Australia expected to advocate for more ambitious NDCs, big climate funds at COP29

Australia is expected to advocate for raising commitments in Nationally Determined Contributions (NDCs) under the Paris Agreement and a substantial climate fund for developing nations at the UN Climate Change Conference (COP29) in Azerbaijan, commencing Nov. 11, as it seeks to be seen as a key global supporter of climate action, experts said.

World leaders are expected to deliberate on building a new global climate finance framework, called the New Collective Quantified Goal on Climate Finance at COP29 in Baku, to replace the $100 billion/year fund established under COP15, that ends next year.

"Australia is going to be very focused on the financing, specifically the New Collective Quantitative Goal," said Logan Reese, Associate Director, Research and Analysis at S&P Global Commodity Insights.

"The Energy Minister, Chris Bowen, is helping head up the effort there to get a consensus and to come up with a collective goal that they've been working on over the last few years."

Australia announced $100 million towards a Pacific Resilience Facility in the previous COP and Reese said the nation would be looking to solidify and strengthen those commitments as their focus is going to stay within the Asia Pacific region.

Secondly, Australia is expected to support more ambitious post-2030 NDC targets, Reese added, which will draw attention to Australia's ambitious climate policies, including a 43% reduction in emissions below 2005 levels by 2030 and a net-zero target at 2050, both of which were legislated in the Climate Change Act of 2022.

Australia has other key climate policies such as the Safeguard Mechanism where the heaviest emitters must keep emissions under a threshold and the goal to have 82% renewable power in its grid by 2030.

"Australia's federal 2030 emissions reduction target is broadly consistent with a well-below 2-degree Celsius scenario and its net zero by 2050 target is (also) aligned with the well-below 2 degrees Celsius scenario," said Matt Lyon, Senior Project Manager (Sustainable economies) at Climateworks, in a recent webinar.

"There is a significant amount of work needed to achieve these targets, and we're already seeing states and territories taking a leadership role in certain policy areas that are helping to drive down emissions."

Data from Commodity Insights shows Australia's greenhouse gas emissions peaked in 2022 at 543.56 mtCO2e and is seen falling to 490.84 mtCO2e by 2030 under an inflection scenario, including CCUS.

Hydrogen initiative

Australia will look to push the interests of its renewable hydrogen industry at COP29 where a Hydrogen Action Initiative, one of several initiatives under the Action Agenda, will seek to drive progress through coalitions.

Australia may be interested in getting a supply chain established, that will help materialize its plans to export green metals, green iron, and other goods manufactured using renewable hydrogen especially to cater to its existing markets where coal and iron ore are consumed, namely China, Japan, Korea and India, Tony Wood, Energy and Climate Change Program Director at Grattan Institute told S&P Global.

"Even though it can be a substantial increase in the cost... you still have people who are prepared to recognize they're either prepared to pay that premium or their governments are going to require them to pay that premium," Wood said, emphasizing what Australia could be seeking in the Action Initiative.

"The best thing is going to be to have a small number of very targeted development projects to prove that we can do it technically with what will require some government support, and to focus on those areas where hydrogen isn't just nice to have, it's necessary to have."

The Azeri UN Climate Change Conference presidency put low-carbon hydrogen firmly on the agenda for COP29, promising the outcome will unlock the potential of a global market for hydrogen and derivatives.

Commodity Insight's Hydrogen Assets Database shows Australia has over 150 renewable hydrogen projects mostly for the production of renewable hydrogen, with a total estimated capacity of about 17 million tons.

Offset industry

Australia will be weighing the benefits of a significant boost to the offset industry against a price increase in Australian Carbon Credit Units (ACCCUs) that would impact the ability of Australian companies to meet their obligations under the Safeguard Mechanism, Reese said in the context of the impending talks on Article 6 that will give directions to global carbon markets.

"If Australia opens its offset industry to international markets, the demand for ACCUs will likely outpace new supply with the price of ACCUs increasing to similar levels to global benchmarks," he said.

Platts, part of Commodity Insights, assessed the Generic ACCU price at A$39.65/mtCO2e ($26.15/mtCO2e) Nov. 8, up 10.45% from a month ago.

Platts assessed EU Allowance contracts for December delivery at Eur66.01/mtCO2e ($70.72/mtCO2e) on Nov. 7, up Eur2.14/mtCO2e day on day.