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4.2 Transport energy systems

Key points

  • Transport systems need to become much less greenhouse gas-intensive over the next
    20 years if greenhouse gas emission reductions are to be achieved.

  • The dominant role of transport in urban environments creates major opportunities when combined with the possibility of increasing urban amenity and resilience (see Section 5, Recommendation 4).

  • Many options for reducing the greenhouse gas intensity of transport carry implications elsewhere: for example, increased use of electricity for transport will require decarbonisation of stationary energy, while increased use of biofuels has implications for water use and food production (see Section 5, Recommendation 3).

  • In the absence of a price on carbon there is potential for a major increase in emissions if rising oil prices lead to the adoption of more greenhouse gas-intensive alternatives.

Situation and outlook: Australian roads are host to about 15 million vehicles, 77 per cent of which are passenger vehicles with an average age of 9.7 years. The fleet has been growing at 2.9 per cent per year since 2003. The transport sector is the largest user of final energy in Australia at around 35 per cent (ABARE, 2010a). It is also responsible for approximately 14 per cent of Australia’s total GHG emissions (DCCEE, 2010b).

Australia’s current transport fuel mix is shown in Figure 4.2. Petrol is the dominant fuel used by passenger and other light vehicles, while diesel dominates the heavy vehicle sector (trucks and buses). The other significant fuels are liquefied petroleum gas (3 per cent) used by high distance vehicles such as taxis, a growing supply of E10 (10 per cent ethanol in petrol) and compressed natural gas used by bus fleets. Average fuel consumption has not changed greatly over the last decade (ATC and EPHC, 2008): as engine efficiency has increased, so too has engine size. In 2005, the overall fuel efficiency of Australia’s passenger vehicles was 11.2 L per 100 km compared with the European average of around 8 L per 100 km. However, with the entry of smaller, more fuel efficient vehicles into the Australian market, overall fuel efficiency is starting to improve (ATC and EPHC, 2008).


Figure 4.2: Australia’s transport fuel mix in 2006 (ABS, 2007b). Trucks include rigid, articulated and specialised trucks. LPG is liquefied petroleum gas, CNG is compressed natural gas, ML is million litres.


Australia’s transport fuel supply: The gap between Australian oil production and imports has been widening over the last two decades, particularly as our petroleum demand has increased. While the gap has not been a major issue so far, it becomes a concern when the oil price rises, due to changes in global prices and/or exchange rates. In the June quarter of 2008, Australia’s oil trade balance was a deficit of 1.8 per cent of GDP, with an increasing trend. Since oil is an internationally-traded commodity and Australians pay world oil prices for the shortfall between demand and domestic production, our vulnerability to rises in the oil price will increase as our domestic supply diminishes. This will continue while we remain dependent on petroleum products as our major source of transport fuels.

Changing vehicle and fuel technology: Figure 4.3 illustrates possible changes in vehicle technology for the Australian transport sector to reduce its GHG emissions consistent with stabilisation at 450 ppm CO2eq, and to simultaneously reduce its dependence on imported oil. As in Figure 4.1, this scenario analysis determines the minimum-cost pathway to meet the emissions constraint while also taking account of increases in the world oil price. In the scenario the Australian fleet will become increasingly electrified, with growing use of hybrids, plug-in hybrid electric vehicles (PHEVs) and pure electric vehicles. Despite the strong predicted trend to electrification, it is anticipated that ongoing use of hybrid, plug-in hybrid and fully internal combustion engines will cause on-board combustion of liquid fuels to remain the dominant source of energy for transport until 2050.


Figure 4.3: Scenario to 2050 for a mix of vehicle technology types consistent with stabilising greenhouse gas concentrations at 450 ppm CO2eq. Scenario analysis using the CSIRO Energy Sector Model by the CSIRO Energy Futures group (Paul Graham, pers. comm.). PHEV is plug-in hybrid electric vehicle.


Figure 4.4 shows the changes in the transport energy mix that accompany the vehicle technology scenario in Figure 4.3. In this scenario there will be greater use of alternative fuels such as ethanol from bio-sources (biofuels, see Section 4.4), diesel from gas and coal (combined with CO2 geosequestration), and liquefied or compressed natural gas (LNG or CNG; particularly for heavy transport).


