Exclusive: miner Gold Fields to get $1m from Coalition fund for gas power plant for its Western Australian mine

Emissions reduction fund to pay for fossil fuel plant that would be built anyway

Emissions reduction fund to pay for fossil fuel plant that would be built anyway

The Morrison government’s emissions reduction fund – rebadged as a “climate solutions” policy and to be boosted with an extra $2bn – is being used to help one of the world’s biggest gold miners pay for a fossil fuel power plant the company concedes it would have built anyway.

Fund opponents say it is the latest evidence that design flaws in the scheme are leading to taxpayers’ money being wasted on projects that are commercially viable even without public support. In some cases, the climate funding is going to new fossil fuel projects on the grounds that they are cleaner than the dirty projects they replace.

To qualify for the ERF, projects are meant to deliver emissions cuts that would not have happened without public money

National greenhouse gas emissions have risen each year since the fund, billed by the then-prime minister Tony Abbott as a “direct action” policy, replaced a carbon pricing scheme in 2014.

South African mining company Gold Fields is receiving climate funding for a gas-fired station to power the underground Granny Smith mine in outback Western Australia. According to its annual reports, it has received $126,000 and expects to get about $1m over seven years.

Gold Fields built the gas plant to replace a diesel-fired generator after it was announced a new gas pipeline would be laid to supply the nearby Tropicana mine. It qualified for the emissions reduction fund because burning gas emits less carbon dioxide than diesel.

To qualify to bid into the emissions reduction fund, projects are meant to deliver emissions cuts that would not have happened without public money. But a Gold Fields spokesman told Guardian Australia that it would have built the gas plant regardless of support from the fund.

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“The investment would have been made, but at the time there was a risk that gas prices could have risen in the future, like we have seen recently on the east coast of Australia. When the investment decision was made, the [fund] was considered a partial mitigation against future price escalation,” the spokesman said.

Kelly O’Shanassy, the chief executive of the Australian Conservation Foundation, which has been investigating the fund’s operation, said it was beyond parody that public money earmarked to cut emissions had been handed to a giant gold miner to burn gas for a project it would have built anyway.

She said the project may add to damage to the climate by locking the miner into gas ahead of a more rapid shift to renewable energy. Gold Fields recently announced it would be installing solar power and batteries at the mine site to use alongside gas.

“Australians should rightly ask whether allocating more money to the emissions reduction fund at this time will mean more cash for big industrial players to burn coal, oil and gas,” O’Shanassy said.

“A program like the emissions reduction fund has a role to encourage farmers and landowners to cut pollution, plant more trees and protect vegetation, but methods that pay large corporations to make at best minor changes must be scrapped before any more cash is tipped in.”

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The $2.55bn fund works as a reverse auction, supporting the projects that promise the cheapest emissions cuts. Payments are made once the cuts are delivered. Across eight auctions, taxpayers have paid out $476m and committed another $1.8bn, with $226m left unspent.

On Monday the prime minister, Scott Morrison, promised another $2bn over 10 years to partner with farmers, local governments and businesses to deliver “practical climate solutions” across the economy that reduce emissions.

He said the government was committed to “meaningful, practical action” to reduce emissions and would meet its 2030 target of a 26-28% cut in pollution below 2005 levels. Most projections before Monday’s announcement, which also included a commitment to new investments in pumped hydro power and a yet-to-be-released electric vehicle strategy, have found it was not on track to meet the target.

“We will continue to play our part in meeting the global challenge of climate change in the 21st century,” Morrison said.

Guardian Australia recently reported that the Vales Point coalmine has been registered under the fund for a project to upgrade some turbines, a project that would reduce its emissions by just 1.3% over a decade. It may yet not qualify to bid into the auction as the project will not reduce its emissions intensity below the average of the national grid. But the revelation that a coal plant could qualify for climate funding sparked campaigns from environment groups calling for the scheme to be changed.

The Intergovernmental Panel on Climate Change has estimated that putting the world on a pathway to limiting global warming to 1.5C and avoiding more significant climate change requires coal use for energy to be cut 59-78% below 2010 levels by 2030.

Several problems with the emissions reduction fund have been identified. The bulk of the money has gone to landowners promising to restore or protect carbon stores in vegetation and the land, but across the country deforestation is outpacing habitat restoration by a rate of five to one. It was found landfill sites that capture and burn leaking methane – another regular recipient of contracts under the fund – would have existed without taxpayer support.

Many of these problems were predicted. While on the backbench in 2010, Malcolm Turnbull branded the fund “a recipe for fiscal recklessness on a grand scale” and let the fund dwindle. Once prime minister, he let the fund dwindle to almost nothing and promoted alternatives such as the national energy guarantee, which was opposed by conservatives and dumped by Morrison once he assumed the leadership.

In the case of Gold Fields, the company has announced that it is expanding both the Granny Smith mine and the gas plant as well as installing solar and batteries. It said the shift would cut its gas use by 10–13%, but the gas plant needed to be expanded to meet increased demand for ventilation, cooling and dewatering at night.

The company’s spokesman said it would receive large-scale generation certificates through the national renewable energy target for the solar energy it generates, but the projected future value of the certificates was not encouraging for future clean power investment in Australia.

Asked if the company thought helping large businesses shift to a cleaner form of fossil fuels was a good use of climate funding, the spokesman said the few off-grid renewable energy mining projects in Australia to date have had some form of government support. “Without government enabling these early adopters, the movement to cleaner energy will take much longer,” he said.

But he said Gold Fields was demonstrating it was feasible to invest in large-scale solar without additional support.