The evidence from this inquiry is clear. Under Labor’s Safeguard Mechanism, actual pollution from coal and gas goes up and the climate crisis gets worse.
This isn’t incremental progress, it’s making things worse. You cannot put the fire out while pouring petrol on it.
The first step in fixing a problem is to stop making the problem worse. But Labor’s Safeguard Mechanism makes the problem worse.
The Australian Greens are of the view that, given the danger that new coal and gas projects pose to a stable climate and a safer society, this bill and legislative instruments should not pass in their current form.
Coal and gas are the main causes of the climate crisis. To have any chance of getting the climate crisis under control and meeting even the net zero climate targets that the government claims to support, there can be no new coal and gas projects. This is the view of the conservative International Energy Agency, the United Nations Secretary-General and the world’s scientists. It seems that Labor takes a different view.
This inquiry has prompted further doubts about the effectiveness of Labor’s Safeguard Mechanism to achieve any real reduction in emissions.
In fact, actual pollution from the biggest causes of the climate crisis—coal and gas—will rise under the scheme and the global emissions impact from just one new gas project starting in 2025 will wipe out the entire claimed benefit of the Safeguard Mechanism.
A good climate policy should see pollution from coal and gas go down, not up. Given that 57 per cent of emissions covered by the safeguard come from coal, oil and gas, we’d have thought the government would be keen to tell the committee that their safeguard would cut pollution from coal and gas. But the government didn’t say that.
The government made no commitment and offered no evidence that pollution from coal and gas would actually go down, despite repeatedly being invited to do so. In fact, the government’s own 2022 Emissions Projections say pollution from the gas sector will go up. The climate crisis will get worse.
If the Department of Climate Change, Energy, the Environment and Water (the Department) possessed any information to dissuade the committee of the view that actual coal and gas pollution would increase under the Safeguard Mechanism, they could have provided it and are still welcome to provide it.
The Department’s stubborn unwillingness to provide answers to the most basic questions has made it difficult to have any confidence that the scheme as designed will do anything to curb business-as-usual behaviour from coal and gas companies.
It is worth recalling that the Safeguard Mechanism only targets a narrow class of coal and gas total emissions, namely, scope 1 direct emissions from a facility. Of this narrow class of emissions, only 4.9 per cent a year will face a price signal. What cost impacts are imposed on this fraction of a fraction of overall emissions can be completely offset, with facilities able to buy their way out of the scheme at a very low price for a very sustained time.
Deputy Secretary of the Department, Ms Jo Evans, made this clear in her testimony when she said in response to Senator David Pocock’s questioning about Australian Carbon Credit Unit (ACCU) prices reaching the proposed $75 price cap:
The reality...is that we have genuinely not anticipated getting into that situation [of the $75 price cap being reached] so we don’t have an answer for that at this point. We would need to think it through. We think it’s at least 10 years away before we would be even close to getting to there.
Minimal prices for offsets appear inevitable with the government having already contracted 119.6 million ACCUs by 2030, with a further 23.7 million ACCUs held in the private market. This total 143.3 million ACCUs contracted or already in existence represents 69.9 per cent of the government’s total abatement task of 205 million tonnes by 2030.
What this means is that not only can coal and gas pollution continue to rise as long as enough offsets are bought, but more than two-thirds of the modest ambitions of this scheme will have been achieved without a single dollar of new investment.
In his evidence to the committee, the Carbon Market Institute’s, Mr John Connor, cited expectations that around 70 per cent of offset delivery contracts with the government would be broken through the fixed delivery exit arrangement. On this calculation, the program instigated by former Minister for Energy and Emissions Reduction, the Hon Taylor MP and allowed to continue under the current government, will permit around 84 million land-based offsets to flood into the private market.
The biggest beneficiaries of this abundance of offsets will be coal and gas companies with new projects planned. Since profiteering from the invasion of Ukraine, coal and gas companies are best placed to use their swelling balance sheets to scoop up all the necessary offsets at the detriment of hard-to-abate industries that genuinely need ACCUs like steel, aluminium and cement.
The biggest risk from intentionally suppressed low prices is not just the greenwash that will be painted over the expansion plans of coal and gas companies, but that offsets will displace the urgent investment in measures that actually reduce industrial pollution.
