Australia to tighten gas, coal emissions rules

The Australian federal Labor government has secured the support of the Greens party in passing its reform to the safeguard mechanism, which is central to a target of reducing greenhouse gas emissions by 43pc of 2005 levels by 2030.

The Greens backed down on calls to ban all new coal and gas projects but secured an amendment that all new gas developments must have net zero scope 1 emissions. This has derailed the planned onshore wells in the Beetaloo basin and Australian firm Santos' offshore Barossa gas field by increasing cost of development, according to Greens leader Adam Bandt.

This could disrupt the planned refurbishment and restart of the 3.7mn t/yr Darwin LNG project in the Northern Territory. The Barossa field, which underpins the restart of Darwin LNG, is already facing delays because of culturally significant underwater sites. Tamboran Resources, which was also considering supplying gas to the plant, is developing a gas venture in the Beetaloo basin.

The safeguard mechanism also now has a hard cap on emissions, so that they cannot go up, even if industries like coal and gas production grow. This will mean about half of the 116 new coal and projects will be stopped from going ahead, according to Bandt.

The environmental approvals of new projects will now include an assessment of whether they will meet their emissions obligations under the safeguard mechanism, which could lead to fewer coal and gas projects being approved in Australia. The government's Climate Change Authority will seek to update methane measurement, verification and reporting in time for implementation by 1 July 2024. Methane is a major greenhouse gas emission from coal and gas projects.

The support of the Greens and two independent MPs will allow the safeguard mechanism to come into effect from 1 July 2023. The revised mechanism will require emissions-intensive trade-exposed (EITE) entities to explain to the regulator if they are using more than 30pc offsets to meet their requirements to cut net emissions.

Australian Carbon Credit Units (ACCUs) cost around A$38/t ($26/t) on 27 March and will be capped at A$75/t under the scheme. ACCUs peaked around A$57/t in January 2021 before returning to trade between A$25/t and A$35/t since late February 2021, according to the Clean Energy Regulator.

EITEs other than coal and gas will be eligible for up to A$1bn in funding, with A$400mn targeted at industries like steel, aluminium and cement that are needed for renewable energy.

Canberra will also review the feasibility of an Australian carbon border adjustment mechanism similar to the one in place in the EU and focused on the steel and cement sectors.

By Jo Clarke