Australia sets new limits on heavy industry in push for decarbonisation

AUSTRALIA has passed legal reforms that set a hard cap on industrial emissions and require new gas fields supplying LNG facilities to be net zero as it pushes heavy industry to decarbonise.

The so-called ‘safeguard mechanism' requires Australia’s largest emitters – around 215 facilities that produce over 100,000 t/y of greenhouse gases – to keep their emissions below a baseline, but the scheme has proved ineffective with emissions increasing from around 130 m t in 2016/17 to more than 140m t in 2019/20. The mechanism covers facilities for oil and gas production, mining, power, manufacturing and waste that are responsible for around 28% of the country’s emissions. In support of its plans to reduce carbon emissions by 43% by 2030 and go net zero by 2050, the Labor government has now passed reforms that will reduce greenhouse gas emissions by major polluters by 205m t to 2030 and set a hard cap so that emissions cannot exceed 1.2bn t between 2020 and 2030.

Responding to the new law being passed, Chris Bowen, minister for climate change and energy, said it was a “historic day” for the country by ensuring the economy can take advantage of the opportunities of decarbonisation and meet its ambitious climate targets.

Squeeze on gas

The Labor government had to negotiate on amendments put forward by the Greens to secure the votes needed to pass the reforms. Among the key measures agreed are that any new gas fields supplying existing LNG facilities will be treated as new facilities and will have their baseline emissions set by international best practice. Using the existence of low-CO2 fields and the opportunities for carbon capture and storage (CCS) as the point reference for best practice, the new rules require zero emissions from new fields. Likewise, new entrants wishing to produce gas from the onshore Beetaloo basin in the Northern Territory will have to be net zero for the scope one emissions produced directly from their operations.

Greens leader Adam Bandt has predicted that the reforms will prevent such projects from going ahead: “Coal and gas have taken a huge hit. The Greens have stopped many of the 116 new coal and gas projects in the pipeline from going ahead, pollution will actually go down, and we’ve derailed the Beetaloo and Barossa gas fields.”

However, Santos CEO Kevin Gallagher has told shareholders that the company remains committed to its offshore Barossa natural gas project despite the reforms. The project, which will feed gas to the Darwin LNG plant, will use CCS technology to capture emissions from the field but the capture is not scheduled to begin operations until 2027. The full details of the reforms, including how new baselines will be set, will be agreed in coming legislation. Gallagher said more details were needed as soon as possible to determine the full impact on the Barossa project, which has been described by environmentalists as a ‘carbon bomb’ due to the high volume (18%) of CO2 contained within the field.

Gallagher said: “The regulations that support the legislation are yet to be developed and so we’ll be working with the government over the weeks ahead to get clarity on that, and if that changes, and that has any impact on schedule, then we will have to take that into account at that point in time,” The Australian reports.

The Australian Petroleum Production & Exploration Association (APPEA) has criticised the rules saying they risk slowing the development of the gas projects that it argues are necessary for a cleaner future, and could leave the country reliant on dirtier coal. Samantha McCulloch, CEO of the trade group, said the changes strengthen the need for the federal government to develop a national plan for CCS.

Measurement and project oversight

Furthermore, the reforms will require companies to justify heavy use of Australian carbon credit units (ACCUs) to offset emissions. The integrity of the ACCU scheme has been called into question and the new reforms now require any company using offsets to cover more than 30% of their emissions to explain their actions to the regulator. The reforms also require the Climate Change Authority (CCA) to take action to improve methane measurement, verification and reporting by July 2024.

Among the new rules is a so-called ‘pollution trigger’ that will require the climate change minister to test a new or expanded project’s impact on the emissions cap. Bandt says this gives the minister power to effectively prevent projects that would contribute to the cap being exceeded, and scope for legal enforcement if the minister fails to act.

Bandt said: “We’ve secured a pollution trigger that, for the first time in history, means new projects must be assessed for their impact on climate pollution and they can be stopped. Labor now has the power to stop coal and gas projects that would breach the pollution cap."

In a bid to ensure that heavy industry remains competitive in the face of these new limitations, the government is giving an extra A$400m (US$266m) to help decarbonise those industries that provide critical inputs into clean energy industries, including the steel, cement and aluminium sectors. It will also reduce the rate by which these industries have to reduce their emissions. There will also be a review to examine the feasibility of using a carbon border adjustment mechanism, particularly for the steel and cement sectors, that would prevent cheaper goods imported from countries without emissions limits on industry from undermining Australia’s decarbonisation efforts.

Reaction

Ben Eade, CEO of the trade group Manufacturing Australia, said the creation of specific rules for manufacturing was appropriate because the sector faces high levels of trade exposure and needs to remain competitive with imports.

Eade said: “Australia has profound opportunities to create and retain high quality jobs, and grow its manufacturing sector, through a carefully managed transition to low emissions manufacturing.”

He added: “These changes are sensible and pragmatic. It’s now vital that we get the details and the implementation right, to enable the multi-decade investments that are needed to underpin low emissions manufacturing."

Explosives producer Orica welcomed the proposals saying they provide policy confidence and investment certainty to industry. It says it will continue with plans to install tertiary catalyst abatement technology at its Kooragang Island project in Newcastle that will eliminate at least 567,000 t/y of emissions from the site’s operations. It will also proceed with the final investment decision for its Yarwun nitrates decarbonisation project in Gladstone that will deploy similar technology and reduce emissions by 200,000 t/y.

Jennifer Westacott, CEO of The Business Council of Australia, said the new rules are tough but achievable and provide a big step towards getting on with the ‘how’ of decarbonisation.

“After more than a decade of uncertainty and equivocation, employers now have certainty about our emissions targets and how we’re going to get there.” Though she offered a similar warning to that from the APPEA: “We’ll need to work carefully through the implementation of this policy to avoid unintended consequences that lock critical transition fuels including gas out of the market.”

The Australian Conservation Foundation welcomed the cap on emissions and ministerial controls over fossil fuel projects that might exceed the target, but called for lawmakers to go further. Acting-CEO Paul Sinclair said: “The safeguard mechanism only covers domestic emissions – most of the pollution from Australian fossil fuels comes when exported coal and gas is burnt overseas. The pollution we export through coal and gas is twice what we produce at home. Attention should now turn to replacing our coal and gas exports with clean exports. Solid research shows it can be done – and can be an economic boon. The strengthened mechanism is a critical start, but not the final word, on real climate action.”