Figure 4.4: Scenario to 2050 for transport energy sources (in Petajoules (PJ) per year) consistent with stabilising greenhouse gas concentrations at 450 ppm CO2eq. Scenario analysis using the CSIRO Energy Sector Model by the CSIRO Energy Futures group (Paul Graham, pers. comm.). LPG is liquefied petroleum gas, GTL is gas-to-liquid, CTL is coal-to-liquid.

The scenario also indicates a strong increase in the demand for electricity to power plug-in hybrids and electric vehicles. This would have to be supplied by the electricity grid, which would need to be progressively decarbonised from a current GHG intensity of around 0.9 tCO2eq/MWh (IEA, 2009a; Climate Group, 2009; DCCEE 2010c) to around 0.2 tCO2eq/MWh by 2050. Until 2030 the increase in electricity consumption due to electric vehicles is likely to be relatively small, but demand is expected to increase strongly from then until 2050, implying a 12 per cent increase in total electricity production to service demand. People are likely to charge their cars overnight, which will assist in smoothing out electricity demand and may increase generation and distribution efficiencies. Electric vehicles’ stored energy could be used to return power to the grid at times of high demand. The management of the charging process and possible two-way flows will require the advancement of smart grid technology to maximise these benefits (see Section 5, Recommendation 2).

The projections of technology and fuel mix in Figures 4.3 and 4.4, along with those for stationary energy in Figure 4.1, are based on an assumption of global mitigation of greenhouse gas (GHG) emissions to keep concentrations to 450 ppm CO2eq. In the absence of such mitigation, it is likely that the stationary energy technology mix will change little from the present. However, a low-mitigation scenario could also see a changing transport energy mix that causes a major increase in GHG emissions because of global oil shortages as resources are exhausted. Expensive alternatives to conventional oil supplies (such as the conversion of coal to liquid fuels and the use of shale oils) will become economically viable if international oil prices rise sufficiently and there is no price on carbon. These alternatives have much higher GHG emissions per unit of energy: for instance, the use of shale oil produces two to three times more CO2 than the use of conventional oil (International Energy Agency, 2009c). Figure 4.5 shows the production costs and resources for all the main oil options. Those that become economically viable above an oil price of US$50 to $60 a barrel, (to produce petrol and diesel products equivalent to conventional oil) have considerably higher GHG emissions per unit of energy.


Figure 4.5: Long-term oil supply cost curve. The height of the boxes represents the estimated range of production costs for each oil resource; the width shows the estimated availability of the resource. Gas-to-liquids and coal-to-liquids are overlapping to indicate the range of uncertainty surrounding the size of these resources, with the combined width showing a best estimate of the likely total availability of the two. There is also a significant uncertainty on oil shale production cost, as the technology is not yet commercial. Cost associated with CO2 emissions is not included. MENA is the Middle East and North Africa; CO2-EOR is carbon dioxide enhanced oil recovery; EOR is enhanced oil recovery (International Energy Agency, 2008).



The role of hydrogen in Australian transport needs to be clarified, especially in the light of the huge investments being made by most overseas car and bus companies in fuel cells, hydrogen generation and distribution systems.

Adopting the changes in vehicle technology and alternative fuels shown in Figures 4.3 and 4.4 would result in the Australian transport sector playing its role in reducing overall Australian GHG emissions by around 20 MtCO2eq/year by 2030 and up to 40 MtCO2eq/year by 2050, against a backdrop of increasing population.

Energy-water-carbon intersections: Australia’s transport future depends on many factors, including requirements for environmental sustainability, technological innovation and cost effectiveness.

Constraints on GHG emissions, together with rising world oil prices, are likely to drive changes in transport technology (Figure 4.3). The necessary alternative fuels (Figure 4.4) are likely to require increased water use in production and processing, particularly those from bio-sources and those using carbon capture and storage.

There is encouragement coming from both government and industry through voluntary fuel efficiency measures for both light and heavy duty vehicles, building more fuel-efficient vehicles in Australia through the $6.2 billion ‘A New Car Plan for a Greener Future’ with its Green Car Innovation Fund and public education initiatives such as the ‘eco-driving’ program.

Public preference and choice will also play a role in deciding Australia’s transport future. Choices will be driven by a complex mix of vehicle technology, cost (both of new vehicles and the fuel) and travel convenience. Public transport will also be a major factor in urban amenity and needs to take into account the various population growth scenarios and links with city planning strategies. Greater use of rail for the transportation of goods will be important and also needs to be factored into our transport future.

