infrastructure decisions are also vitally important to reducing emissions. Significant emissions reductions can be delivered by planning for communities and developments to be more energy ef.cient and encouraging more compact cities and towns.

Creating a sustainable built environment will involve policies, decisions and actions across the areas of land use, precinct and building design, transport planning and investment, energy supply and efficiency, and community behaviour. We will also need to apply new technologies and approaches to improving emissions from buildings and developments. Changing the way we do things in these areas represents a major challenge, but the bene.ts will be substantial. Partnerships between industry, government and the community will be important to delivering these bene.ts.

A climate change priortiy for action
Establish future-focussed transport, planning and building systems to support a low emissions future and accommodate a changed climate.

What we’ve already done

The Government is already delivering programs to improve the energy performance of Victoria’s built environment, including
Our Focus

The Victorian Government has a role to play in complementing the CPRS to drive emissions reductions in the built environment, particularly through policy in land use planning and development processes, and building regulation.

One of the top areas for action in the Climate Change White Paper will be to drive improvements in the energy performance of the State’s built environment, with potential areas for action including: Questions to consider
What might Victoria look like in 10 years with a climate-smart built environment?

Global attention to climate change and the adoption of a carbon price will contribute to the greatest change across our urban areas since the post war boom of the 1950s.

Over the next decade, there is likely to be an intensi. cation of residential and business activity around transport hubs and along tram routes. The value of living closer to transport routes and working closer to home will increase.

Trends toward a more compact city will heighten as the outward spread of Melbourne and Victoria’s major centres is tempered with greater attention to reducing transport costs and greenhouse gas emissions from vehicles. The design of our urban areas will support more services and activities in our neighbourhoods that are within walking and cycling distance from our homes.

Some neighbourhoods will be producing their own energy; others will have integrated a range of renewable and energy Efficient technologies, resulting in zero emissions buildings and precincts.

Some buildings will have roof gardens, helping to reduce the heat load on buildings associated with climate change and the Urban Heat Island effect.

New homes will be operating more Efficiently, with much greater use of solar hot water systems, recycled water integrated into the plumbing, solar panels on the roof and landscaping that shades our homes and captures stormwater on-site to keep our gardens green. Our existing homes will be retro. tted with energy and water saving technologies.

In some places, innovative building designs will use wind for power generation, and the use of natural ventilation to supplement or replace mechanical air conditioning will be more widespread in our homes and our workplaces.

Mindful of the increased risks associated with fire, flood and coastal inundation, new homes, buildings and infrastructure in potentially vulnerable locations will be sited, designed, protected or adapted to avoid and be resilient to the future impacts if climate change.

Our commercial and residential buildings will use water more Efficiently, consuming less fresh water and capturing more water for reuse and recycling. Water sensitive urban design will protect and enhance city parks and open spaces, which will in turn improve the thermal comfort of our built up areas.

In commercial and residential precincts, opportunities to generate and distribute energy will become more attractive. Extracting the energy from waste heat from commercial and industrial processes and using it for heating and cooling (co- and tri-generation) will be much more common.

The increased use of natural light and ventilation and more appropriate materials in our buildings, alongside improved transport options and connections to local activity centres, will mean that our homes, workplaces and cities will be safer, healthier and more Efficient - and part of a climate smart built environment. Figures 5 and 6 show how a climate smart built environment might look in 2020 at the buildings and precinct levels.

Figure 5 - What a Climate Smart Built Environment might look like in 2020 - Buildings Level

Figure 5 - What a Climate Smart Built Environment might look like in 2020 - Buildings Level

Figure 6 - What a Climate Smart Built Environment might look like in 2020 - Precinct level

Figure 6 - What a Climate Smart Built Environment might look like in 2020 - Precinct level


3.5 Solid waste management

The solid waste management sector plays a vital role in Victoria’s economy, society and environment. It ensures the safe and hygienic disposal of the waste generated as a result of our everyday activities. New waste technologies will also be a key part of Victoria’s Green Economy.

What we need to do

The waste generated by Victorians has a direct impact on climate change, with the decomposition of garden and food waste, paper, cardboard and timber being the primary source of direct emissions from the sector. This decomposition occurs in land. lls and leads to the release of methane gas, which has 21 times the global warming potential of carbon dioxide.