This is an unacceptably high opportunity cost in this critical decade for climate action, particularly given that methane from coal and gas, which is a short lived and very potent heat trapping gas, is what is already causing the carnage of natural disasters in our lifetime.
As Mr Anatoli Launay-Smirnov, coal-mine methane analyst for Ember, assessed the risk of offsetting methane:
I don't think offsets will work with methane. CO2 and methane are very different gases. Most offsets are carbon offsets, carbon dioxide offsets, and methane is a completely different gas that behaves differently. It has a much shorter lifetime. Cross-offsetting is meaningless, and you need to physically get rid of methane going into the atmosphere, rather than trying to find a CO2 project. That has an impact over hundreds of years, whereas methane has an impact of almost immediately, so we would really advise against offsetting methane.
If government policy doesn’t prioritise rapidly phasing out the release of methane from coal and gas production, then, over coming years, we are exposing our society to natural disaster costs orders of magnitude higher than Treasury’s estimated 0.25 per cent of GDP ($5 billion) that the Australian public were forced to cover for the impacts of last year’s floods.
Because methane is so toxic in the short term, the United States is leading a push to reduce methane use by 30 per cent by 2030. Cuts to methane in the next few years are critical to have any chance of meeting climate targets. But despite Australia signing up to the Global Methane Pledge, methane pollution will rise under the Safeguard Mechanism, with at least seven new massive gas projects projected by Labor to get underway by 2030.
It is no wonder that the Prime Minister recently said in question time that Labor’s safeguard is endorsed by Woodside, Shell, Rio Tinto and Origin.
Coal and gas companies should be paying to clean up the mess they are making through schemes like the Safeguard Mechanism. But instead they are able to lend their support for such policies, then announce three-fold boosts in their profits to the ASX while the community cleans up the debris left in their wake. Prime Ministers and Premiers will increasingly attend the anniversaries of another 1 in a 100-year disaster.
Just one new coal and gas project wipes out gains from the Safeguard Mechanism
To measure the size of the shadow that new coal and gas projects will cast over the Albanese Government’s centrepiece climate reform, just one expanded gas project will more than wipe out all of the gains the Safeguard Mechanism is expected to achieve.
Woodside’s Scarborough-Pluto project in Western Australia—which is forecast by Labor to commence in 2025—will contribute a net amount of 232-235 million tonnes of carbon pollution globally by 2030.
This is 27-30 million tonnes more pollution out to 2030 than the 205 million tonnes that are projected to be removed by the Safeguard Mechanism.
This is the effect of just one fossil fuel project on the horizon. The government’s emissions projections assume at least a further five new gas projects on top of Scarborough and Pluto before 2030 with a total 117 coal and gas projects in the government’s list of major projects in development. The global impact of emissions from these projects is 1306 million tonnes of pollution a year. For reference, Australia’s emissions are 490.5 million tonnes a year.
The first step in fixing a problem is to stop making the problem worse. As it stands, the ‘safeguard’ will see actual emissions from coal and gas rise and bring the climate crisis closer. Labor’s policy sees the climate crisis get worse.
Recommendation
That the Government should design a scheme that makes pollution from coal and gas go down, not up.
Recommendation
The Bill be amended to prevent any new coal, oil or gas project from proceeding in Australian lands or waters.
The Safeguard Mechanism allows coal and gas corporations (indeed, all the scheme’s participants) to ‘cut’ all of their pollution by buying offsets from someone else. Paying someone else to go on a diet for you doesn’t work, and Australia’s biggest coal and gas polluters won’t cut pollution by buying offsets.
The ability to meet 100 per cent of safeguard obligations by buying offsets means the government's claimed 205 million tonnes of emissions ‘cuts’ from the entities covered by the scheme could be entirely on paper. Pollution from the Safeguard entities can go up as long as they buy enough offsets. It is an accounting trick that won’t fool the planet.
Recommendation
Given the substantial, ongoing integrity concerns with ACCUs generated from existing projects and methodologies, the Government should take immediate action to ensure all credits, including existing credits have integrity.
There has been a pattern of non-disclosure in this inquiry reminiscent of the Morrison Government. There have been Ministerial claims of public interest immunity to prevent disclosure of documents forecasting expected offset use and actual pollution reductions. While, at the same time, the Department’s outright obstruction of information has made it very difficult for Senators to have a clear view of the effect of the legislation and legislative rules.
