Australia looks to deploy A$2bn emissions reduction fund

THE Australian Government is looking to deploy a A$2bn (US$1.32bn) fund to support adoption of technologies that reduce emissions and increase efficiency and productivity. This follows the release of an expert panel review aiming to identify new opportunities for low-cost abatement.

Whilst industry has responded positively to the review and the Government’s response to it, environmental groups have not been welcoming.

The expert panel was commissioned in October 2019 by Australia’s Minister for Energy and Emissions Reduction, Angus Taylor, and led by former President of the Business Council of Australia, Grant King. Also known as the King Review, the report looks to build on the success of Australia’s A$2.55bn Emissions Reductions Fund (ERF) and outlines how the A$2bn Climate Solutions Fund can be deployed to leverage greater co-investment from the private sector and other levels of government. The ERF – allocated in 2014 – has contracted more than 190m t of emissions reductions at an average cost of about A$12/t.

The Climate Solutions Fund will be deployed to support farmers, businesses, and communities in adopting beneficial technologies. According to Taylor, the Government will target dollar-for-dollar co-investment to drive at least A$4bn in investments to reduce emissions across the country.

He added: “We have seen considerable success in the land and electricity sectors to reduce emissions – this is about supporting and capitalising on new and exciting opportunities in the agriculture, manufacturing, industrial, and transport sectors to build on that success.”

In its review, the expert panel makes 26 recommendations to the Government intended to help Australia exceed current international commitments and to help meet future commitments under the Paris Agreement. The Government agreed, or agreed in principle, to 21 of the recommendations, and noted the remaining five.

The recommendations were made across three themes: enhancing ERF to encourage greater participation; incentivising voluntary emissions reduction on a broader scale; and unlocking transformative low emissions technologies that businesses need.

They include establishing a co-investment programme to accelerate uptake of high abatement potential technologies, focussing on hard-to-abate sectors such as heavy industry, freight transport, and aviation; amending ERF legislation to enable development of carbon capture and storage (CCS) and/or carbon capture, utilisation and storage methods; developing and publishing formal policy to govern prioritisation and development of ERF methods; and encouraging state and territory government use of national crediting architecture to offset emissions.

The review also recommends leveraging Australia’s safeguard mechanism – which places emissions limits on the country’s largest electricity, resources, and industrial emitters – to accelerate the adoption of low emission technology. Under the mechanism, facilities that exceed their emissions limit must surrender carbon credits to bring their net emissions below their baseline. According to The Guardian, in practice, this policy has led to a 12% increase in pollution from industry.

The recommendations align with the Government’s technology-based approach to emissions reductions, which Government will develop further through its Technology Investment Roadmap. The roadmap is to be developed in consultation with industry, researchers, and the financial sector. A discussion paper for the roadmap was released on 21 May.

According to Taylor, the Government’s approach is expected to incentivise voluntary emissions reductions on a broader scale without imposing new costs on households, businesses, or the economy.

Taylor commented: “Our 2030 Paris target is a floor not a ceiling. These reforms will position Australia to overachieve on our 2030 Paris target while maintaining a strong economy.”

By 2030, Australia aims to reduce greenhouse gas emissions by 26–28% compared to 2005 levels (612m tCO₂-e). This is a step up from the country’s goal to reduce emissions to 5% below 2000 levels (equivalent to 13% below 2005 levels) by 2020. The country says it is on track to exceed its 2020 target by about 411m t, or around 80% of a full year’s emissions.

Industrial and environmentalist responses

Several companies and industrial groups have released positive statements regarding the King Review and the Government’s follow-up.

Kevin Gallagher, MD and CEO at Australian energy company Santos, said that the review makes “sensible, job-creating” recommendations that will help to accelerate investment in real emissions reduction opportunities in Australia.

He added: “I am very pleased to see Energy and Emissions Reduction Minister Angus Taylor and the Morrison Government moving forward with a regulatory framework that will include pathways to underpin development and deployment of CCS. Just as private investment in renewable energy deployment was accelerated through public policy and funding over the last two decades, we now need to focus on accelerating CCS in similar ways to achieve the scale and experience that will not only drive costs down but will also deliver real scale when it comes to emissions reduction.”

Recently, Santos and BP entered a non-binding agreement to support Santos’ proposed Moomba CCS project, which will capture 1.7m t/y of CO₂ from the Moomba natural gas processing plant.

Andrew McConville, CEO of industrial association Australian Petroleum Production & Exploration Association (APPEA), commented: “The Review has identified and recommended ways to improve participation in various emissions reduction opportunities by removing barriers to participation.”

“APPEA welcomes these recommendations to deliver greater abatement opportunities for the country. Importantly the report underlines the key role the oil and gas industry can play in cutting emissions.”

“For example, there are several carbon capture, utilisation and storage (CCS/CCUS) projects, and enhanced oil/gas recovery activities (EOR/EGR) projects under consideration in Australia that may provide opportunities to reduce emissions.”

Tania Constable, CEO of advocacy group Minerals Council of Australia, said: “The King Review and the Government’s response provide a clear path for reducing emissions, while also taking steps to ensure Australia’s core industries such as mining and minerals processing remain internationally competitive and enabling practical approaches to emissions reduction which recognise Australia as a large energy-intensive country.”

Chief Executive of national employer association Australian Industry Group Innes Willox, noted: “The existing Emissions Reduction Fund has delivered more abatement than many expected, but has not reached many parts of the Australian economy or advanced a successful long-term energy and climate transition. The King Review contains many refinements or extensions to existing policies and while there is complex work to do to implement some of the recommendations, overall they constitute important improvements.”

“The next steps for the Federal Government are to flesh out these recommendations in close consultation with industry and affected stakeholders; to build consensus around a national long-term strategy; and to back in these measures through the next budget and beyond. We look forward to working with them.”

Conversely, environmental groups have expressed concern at the efficacy of the recommendations.

Suzanne Harter, Climate Campaigner at national environment organisation Australian Conservation Foundation, said: “The Emissions Reduction Fund is already an ineffective A$2.55bn fund that is not up to the task of reducing Australia’s rising climate pollution. The recommendations of Grant King’s review would make it even weaker and less able to cut emissions.

“By releasing this plan, advised and led by a former fossil fuel executive, Energy Minister Taylor has undermined the Government’s Climate Change Authority, which is conducting its own review of the Emissions Reduction Fund.”

“Australia has virtually no effective climate policy and no pathway to achieve net zero by 2050, which is required if we want to keep this a liveable continent for coming generations.”