Morrison to redirect climate funds to carbon capture and big emitters

The Morrison government has released the findings of the “King Review” into Australia’s emissions reduction policies, agreeing to recommendations to open up climate funding to carbon capture and storage projects, and to big emitters.

The findings of the King Review were released by federal energy and emissions reduction minister Angus Taylor on Tuesday, with the federal government set to adopt recommendations for the $2 billion Climate Solutions Fund, as well as Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC), to be opened up to providing funding to heavy emitters and fossil fuel projects.

The review was quietly commissioned by Taylor in October last year and was led by former Origin Energy CEO and Business Council of Australia president Grant King, who was joined on an “expert panel” by Clean Energy Regulator chair David Parker, head of the Emissions Reduction Assurance Committee, Andrew Macintosh and chief executive of the Australian Industry Greenhouse Network, a long-time advocate for the Australian fossil fuel sector, Susie Smith.

In its response to the review, the Morrison government has agreed to establish two new abatement categories under the Emissions Reduction Fund; one for carbon capture and storage, and another to award abatement permits to major industrial emitters which reduce emissions below a baseline set under the Safeguard Mechanism.

Under the Emissions Reduction Fund, such projects will be able to sell their abatement to the federal government in return for taxpayer funds through the Climate Solutions Fund.

Carbon capture and storage projects have had a fraught history in Australia, having already received a substantial amount of taxpayer funds from state and federal governments with the promise of “clean” coal and gas power stations.

While Australian governments have committed billions of dollars into carbon capture projects and technologies, there has been virtually nothing to show for that commitment of taxpayer funds, and the latest commitment to direct climate funds into carbon capture projects is likely to be yet another wasteful step.

The proposal has been slammed by The Australia Institute’s, climate and energy program director, Richie Merzian.

“In news that will surprise few, the government asked a corporate lobbyist and former gas executive to review its climate policy, and the report calls for weaker regulations of major emitters and even more public funding for failed clean coal technologies,” Merzian said.

“It is preposterous that the Government has not just agreed to, but already started development of a method to use climate action funding to reward carbon capture and storage (CCS) projects, after already wasting over $1.3 billion dollars of taxpayer funds on this failed CCS technology.”

As the support for carbon capture and storage will draw upon an existing policy mechanism, being the Emissions Reduction Fund, the Morrison government is unlikely to need parliamentary approval for the change.

Another recommendation agreed to by the Morrison government will see industrial emitters paid for reducing their emissions under a “below-baseline crediting arrangement.  It will award “Safeguard Mechanism Credits” for reducing emissions by deploying “low emissions technologies”. It is proposed that these credits are subsequently purchased by the government under the Climate Solutions Fund, or used to offset increased emissions from other industrial emitters.

The Morrison government said it would undertake comprehensive consultation on such a proposal, which on the surface would appear to be a step towards the creation of a baseline and credit emissions trading scheme for industrial emitters.

The King Review has also recommended that the investment mandates for ARENA and the CEFC be broadened, to become “technology neutral” so as not to be constrained to supporting only clean energy projects, with the Morrison government agreeing to this recommendation “in principle”.

“The Government agrees that ARENA and the CEFC should provide support to the widest range of low emissions technologies and notes that their investments will be guided by the Technology Investment Roadmap,” the government says in its response to the review.

“The Government is currently consulting on the development and implementation of the Technology Investment Roadmap and the role of ARENA and the CEFC in that context.”

This likely means ARENA and the CEFC could be tasked with supporting fossil fuel based projects, as has already been flagged with the government asking the CEFC to invest in gas to hydrogen production facilities.

The future of the ARENA has been uncertain, as it approaches the end of its funding allocation, and while it appears set to receive a reprieve from the Morrison government, the allocation of new funding to the agency is likely to come with a widened scope to provide grant funding outside of the renewable energy sector.

Angus Taylor said that given ARENA, the CEFC and the Clean Energy Regulator had achieved success in supporting the growth of the renewable energy sector, and lowering emissions in the land management sector, the government now wanted to spread the support industry.

“We have seen considerable success in the land and electricity sectors to reduce emissions – this is about supporting and capitalising on new and exciting opportunities in the agriculture, manufacturing, industrial and transport sectors to build on that success,” Taylor said.

“The Government will target dollar for dollar co-investment from the private sector and other levels of government to drive at least $4 billion of investment that will reduce emissions across Australia.”

As revealed by RenewEconomy, the review had consulted with a handpicked list of industry representatives, that was heavily stacked towards representatives of big industrial emitters and the fossil fuel industry.

While the review says that it consulted with more than 50 industry groups and experts, it was never formally announced by the Morrison government, and undertook no open public consultation.

But, having now released the findings of the secretive King Review, the Morrison Government has agreed to most of its 26 recommendations, with none of the recommendations rejected outright.

In addition to supporting carbon capture projects and industrial emitters, the recommendations include a shift to awarding emissions reduction permits to abatement projects under the Emissions Reduction Fund “on a compressed timeframe”, meaning projects could be awarded reduction permits before the actual abatement has occurred.

The justification for the shift is to provide early revenue to abatement projects that face high upfront capital costs but will also leave the government exposed to the possibility of purchasing permits from projects that fail to deliver on promised emissions reductions.

The Morrison government has also agreed to create a “fixed price purchasing desk” for small carbon abatement projects, allowing project proponents to sell carbon abatement to the clean energy regulator at an agreed price, without having to participate in an ERF auction.

The government will also consider whether it will subsidise the costs of measuring the carbon stored by some projects, with a particular focus on soil carbon storage projects.

The King Review also recommended the introduction of mandatory energy performance disclosure obligations for residential homes and the establishment of a nationally consistent rating system, which would provide greater transparency as to the energy efficiency of housing, but the Morrison government has not committed to implementing the recommendations, saying it was the responsibility of the State and Territory governments.

The Morrison government will also look to establish an agreed “carbon exchange rate” for Large-scale Generation Certificates awarded under the Renewable Energy Target, allowing LGCs awarded to wind and solar projects to be tagged with an equivalent emissions reduction, to allow renewable energy buyers to estimate a consistent emissions saving.

Further details about the government’s response to the King Review are set to be detailed in the long flagged Technology Investment Roadmap, being developed in consultation with chief scientist Dr Alan Finkel, and which is expected to be released soon.

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