These are crucial documents needed for law-makers to come to an informed decision about how the scheme is envisioned to work and in what ways it needs to be amended.
Recommendation
The Committee recommends that the Senate reject the Government’s claims of public interest immunity and insist on the production of the assumptions behind the use of offsets and on-site abatement.
The Committee also heard allegations that viewing the ‘carbon estimation areas’ that contain surveys of changes in tree cover for the Human Induced Regeneration offset method would show that crediting ACCUs is occurring where there is already tree cover. In other words, it is alleged that offsets are being awarded for trees that were already there.
While we acknowledge that the majority report recommends making this information publicly available as a result of the Chubb Review, the Australian Greens are of the opinion that to assist Senators to have the necessary information before they vote, that these materials and data should be provided to the committee and thoroughly assessed to test the veracity of those allegations.
Recommendation
The committee recommends that the Senate compel the production of the carbon estimation areas materials from both the Clean Energy Regulator before the final two sitting weeks of March 2023.
Recommendation
That recommendations 1 through to 4 of the Chair’s report be implemented by the Government.
Recommendation
Given the danger that new coal and gas projects pose to a stable climate and a safe society, this bill and legislative instruments should not pass in their current form.
Finally, the Greens are sympathetic to the views of genuine Australian industry expressed during the inquiry that they are being asked to do more than they otherwise ought simply to make room for massive coal and gas projects. The Greens are open to suggestions made by sectors that have a future in a net zero world for a reconsideration of their treatment under the Safeguard Mechanism.
The Greens want genuine Australian industry and manufacturing to thrive. Aluminium, steel, bricks, fertilisers, glass and cement all have a future in a clean economy, but coal and gas don’t. We should be supporting genuine Australian industry to transition, not asking them to make room in a finite carbon budget for more coal and gas.
Appendix: Information on emissions from Woodside’s Scarborough-Pluto Project
In 2021, Climate Analytics assessed the emissions impact of the Pluto project, including Train 1, the expansion to Train 2, and the opening up of the Scarborough gas field to supply Train 2 and part of Train 1, as well as a large increase in domestic gas. They had assumed that domestic gas would be supplied from the Train 2 development from 2025 and LNG from 2026. They calculated that over the lifespan of the Pluto LNG plant, between 2021 and 2055 it would emit 1370 million tonnes of scope 1 and 3 emissions domestically and globally.
Based on Climate Analytics’ assessment of 1370 million tonnes of emissions over 35 years, this equates to an average of about 39 million tonnes of emissions a year.
The Australian Energy Market Operator (AEMO) reported in its 2022 Western Australia Gas Statement of Opportunities that:
Woodside Energy commenced development of Pluto Train 2 and the associated Scarborough gas field in August 2022. The operator is targeting first liquefied natural gas (LNG) for 2026. For the forecasts in this GSOO [Gas Statement of Opportunities], AEMO has assumed first domestic gas supply in 2027.
Taking into account the revised AEMO projections for domestic gas availability, the Scarborough-Pluto project will produce around 243 million tonnes of emissions globally between the years 2024 and 2030.
Cumulative scope 1 emissions of from Pluto LNG facility, including the Pluto expansion-Scarborough gas field project from and including 2024 to 2030, will be between 19-22 million tonnes.
Under the Safeguard Mechanism, facilities will be required to reduce by 4.9 per cent a year compounded on average from the 2022-23 emissions level. With Pluto LNG emissions estimated at 1.95 MtCO2e, then under this average Safeguard Mechanism wide baseline reduction, the cumulative emissions allowed to the project would be approximately 11.2 MtCO2e.
The resulting cumulative reduction would be a maximum of 8-11 million tonnes. Given the way in which the government proposes to set industry baselines it is very likely that the actual required reduction from the future project will be less than that, particularly as it will expand production from 2026.
Subtracting this from the 243 million tonnes above equals at least a net 232-235 million tonnes to be produced globally from the Scarborough-Pluto project under the Safeguard Mechanism.
Every tonne of Scope 1 or Scope 3 emissions has the same impact on atmospheric concentrations of greenhouse gases and the impact on global warming irrespective of how it is accounted for. These are directly comparable as to what is saved and what is released into the atmosphere. It is immaterial that only scope 1 emissions from the Scarborough and Pluto project will be accounted for within Australia’s recorded emissions or that the Safeguard Mechanism only regulates scope 1 emissions.