Australia is fortunate to have a range of resources for the development of alternative transport fuels that can use our existing liquid fuel distribution infrastructure. Options include greater use of gas in the form of CNG and LNG, potential second-generation biofuels and the conversion of gas and coal into liquids (bearing in mind the implications of all these strategies for water and GHG emissions, for example the high emission costs of coal-to-liquid conversion). The use of electricity for transport will also become more important. Crucial to these developments will be low-emission, low-water-use technologies and distribution systems to go with them. While energy and GHG emission analyses are well advanced, similar studies of future transport-related water requirements are needed to properly define parallel water sector implications.

4.3 Water systems

Key points

  • There is increased competition for limited water resources between cities, irrigation, industry and the environment, caused by declining surface and groundwater resources in southern Australia, increasing populations and growing community awareness of the environmental impacts of over-extraction of water.

  • Measures to ensure urban, industrial, agricultural and environmental water security include (1) reducing demand, through education and efficiency programs; (2) increasing supply, through recycling and desalination; and (3) making better use of available water, through proper pricing and ensuring adequate environmental flows.

  • Some measures to increase supply, such as recycling and desalination, have significant energy costs, but can be environmentally viable options provided that the full implications of their costs (particularly for the environment) are properly recognised and met. With such recognition of costs, desalination (for example) is preferable to destroying river systems by over-extraction.

  • Water is a local resource. Large-scale pumping from northern to southern Australia would have prohibitive energy costs compared with desalination.

  • Water and energy efficiency measures often act on the same systems and appliances, so there is scope for a National Energy and Water Efficiency Target scheme to combine state and federal rebates, incentives and regulations (Section 5, Recommendation 1).

  • There is scope for improving the efficiency of urban water use and the water productivity of agricultural water use through smart network technology (Section 5, Recommendation 2).

Situation and outlook: Rainfall in southern Australia has decreased over recent decades (see Section 2.3). Pronounced drying trends have been evident in southwest Australia since the 1970s and in southeast Australia since the 1990s. This drying is consistent with trends expected from human-induced climate change and may be at least partly caused by climate change, in addition to natural climate variability (Section 2.2). An important feature of rainfall patterns over the last few decades in southern Australia has been the absence of very wet years to replenish deep soil moisture and provide the large runoff events that boost reservoir levels.

Because of limited (and decreasing) water availability, the growth in water consumption in southern Australia has been much slower than the growth in energy consumption. Water consumption per person has fallen in response to decreases in water availability (Section 2.3).

Insurance is required against the severe social and economic damage resulting from storage levels falling to critically low levels. Doing nothing except waiting for rain is no longer a viable option for managing security of water supplies for urban, industrial and agricultural uses. Continued effort is needed to respond to three challenges: urban water, food production and ecosystem repair.

Challenge 1—Urban water: Australia’s cities have responded to water stress with demand management and with measures to increase supply. Reduction of demand has already been significant (Section 2.3 and Figure 2.10). On the supply side, urban water authorities are turning to alternative, less rain-dependent water sources—principally desalination and recycling—and are building pipe networks to interconnect city and irrigation supply systems. Through these measures, future water supply for Australia’s urban population can be assured. In effect, cities are achieving security of supply by building a more diverse portfolio of water sources. These alternative water sources, particularly desalination and recycling, are more energy-intensive than traditional gravity-driven supply from reservoirs. Increased diversion of water for urban uses (particularly in the Murray–Darling system) either contributes to environmental water stress or must be offset by reductions in use for agricultural irrigation.

The costs of desalination are steadily declining as technology improves, such that it is now aviable option for city water supplies (Box 4.2). There has been criticism of recently constructed desalination systems on the grounds that the increased electricity demand contributes to increasing Australia’s GHG emissions. The energy and GHG emission costs of desalination are significant, as reviewed in Box 4.2. However, consistent principles for the use of finite resources (see Section 5, Recommendation 1) can ensure that these costs are properly handled. Desalination can be then be an appropriate technology for meeting urban water needs, with less environmental impact than options which do not properly recognise full costs, such as over-extraction from stressed river systems.

Box 4.2 Desalination

There are a range of proven technologies for desalination, the conversion of saline water (seawater or terrestrial water containing salts) into freshwater. All require substantial amounts of energy. Currently the desalination industry is dominated by ‘reverse osmosis’ systems, the technology used in all Australian systems to date. Reverse osmosis involves forcing saline water at high pressure through membranes that allow water molecules to pass but reject salt ions. Only a fraction of the water can be processed and around half of the saline water flow is discarded as high-salinity brine, generally to the ocean.

