More Short Term Pain for Consumers Amid Labor’s Pursuit of Net-Zero

Residents shop at a supermarket in Canberra, Australia, on Aug. 12, 2021. Rohan Thomson/AFP via Getty Images

The Albanese Labor government’s energy plan will likely leave a significant mark on Australia’s economic future.

Resources Minister Madeleine King discussed her government’s intention to implement the Future Gas Strategy, an initiative designed to curtail the natural gas industry’s contribution to national emissions.

“The gas industry is a major contributor to Australia’s emissions profile,” she told the Australian Petroleum Production and Exploration Association’s (APPEA) annual conference in Adelaide.

“In 2020/21, 8.4 percent of all Australia’s emissions came from the extraction and processing of natural gas and oil,” she said. “If Australia is to meet its emissions reduction targets for 2030 and net zero for 2050, the industry’s emissions must come down.”

The key component of this policy is the government’s commission of new acreage for carbon capture storage facilities.

Yet the announcement came amid the government’s defunding of the development of similar storage facilities for commercial use, with liquefied natural gas (LNG) companies now left to finance their own CCS projects.

King, in her speech, assured attendees that the government had a series of reforms to reduce emissions and could maintain the competitiveness of Australia’s export sectors.

Manufactured Goods to Feel the Crunch

But as global financial volatility continues, the proposal could indirectly affect inflation—taxpayer funded or not. With power costs comprising such a large percentage of the manufacturing process, the price of raw materials and final goods are very sensitive to wholesale energy price changes.

In fact, in August last year, the Australian Industry Group conducted a survey with local manufacturers to understand the impact of international energy shortages.

Around 62 percent said they experienced significant negative effects from price hikes, with only 23 percent able to continue production without considerable operational changes. LNG gas also comprises 42 percent of energy usage for manufacturers.

On top of this, global gas and coal prices have tripled over the past 12 months, with businesses and governments scrambling for reliable energy sources in the wake of the global net-zero push.

Meanwhile, an Austrade study found that food prices are at their highest level since April 2011, with the cost of fertilisers globally rising 128 percent between January to December 2021.

Together, combined with Australia’s latest national consumer price index (CPI) at 2.8 percent, every day, Australians are staring down the barrel of more cost-of-living pain.

Future CCS Development a Possibility

Yet there is a belief that the Future Gas Strategy is a key component to achieving the transition to cleaner and more affordable energy.

While LNG companies will likely pass the costs of Labor’s defunding of carbon storage projects onto consumers in the short term, the strategy will almost certainly allow for the development of new gas fields in the long term.

With additional carbon capture facilities, LNG companies will contribute less emissions than they have previously—if the technology is up to par—and their operations will thus be more closely aligned with Australia’s net zero commitments.

Labor’s strategy also has the potential to spur the development of a world-leading carbon capture storage technology in Australia, with many nations in the Asia-Pacific seeking partners to establish their own hubs.

Woodside Energy’s CEO Meg O’Neill believes the industry has huge long-term growth potential and that there is no better-suited nation out there to lead the charge.

“In Australia, I believe this is a technology that may have been judged too soon,” she told attendees.

“Our gas industry is well-placed to develop CCUS, given our expertise in geological storage and large infrastructure projects.”