In December, Prime Minister John Howard launched a task group comprising both the Federal Government and selected companies to advise on how Australia might fit into a global emissions trading scheme and what forms such a scheme could take.
Over 190 stakeholders responded to an issues paper released by the task group, among them LNG giants Woodside Petroleum and Chevron Australia.
Overall, the liquefied natural gas industry accounts for about 4% of Australia’s greenhouse gas emissions. But it has about half the lifecycle emissions of other more carbon-intensive fuels such as coal.
The Australian Petroleum Production and Exploration Association argued that any scheme that did not send “a credible, effective and durable signal to innovators” would fail to stimulate investment in research and development.
In its submission to the taskforce, it said it was “vital” that an emissions trading scheme encouraged more use of natural gas both domestically and in the region.
So what do Australia’s biggest LNG enthusiasts think the government needs to do to secure ongoing investment in the sector under a global carbon trading scheme?
Maintain global LNG competitiveness
The LNG producers said any moves to reduce the nation’s greenhouse gas emissions must also protect the industry’s international competitiveness.
“An inappropriately framed trading scheme, or other greenhouse policy, has the potential to impact the competitiveness of Australian LNG such that additional demand will be sourced from other countries, such as Qatar and Indonesia,” Chevron said in its submission.
“Hence Australia will have sacrificed investment, jobs and living standards for no environmental gain.”
It said Australian national policy should be framed and coordinated with policy frameworks of other national governments so nations can together manage the growth of, or reduce, emissions.
APPEA said a carefully designed, truly global emissions trading scheme may not have significant impacts on Australia’s LNG industry, but such a scheme is unlikely in the short term.
Anything less than universal coverage of countries, gases and sectors will lead to resource misallocation, known as “carbon leakage”, it said.
“In an LNG context, the issue is potentially even more serious,” APPEA said.
“Not only may investment be lost to participants in any scheme, but in an Australian LNG industry context, projects not developed in Australia deny the region the opportunity to access a major low-greenhouse gas emissions energy source.
“This could be considered ‘carbon leakage plus’ – carbon leakage to non-participants plus forgone greenhouse gas abatement opportunities through not developing Australia’s LNG export potential.”
Recognise and support lower emissions technologies
The submissions called for recognition of the widest possible range of emissions sources, abatements and offset activities.
Chevron said a proposed trading scheme should use economic incentives to reward all actions that reduce global greenhouse gas emissions.
The company, which recently received a $60 million grant from the Federal Government to go towards an $850 million carbon capture and storage project on Barrow Island, is still awaiting the green light.
“Chevron notes the delay in having geosequestration recognised under the Clean Development Mechanism,” it said.
“This delay has the potential to significantly impact the uptake of one of the few technologies that could significantly reduce global emissions.”
Woodside said achieving emissions reductions on behalf of Australia’s trade partners in developing countries would have the greatest environmental effectiveness on a global scale.
“This might also be readily achieved through technology partnerships, using targeted bi/multi-lateral partnerships or trade agreements,” it said.
Support early movers
Woodside and Chevron said governments must recognise companies that already reduced their emissions prior to any new scheme.
“In order for companies to continue to invest in emissions reduction actions prior to the implementation of an emissions trading scheme, clear signals that early action will be recognised are also required,” Chevron said.
Woodside said emissions reduction policies should be streamlined and action credited under any existing schemes should merge into a single-policy framework.
“This framework should be formed with a view to linking in with an international framework/s, thus giving Australia access to potentially lower cost abatement opportunities,” the company said.
Adopt a “portfolio” of approaches
APPEA said it had long advocated that governments should adopt a “portfolio” of approaches to greenhouse policy, which would be even more important in a carbon-trading scheme.
It said emissions trading scheme could be used in conjunction with technology research and development programs and technology deployment programs.
Mandatory emissions reporting
Chevron said reporting from all sectors would be essential in determining broad and equitable sharing of responsibilities to reduce emissions.
“Much of the work on emissions reporting being undertaken in Australia is based around the voluntary reporting of data and is not intended to support an emissions trading scheme,” it said.
The company said emissions trading proposals should include an assessment of the adequacy of Australia’s emissions estimation and reporting processes, incorporating lessons learned from markets such as the European Union Emissions Trading Scheme.
Consistency across all sectors and jurisdictions
APPEA said introducing an emissions trading scheme must be accompanied by a significant “rationalisation” of greenhouse measures across all Australian jurisdictions.
“Under no circumstances should such a scheme merely be added to the hotchpotch of existing measures,” the organisation said.
“The development of a single mandatory national greenhouse gas emissions reporting system is an example of an area where streamlining and national consistency is urgently required.”
The taskforce on emissions trading is expected to release its final report on May 31.