The waste sector also plays an important role in tackling climate change through its close links with other industrial and commercial activities. Through better diversion of materials for recycling and energy recovery, Victoria will be able to alleviate emissions that would otherwise occur through the primary production of these materials.

Compared with other sectors, solid waste disposal is unusual as annual emissions have decreased by 20 per cent since 1990 and by just over 2 per cent since 2002. This decrease is due to the use of more Efficient gas capture technologies in landfills.

Our Focus

The Victorian Government’s Metropolitan Waste and Resource Recovery Strategic Plan shows that new technologies that process organic waste to create renewable energy and products like compost will reduce greenhouse gas emissions and create jobs and economic activity in Victoria.

While waste will be a covered sector under the CPRS, there are a number of supply chain and market settings that need to be in place to make new waste technologies viable. These include the effective separation of wastes, the pricing of land. ll to recognise its full costs, the development of markets for end products and Commonwealth tax and depreciation arrangements.

What we’ve already done

The Government is already taking action to reduce waste levels, including: Through the $10 million Victorian Advanced Resource Recovery Initiative (VARRI) the Victorian Government will work with local government to demonstrate the business case and facilitate investment in new waste technologies for Victoria.

Questions to consider
3.6 Land use and forestry

The carbon stored in forests and other natural systems makes a signi.cant positive contribution to Victoria’s emissions pro.le and Victoria has signi.cant opportunities to exploit our comparative advantage in this sector to achieve further emission benefits.

What we need to do

Changes in the way we manage and use land have the potential to make a major contribution to reducing emissions by increasing the potential for bio-sequestration (the process by which carbon dioxide is removed from the atmosphere and absorbed by living organisms, especially trees and plants). Victorian Government policies have already led to significant emissions reduction from land use changes: from 1990 to 2006, net emissions from these changes declined by 192 per cent, due in large part to controls that have led to a major reduction in the rate of land clearing in Victoria.

Victoria’s forestry sector has also delivered significant emissions reductions in recent years and has made progress towards greater sustainability. It will be important to continue the success Victoria has achieved in reducing emissions from land use change and forestry to ensure that these sectors are in a good position to continue to reduce emissions, adjust to the CPRS and take up opportunities within a low carbon economy. As the sector adjusts to a carbon price, significant environmental benefits can be achieved from increased reforestation, including maintaining biodiversity, reducing salinity and improving water quality.

Reforestation will be included within the CPRS on a voluntary opt-in basis. To ensure that Victorian forestry is well placed to take up the option of being involved in the CPRS, industry peak bodies and forestry businesses will need to start investing now in activities that will manage emerging risks and position the sector to take advantage of new opportunities.

In particular, the CPRS White Paper suggests that most forests established as a result of the CPRS are likely to be not-for-harvest forests grown on marginal or less productive land. This means new investment opportunities may emerge in environmental and biodiverse plantings, as well as farm forestry.

To ensure that forestry and land use changes continue to play a positive part in reducing emissions, we need to develop a much greater scienti. c understanding of the carbon cycle in forests and different land uses. For example, recent evidence shows that the stock of carbon for intact native forests in south eastern Australia is much greater than previously estimated. This research also shows significant differences between the carbon dynamics of natural forests and those of plantation forests. A better understanding of these dynamics will be needed to inform future forestry policy under the CPRS.

What we’ve already done

The Government has been a strong supporter of helping Victoria’s forestry sector to adjust to change and become more sustainable. Two important initiatives are underway that will assist the sector to respond to climate change: Victoria has also taken action to ensure the sustainability of public native forests, resulting in a reduction in harvest levels and larger areas of forest being protected in parks and reserves.

The State’s five regional forest agreements (RFAs) have increased parks and reserves by 960,000 hectares or 36 per cent. Currently, a small proportion of native forests (around 10 per cent) are logged on a sustainable basis for wood products. In 2008, the Government also ended logging in the Otway Ranges.

Our Focus

The Victorian Government can play a key role in supporting the sector to further reduce emissions by investing in research, providing information to forest owners and assisting the sector to change its systems and practices. The Government can also show leadership in the management of its own forests.

Potential areas for further action under the Climate Change White Paper include:
Questions to consider
3.7 Agriculture

Climate change is already having an impact on Victoria’s agricultural sector - creating opportunities for new technologies, products and services.

