Australia's largest emitters of greenhouse gases (GHG) want government support to help them meet their GHG emissions reduction targets under a proposed safeguard mechanism, particularly firms operating in global markets against competitors that operate without a similar system.
The federal government's reform of the country's safeguard mechanism, which imposes emissions caps on all facilities emitting over 100,000 t/yr of carbon dioxide equivalent (CO2e), is due to be introduced as legislation in the Australian parliament next month and to come into force at the start of the 2022-23 fiscal year to 30 June.
Australian resources firm BHP, which operates 17 facilities that will be subject to the safeguard mechanism that covers iron ore, coal, nickel and copper production, as well as electricity generation and bulk rail transportation, said it favours forms of assistance to emissions intensive trade exports (EITE) activities that will not result in a corresponding increase in the emissions reduction burden on other safeguard facilities.
This assistance will allow for direct funding/monetary compensation financed out of general revenue and/oraccepting reductions in scope two emissions, which is largely from the electricity and energy in the production process, as an additional option to buying Australian carbon credit units for reducing net emissions under the safeguard mechanism.
BHP's facilities under the safeguard mechanism emitted 7.4mn t of CO2e on a scope one basis, which is the result of emissions in the direct economic activity, in 2020-21, BHP said in its submission to the government's safeguard mechanism consultation.
Australian independent Woodside Energy also supported government assistance. "Protection from the international competitive effects of the scheme should be in the form of economic support for the cost of reducing emissions, instead of a waiver from reducing emissions through provision of the issue of credits under the safeguard mechanism."
Woodside has interests in six Australian oil and gas facilities that it either operates or has a financial interest. The net equity scope one and two emissions in 2021 were 3.23mn t of CO2e. Woodside plans to reduce these emissions by 15pc by 2025 and 30pc in 2030 below the 2016-20 gross annual average
Australian steel producer Bluescope also supported state assistance. It has a target of reaching net zero GHG emissions by 2050. "Funding from government and other sources will be necessary to help EITE facilities partially adapt to declining baselines, though the extent of this would depend on the timing, nature and quantum of the funding," Bluescope said.
Criticism
But government funding for EITE sectors came under criticism by the Australian government's Climate Change Authority (CCA).
"It has been the practice of successive governments to extend assistance or exemptions to ameliorate the competitiveness impacts of climate change policies on emissions-intensive, trade-exposed businesses," it said in its submission.
This is based on the premise that, if compliance with climate change policies increases costs for trade-exposed businesses, those business and their emissions may simply shift offshore to countries without similar policies and under such a scenario would see Australia losing industry and employment with no net gain for the environment, the CCA said.
"However there remains a tension between providing assistance to EITEs and progressing the transition to a lower emissions economy," it said. "Indefinitely providing relief to EITE industries delays action to reduce emissions and is not sustainable."
Facilities covered by the safeguard mechanism contributed 28pc of national emissions in 2020-21 fiscal year to 30 June. To contribute this proportional share of the national emissions target of a 43pc fall by 2030 from 2005 levels, aggregate baselines need to fall to 99mn t of CO2e by 2030 from around 137mn t of CO2e in 2020-21. Australia's national emissions were 621.1mn t of CO2e in 2005 and must fall to 354mn t of CO2e by 2030 if Australia is to meet its international target.
