Post-2020 carbon emissions reduction target annoucement

Date: 13 August 2015

The Australian government has announced its post-2020 carbon emissions reduction target, 26-28% below 2005 levels by 2030. It lags leading commitments from USA and Europe, but is comparable to some of Australia’s trading partners, albeit at the bottom end of the range.

The target is well below the 40-60% reduction required by 2030 to keep global warming below 2C this century. The government has highlighted an unwillingness to impose costs on the economy from meeting climate targets, however the cost to meet the 2C goal will only increase from delaying action.

A globally unambitious target is also of limited effectiveness in incentivising business to shift to low-carbon strategies and we note that policy detail is still unclear. Without a definitive position from government, the onus is on business to respond to the global shift towards a low-carbon economy and also mitigate potential future costs from delayed action.

We draw attention to the need to build resilience in investor portfolios as international obligations required to meet the 2C goal put pressure on domestic policy. Increasing urgency to meet carbon budgets can be expected to lead to more prescriptive regulation and the potential for stranded assets and reputational damage for funds.

 

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