What we need to do

The need to reduce emissions, adjust to the impacts of the CPRS and adapt to changing climatic conditions will lead to major changes in land use across Victoria over the next decade. The changing values involved in using land for food, . bre, energy or carbon sequestration could lead to a number of outcomes, including a possible increase in forest plantings, a move from away from grazing towards cropping in high rainfall areas, a reduction in the reliability of irrigated horticulture and an increase in land used for energy production.

With direct emissions from agriculture accounting for 12.6 per cent of Victoria’s total greenhouse emissions, the sector has a vitally important part to play in reducing the State’s overall emissions.

While not covered by the CPRS until at least 2015, Victoria’s agriculture sector will still feel the ‘ripple’ effects of the scheme through rising input costs. Farm business pro. tability may be affected by the CPRS via: The inclusion of agriculture in the CPRS could offer potential advantages for Australia, but key technical issues will first need to be resolved. The Victorian Government will continue to work closely with the Commonwealth to analyse the benefits and costs of including agriculture in the CPRS and to address current technical impediments. The development of a reliable and accurate way to monitor, measure (or estimate) and verify the sector’s emissions without creating perverse incentives will be crucial to these efforts.

Across the State, many farmers are already taking action to reduce biological emissions (methane from livestock and emissions from soils, fertiliser and manure), increase sequestration of carbon and reduce emissions associated with their transport and energy use. Many farm businesses are investing in changes to practices (such as fertiliser application), technology applications (such as feed supplements) and systems (such as switching industry or land use). A range of options are open to farmers in each of these areas and, as the impacts of climate change are felt across the agriculture sector, new and better options will continually emerge. The development of new, efficient and marketable agricultural practices, products and services is an area of potential opportunity for Victoria.

Agriculture in Victoria will also be affected by changing consumer choices. As community awareness about climate change grows, some consumers will seek out low carbon products - and these products may attract price premiums. Currently, such products exist mainly in agricultural niche areas, but they have the potential to generate new growth opportunities more broadly across the sector in the coming years.

What we’ve already done

The Victorian Government has made a substantial investment in helping Victoria’s agriculture sector to adjust to change and become more innovative and sustainable. Government actions range from direct support to individual producers through to statewide strategies. Important initiatives include:
Our Focus

The Victorian Government has an important role in helping primary producers to reduce their emissions, prepare for possible inclusion in the CPRS and adapt to climate change. The Government can assist by removing any barriers to effective emissions reduction and adjustment to the CPRS, investing in infrastructure (such as road and rail freight networks), improving the management of public land and water resources, and effectively regulating industry activities.

Where appropriate, the Government can also drive emissions reduction in the agriculture sector by funding research and providing information and other support for primary producers to change practices, systems and land uses.

There is also a need to improve our knowledge and understanding of the emissions pro. les for different agricultural systems, along with developing practical measurement and accounting tools for these systems.

Areas where the Victorian Government could take action under the Climate Change White Paper include:
Questions to consider
Emissions and the food we eat

The most important role of agriculture is to provide food. In doing so, a viable and sustainable agricultural sector not only generates significant economic benefits; it also plays a vital role in our collective health and wellbeing.

As agriculture is a major contributor to greenhouse gas emissions, reducing emissions in the sector has the potential to significantly reduce the embodied emissions in the food we eat. Efforts by farmers to reduce emissions and increase the resilience of farming systems to climate change will be of great benefit in the future, ensuring that Victoria can continue to produce safe and affordable agricultural products for domestic consumption and export.

Reducing Victoria’s direct (biological) emissions from livestock and soils will require changes in farming practices or technologies. Some Victorian farmers are already taking action to develop sustainable livestock management practices that retain carbon sequestered in the soil - enabling greater carbon sequestration than crop production systems, while also restoring degraded land.

But agriculture is only the first stage in bringing food to our tables. Emissions also occur in downstream processing and distributing. For example, in the meat and dairy industries, the farm is where the majority of greenhouse gas emissions occur. For the viticulture, grains and horticulture industries, the energy used in processing, packaging, refrigeration, transport and even cooking makes a major contribution to emissions.

Improvements are needed in the development and application of carbon accounting to better understand the link between on-farm and post-farm gate emissions from food production and to ensure that consumers have access to accurate information on the emissions associated with the food they eat. However, we can contribute to reducing emissions along the entire food supply chain by:
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