The costs of desalinated water, which are steadily declining as technology improves, have fallen sufficiently to make desalination a viable option for city water supplies. The cost range is $1.15 per kL to $3.50 per kL for desalinated water, compared to a range of $0.15 per kL to $3.00 per kL for dams or surface water (PMSEIC, 2007).

Plants have been built in Sydney, Perth and the Gold Coast, while plants in Victoria, South Australia and Western Australia are under construction.

There has been considerable community criticism of recently-constructed desalination systems on the grounds that the increased electricity demand contributes to increasing Australia’s GHG emissions. This criticism is valid if the mix of stationary energy supply technologies does not change. Desalination requires between 3 and 4.5 kWh of electricity per kL of freshwater produced (GHD, 2003; Watson et al, 2003; Australia Institute, 2005). If all 2100 GL per year of household water use (ABS, 2006) was supplied by desalination, electricity demand would increase by approximately 8000 GWh per year. Assuming a GHG intensity for electricity of around 0.9 tCO2eq/MWh (currently typical for Australian electricity generation; IEA, 2009a; Climate Group, 2009; DCCEE, 2010c), GHG emissions would increase by approximately 7.2 MtCO2eq/y, or about 1.3 per cent of Australia’s total emissions in 2008 (excluding land use change) of around 550 MtCO2eq/y (DCCEE, 2010b).

Some desalination projects incorporate additional renewable (often wind) energy capacity to offset the energy used by a particular desalination plant. This ad hoc approach successfully restricts the increase in emissions to low levels, in the absence of a more holistic overall approach. For example, the Capital windfarm near Bungendore, NSW was built to offset the electricity consumption of Sydney’s Kurnell desalination plant (www.sydneywater.com.au/Water4Life/Desalination).

If an integrated approach to energy, water and carbon is taken, then desalination is a very useful technology for sourcing new urban water supply, with considerably less environmental impact than many other options (see Section 5, Recommendation 1).



There are a number of minor but useful opportunities for maximising the production of renewable energy from water systems themselves. Water supply systems with pressure heads in excess of supply flow needs have already been largely retrofitted with small hydroelectricity systems. Generation of biogas (methane from sewage) could be beneficially exploited further, with the added benefit of simultaneously reducing GHG emissions from the water system.

Challenge 2—Water for food production: The production of food through irrigated and rain-fed agriculture in a drying climate is a major challenge (PMSEIC, in press). If Australia is to prosper as a major supplier of food and fibre to the growing world population, major initiatives are required to improve the water productivity of Australian agriculture (water productivity is the economic value produced per unit of water used). While this is a daunting challenge, Australian farmers have a long history of adaptation to increase agricultural productivity in the face of a highly uncertain climate. Research and development have been key factors in their success. However, the research capacity that underpins improvement in economic water productivity in irrigation is currently at risk with the closure of Land and Water Australia and the Cooperative Research Centre for Irrigation Futures, and an uncertain future for the National Program for Sustainable Irrigation. These gaps need to be filled (see Section 5, Recommendation 5).

Challenge 3—Repairing riverine ecosystems: The third challenge is to repair the substantial environmental damage caused by historically unsustainable levels of water allocation and diversion. A start has been made in facing up to this challenge by investing in water use efficiency, purchase of water from irrigators and transforming water allocation priorities (Water Act of 2007). However, much remains to be done to ensure that these strategies are ultimately successful in restoring environmental flows and the health of rivers and aquatic ecosystems.

Moving water over long distances: When society is faced with regions under severe water stress and unmet demand for water for urban and agricultural use, it seems natural to look to Australia’s wetter regions. Periodically, proposals are mooted for transporting water very long distances from the northern, high-rainfall parts of the continent to drier regions. This option appears even more attractive under climate change scenarios with decreasing rainfall in the south and increasing rainfall in the north (Section 2.2). Long-distance piping of water is expensive from several viewpoints. A water pipeline is a major and expensive piece of infrastructure which must be continually maintained. A significant continuous consumption of electricity is needed to operate the pumps required to drive the water against the frictional losses within the pipe. Summing the amortised capital cost of the pipeline, the maintenance cost and the energy cost yields a total cost of transporting water; the water at the end of the pipe is more valuable than what enters the pipe by this amount. Costs for water piped over long distances are up to $9.30 per kL, compared to a range of $1.15 to $3.50 per kL for desalination. For example, the cost of water piped nearly 600 km to Kalgoorlie is about 10 times higher than the typical cost of locally supplied water in Australian cities (PMSEIC, 2007). Adelaide currently has the highest capital city consumption of energy for water pumping, since much of its water comes via pipelines from Murray Bridge and Mannum, an average distance of around 70 km. The resulting energy cost is in the middle of the range for modern desalination plants (PMSEIC, 2007).

