Industrial emissions grow as polluters side-step safeguard caps

Greenhouse gas emissions from Australia’s major industrial polluters grew in the 2018-19 year as weak rules under the Morrison government’s Safeguard Mechanism allow companies to side-step emissions caps.

According to data published by the Clean Energy Regulator, almost a fifth of all industrial emitters exceeded their emissions caps under the Safeguard Mechanism, but most were able to avoid the need to offset increases due to the scheme’s weak rules.

Just 18 of the 210 companies covered by the Safeguard Mechanism were required to surrender carbon credit units to offset increases in their greenhouse gas emissions during 2018-19.

The total number of emissions offset through the surrendered units represented 190,381 tonnes, which amounted to just 1.3 per cent of the 144 million tonnes of emissions produced by companies covered by the Safeguard Mechanism.

The Safeguard Mechanism has been designed by the Coalition government and is supposed to place a cap on emissions from major industrial polluters, but excludes the electricity sector.

It currently covers 210 major emitters, drawn mainly from the resources and industrial processing sectors, with the largest growth in emissions being driven by LNG producers, with each company assigned an emissions “baseline”.

If companies exceed the baseline, they are required to offset the excess emissions, but in practice, very few companies have needed to do so.

The largest emitters under the Safeguard Mechanism are predominantly major gas producers, including Chevron, Woodside and Santos, as well as steel and aluminium producers including Bluescope, Alcoa and South32.

Airlines Qantas and Virgin Australia also rank highly.

While the Safeguard Mechanism is supposed to limit growth in Australia’s industrial emissions, successive Coalition governments have worked to loosen the rules, providing companies greater flexibility, and often to directly facilitate increases in emissions without penalty.

According to the Regulator’s data, emissions under the Safeguard Mechanism increased from 138.4 million tonnes in 2017-18 to 144 million tonnes in 2018-19.

This increase is partially due to growth the number of companies applying to use “multi-year monitoring periods” for annual emissions, providing an opportunity for companies to use an average amount of emissions over two or three years.

“A multi-year monitoring period allows a facility to exceed its baseline in one year, so long as average net emissions over a two or three year period are below the average baseline for that period,” the Clean Energy Regulator’s website says.

The Clean Energy Regulator’s data shows that the number of companies using a multi-year baseline almost doubled in the last year.

The Australian Conservation Foundation said that this shift by companies to using the multi-year accounting approach allowed companies to effectively delay any action to reduce their greenhouse gas emissions.

These excess emissions totalled almost 800,000 tonnes and would have cost emitters more than $10 million to offset using available carbon credit units.

“Multi-year monitoring is a problem because companies that exceed their emissions limits in one year don’t have to buy carbon offset credits to compensate and in many cases they are not reducing their emissions in subsequent years but instead are allowed to re-calculate their baselines and pollute more,” ACF climate change program manager Gavan McFadzean said.

“Alarmingly, the Morrison Government’s so-called safeguards are not curbing the emissions of the big polluters that are fuelling climate damage in Australia.”

“This is one of the key policies the Morrison Government relies on to cut Australia’s climate pollution,” McFadzean added. “Australia desperately needs a climate change strategy that brings down pollution from all sectors of our economy to zero.”

Emissions data published by the Department of the Environment and Energy showed Australia’s overall emissions remaining virtually unchanged in the 2018-19 financial year, falling by just 0.1 per cent.

In the year, emissions fell in the electricity sector, due to the increased adoption of renewable energy sources, as well as in the agricultural sector, which was impacted by severe drought conditions.

However, these falls were offset by increases in industrial emissions, including increases in industrial energy use, fugitive emissions that escape from coal and gas extraction, and emissions from industrial processing.

A recent market analysis produced by Reputex said suggested that it was likely that the impact of Covid-19, which could see industrial output fall across several sectors, would further reduce the need for companies to offset their emissions increases.

The Morrison government is currently considering the outcomes of a review of Australia’s greenhouse gas reduction opportunities, having received the findings of an ‘expert panel’ lead by former Origin Energy chief Grant King.

The expert panel was specifically tasked with finding new emissions reduction opportunities in the industrial, manufacturing and transport sectors, but the findings and recommendations of the panel have yet to be released publicly.

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