Exploring emissions reduction target for a state government’s resource sector

Background

Our client, a state government department, sought to understand an appropriate emissions reduction target for the state’s resource sector that would balance the need to reduce emissions against the requirement to remain competitive (within Australia and internationally) – and the least cost way in which the department could facilitate this outcome.

What we did

We used the Deloitte Decarbonisation SolutionsTM Marginal Abatement Cost Curve (MACC) module tool to explore the abatement potential and unit cost of abatement of options, under different scenarios of energy price variations, carbon pricing, changes in capital costs of technology and changes in operational costs.

Specifically, we worked in close collaboration with the client to develop the pathways and policy options. As part of this, we:

• defined baseline emission pathways using the current government’s determination of what is attributable to the resource sector (fugitive and on-site)
• identified baseline policy scenarios to benchmark various policy options against core emission targets
• identified key policy pathways under each policy option – regulation, direct intervention and market mechanisms
• designed baseline cost curves to define resource sector elasticity
• based on a bottom up approach for each abatement option, developed baseline MACC to determine levelised cost of each abatement option
• optimised each policy option based on choice of the marginal abatement potential against maximum technical abatement potential.

Outcome

By combining emissions modelling through MACCs with an understanding of emissions reduction policy options at a sector level, we were able to provide the client with robust options to help the sector to reach net-zero by 2050 in the most effective way. The findings were communicated in a highly visual and comprehensive manor, helping the client communicate with other key parties within government.