These considerations reinforce the view that water is essentially a local resource that can be moved over long distances only at a cost which is larger than the cost of desalination. Thus, the option of moving water from the wet north to the dry south of the continent is not economically viable.

Opportunities for end-use efficiencies at energy-water intersections: A 2008 report on energy use in urban water systems (Kenway et al, 2008) found that ‘the total energy use by water utilities in Sydney, Melbourne, Perth, Brisbane, Gold Coast and Adelaide in 2006–07 represents about
0.2 per cent of energy use in the total urban system. The total energy use by water utilities is less than 15 per cent of the energy used for residential water heating’. Heating water is some four to five times more energy-intensive than desalination using membranes. Reducing hot water use through more water-efficient washing machines, shower roses and dishwashers, combined with a shift away from electrical hot-water heaters to solar and instantaneous gas units would make a substantial reduction in the GHG emissions from energy use by urban water systems.

A 2008 report by the Department of Environment, Water, Heritage and the Arts on energy use in Australia (DEWHA, 2008) found that water heating is the only major residential energy use predicted to decline over the period 2005 to 2020, principally as a result of various energy programs undertaken by federal and state/territory governments. The anticipated decline is about 10 per cent. The key drivers of this change are an increase in the share of gas and solar technologies, with a corresponding decrease in electric storage hot water, and some additional impact from the introduction of electric water heater minimum energy performance standards in 1999. This illustrates that efficiency standards can be effective in improving the energy or water efficiency of individual appliances or items. A more systemic strategy is needed to improve the end-use efficiency of both energy and water use, combining efficiency and demand management measures, especially those that address energy and water use together.

The Victorian Energy Efficiency Target (VEET) scheme provides incentives to replace items like lights, refrigerators, space heaters and water-heaters, and will be expanded to include air conditioners and televisions. This scheme has been successful in its first two years of operation in Victoria.

A scheme such as the VEET could be extended nationally to include both energy and water efficiency (see Section 5, Recommendation 1). Such a National Energy and Water Efficiency Target scheme would include incentives to:

  • replace low efficiency water heaters, ducted heating and lighting with high efficiency models

  • install insulation, window seals and energy-saving windows

  • install insulation cladding on hot water pipes

  • upgrade to low-flow shower roses

  • purchase high energy efficiency refrigerators

  • purchase washing machines, dishwashers and clothes dryers with higher energy or water efficiency

  • upgrade to switchable power boards.

Large retailers of consumer products, such as lighting and whitegoods, could be encouraged to become accredited under this scheme to simplify the generation of energy and water efficiency certificates at the point of sale. For whitegoods, these would be verifiable upon installation of new items and removal of old ones. For products such as lighting, certification could involve a trade-in mechanism whereby consumers would bring inefficient lights to stores and swap them for efficient ones. By allowing consumers to choose products in stores instead of relying on ‘door knocking’ by contractors, consumers can exercise their own choices over products and have the reassurance of retailers’ brand presences.

A single point of access for the public can be developed that encompasses the wide variety of state and federal rebates, incentives and regulations affecting purchase decisions. This can address the barrier of ‘information overload’ that leads to inaction from consumers and would allow all possible opportunities to be accessed.

4.4 Land systems

Key points

  • Energy, water and carbon in rural Australia underpin five major landscape functions:
    (1) food, fibre and wood production
    (2) water production and use
    (3) bioenergy production and biosequestration
    (4) conservation of environmental assets
    (5) economic and social wellbeing.
    All of these linkages can create both tensions and opportunities.

  • To maximise opportunities and resolve tensions, these functions and their underlying energy-water-carbon intersections need to be integrated to achieve long-term resilient land systems (see Section 5, Recommendation 3).

  • There is an immediate opportunity to establish joint development goals for food/fibre and fuel production, focusing on linked biomass, energy and water planning to increase productivity while supporting Australia’s move to a low-carbon future.

  • Opportunities exist to combine better soil carbon management with carbon sequestration, both through natural and engineered solutions, and for a shift to non-land-based sectors
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