After more than half a century of growth, gas usage in Australia has peaked in all sectors and entered a structural decline, according to a new report from the Grattan Institute. The influential thinktank warns that while use is now declining, it must fall faster to meet the nation's climate targets.
Report Highlights Peak and Decline
The report states that residential gas use peaked in 2020, gas for electricity generation has dropped 11% since 2014, manufacturing gas use has been falling since the early 2000s, and liquefied natural gas (LNG) exports likely peaked in 2022. Alison Reeve, director of the institute's Energy and Climate Change program, said: "Gas is now in structural decline across Australia. There's only one way to go from a peak, and that's down."
Government Response and Policies
Despite the report's findings, federal and state politicians have recently expressed support for gas. Prime Minister Anthony Albanese has announced plans to reserve more gas for domestic use, and the government is encouraging exploration in Victoria and Tasmania. Coalition leader Angus Taylor has called for fast-tracking coal and gas projects. In South Australia, Premier Peter Malinauskis is pushing to lift a fracking moratorium, while NSW has opened new areas for gas exploration.
Reeve emphasized that reducing gas use is a "multi-decade project that must start today" and that ignoring it will lead to "a chaotic and inequitable process with higher costs for all." The report notes that the declines in gas usage have largely not been driven by emissions-reduction policies and are insufficient to meet climate targets.
Implications for Net Zero
The Grattan Institute estimates that overall gas-related CO2 emissions will drop from 90 million tonnes to 64 million tonnes by 2050, which is still too high for Australia to achieve net zero. The report recommends targeted policies across households, industry, and power generation, including phaseout dates for residential gas use. Without such policies, governments would face implausible options like expensive carbon capture and removal technologies.
While green hydrogen or biomethane could lower emissions, the report highlights that the costs of producing them in the required volumes are significant. "In a net zero economy, both will be required in some quantities. But in practice, neither is likely to be available in the quantities required," the report states.
Gas as Backup for Renewables
As Australia's electricity grid transitions to renewables, gas is often cited as an important backup for periods of low solar and wind output. However, Reeve noted: "We hear this catchphrase all the time that gas is important for the transition, but they don't say how much gas, or for how long." The report indicates that the amount of gas needed to back up renewables in the coming decades will likely be half of what was burned in the 2010s.
The Grattan Institute's analysis comes despite recent public backing for gas from politicians, and Treasury modeling released last year suggested that the value of coal and gas exports from Australia could halve within five years as global demand slows.
