Australia’s key national policy for cutting carbon emissions is giving coal and gas companies “a free ride,” new modelling shows, while industries like manufacturing come under increasing pressure to decarbonise, or pay the cost.
The RepuTex modelling, commissioned by the Australian Conservation Foundation and the Climate Council, comes ahead of a major review of the still contentious federal Safeguard Mechanism.
It shows that forcing the most polluting coal mines and gas projects to actually reduce emissions faster could halve the decarbonisation required from other long-term industries such as manufacturing and minerals processing.
Leaving the Safeguard Mechanism unchanged, meanwhile, would leave Australia exposed to global shocks, rising costs and escalating climate risks, the Australian Conservation Foundation (ACF) and the Climate Council say.
“Big coal and gas corporations are increasing climate pollution, using low-integrity offsets and making life harder for Australian households and industry,” said ACF national climate policy adviser Annika Reynolds in a statement.
“The modelling shows new coal and gas mines, like Woodside’s ultra-polluting Browse project, will lift climate pollution and put Australia’s climate targets in doubt. If it ramps up to full production, Browse alone will increase total Safeguard Mechanism pollution by 6 per cent.”
The modelling comes as the federal government prepares to start the promised 2026-27 review of the Safeguard Mechanism.
In 2022-23, the then newly elected Albanese government reformed the mechanism, which covers 120 companies operating 2019 of the highest emitting facilities in the country.
Facilities have a baseline level of emissions, which falls every year in line with Australia’s Paris Agreement nationally determined contributions: those with emissions under the baseline get free Safeguard Mechanism Credits (SMCs), those above need to buy offsets.
However, the point the AFC and Climate Council are hammering home, with the first review start date approaching, is that gas and coal make up more than half of the emissions covered under the mechanism, but project extensions or additions are not considered new.
This is even if they require entirely new infrastructure that could be built to a higher standard, such as Woodside Energy’s Browse gas field which will extend its North West Shelf facility.
Instead, they’re assigned the same default baselines as the original facility, a setting that was established to let companies do upgrades to existing facilities in manageable increments.
Reputex found that applying more stringent best practice baselines to all coal mine and gas expansions and extensions will blow out business-as-usual emissions by 2.7 times, from 11 to 31 mtCO2-e.
But that means the country’s net emissions drop by 7 per cent by 3035. The faster emissions reduction will then leave more room in the Safeguard Mechanism ‘budget’ for other industries with fewer options to adapt more slowly.
It’s a situation that Climate Councillor and former BP executive Greg Bourne says gives coal and gas companies “a free ride” while other industries such as manufacturing have no choice but to invest in modernising their processes.
“The government cannot continue to allow big polluters to cook the books with dodgy offsets, undermining a system designed to protect Australia’s economic future,” he said in a statement.
“Australia is paying a high price for our reliance on volatile fossil fuel markets. Every day we remain tethered to coal and gas, we are at risk of energy price pain caused by overseas conflicts and escalating climate costs.”
Bourne says closing the default baseline loophole for gas and coal extensions and additions will support a more resilient economy and send a signal that investing in clean manufacturing and green exports is worthwhile.
Reputex expects 43 new and expanded facilities to enter the Safeguard Mechanism by 2035 and add 160 MtCO2-e of pre-abatement emissions.
But it estimates only two-thirds of these will be covered by best practice baselines.
The modelling warns that mega gas projects such as Woodside’s Pluto 2 and Browse, and Santos’ Barossa gas fields will be behind the surge of expanded and extended coal and gas projects that will make up to one fifth of covered emissions in 2035.
If technologies such as carbon capture and storage fail to work, as Chevron’s Gorgon CCS has, that could cause a blow-out of 50 million tonnes of extra emissions from coal and gas facilities in the next nine years.
The Reputex modelling also suggests polluters will lean more heavily on offsets to comply with their responsibilities, a situation that doesn’t guarantee they will reduce on site emissions.
And yet recommendations adopted by the federal government to change the way coal mines measure methane will really blow the carbon budget – but are necessary to know exactly what Australia’s coal mines are actually doing.
In 2026 and 2027, all Safeguard-covered coal mines must transition from measuring methane using state-specific factors based on the quantity of coal extracted, to taking the temperature at specific sites and calibrate that with CO2 and methane sampling of the local coal strata.
Those measurement improvements would lift Safeguard emissions by 18 per cent to 2035 and risk the achievement of the 2030 carbon budget, the ACF and Climate Council say.
While the changes need to be made so Australian can see whether the coal mine methane emissions really are 64-117 per cent higher than reported, there is little upside to the outcome
The Reputex modelling shows it will drive up Australian Carbon Credit Unit (ACCU) prices but isn’t likely to drive faster decarbonisation in other industries, because there aren’t many cheap and easy options available for any of the existing high emissions facilities.
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