Analysis finds regulator has approved a 32% increase in how much large industrial facilities are allowed to emit each year

This article is more than 1 year old

This article is more than 1 year old

Heavy industry companies in Australia have been given the green light to increase their greenhouse gas emissions by nearly a third without penalty under the Coalition’s climate change policy.

An analysis of a scheme known as the “safeguard mechanism”, part of the Coalition’s Direct Action policy, found the government regulator has approved a 32% increase in how much large industrial facilities are allowed to emit each year since the policy was introduced.

While not every company emits up to their limit under the scheme, the most recent data, for 2017-18, shows emissions from large industry are up 12% since 2015.

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The increases have been signed off despite the safeguard mechanism having been promised to limit emissions from big polluters to ensure they do not just cancel out cuts paid for by taxpayers through the other half of Direct Action, the emissions reduction fund.

The analysis by RepuTex, an energy and emissions research firm, found the increase in recorded emissions was set to wipe out the entire $2.55bn committed to pollution cuts over the past five years. Most of that has gone to restoring and protecting habitat and cutting pollution at landfill sites.

“This is effectively money going down the drain,” RepuTex executive director Hugh Grossman said.

Grossman said, though rarely discussed, the “safeguard mechanism” was Australia’s climate policy Achilles’ heel. He said it needed to be weighed alongside any cuts purchased through the emissions reduction fund, which the prime minister, Scott Morrison, has renamed a “climate solutions” fund.

“In simple terms, Australia’s emission reduction target won’t be met until industrial emissions growth is constrained,” Grossman said.

Industrial sites under the safeguard mechanism are the main driver of the continuing rise in Australia’s national emissions. The most recent government data shows emissions rose 0.9% in the year to September, a point Morrison has conceded during the campaign. Much of the increase is due to a 19.7% expansion of the liquified natural gas (LNG) industry, which is covered by the mechanism.

The Coalition has changed how it describes the safeguard mechanism over time. In 2016, the then environment minister, Greg Hunt, said it would ensure emissions cuts contracted through the emissions reduction fund were not offset by significant increases above business-as-usual levels elsewhere in the economy. A government climate policy document released in February said the mechanism required Australia’s largest emitters to “measure, report and manage” their emissions, but did not say it would limit pollution.

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The government plans further changes to the scheme that are expected to allow more industrial sites to change their emissions limit. When the scheme began, most sites received limits, known as baselines, equivalent to their highest pollution level between 2009 and 2014. Companies that went beyond their baseline had to buy carbon credits to offset the breach. This has happened in a handful of cases.

But companies could also apply to increase their baseline if their production levels were expected to rise or they had started operating more recently. About 100 companies have applied for a higher pollution limit, known as a “calculated baseline”.

After consulting with industry, the government announced in March it would allow all companies to adopt a calculated baseline to “improve operation of the scheme, reduce costs for business and make it fairer and simpler”.

Grossman said this was expected to lead to further emissions increases beyond those already approved. RepuTex found the combined baseline levels, or limits, of companies under the scheme had increased from 151m tonnes to 200m tonnes a year since the scheme was introduced, a 32% rise.

Actual annual emissions from industrial sites under the scheme have increased from 139m tonnes to 155m tonnes since it was introduced, a 12% jump. RepuTex forecasts they will rise to 166m tonnes a year.

It would lead to a total of 280m tonnes of extra emissions from Australian industry by 2030 – significantly more than the 193m tonnes of cuts that have signed up through the emissions reduction fund.

Morrison has promised $2bn additional funding for the rebadged “climate solutions” fund if re-elected over 15 years. RepuTex found this could only offset the rise in industrial emissions – a situation the analysts describe as “running to stand still” – and not lead to a cut in national emissions as the government has promised.

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Labor says it would strengthen and expand the safeguard mechanism so polluters have to cut their combined emissions 45% by 2030 compared with 2005 levels. It promises to protect export industries from the full cost of emissions reductions. Many details of how it would transform the scheme remain unexplained.

The government says Labor’s plans would hurt production and employment, while it will allow industry to grow.

The progressive thinktank the Australia Institute produced broadly similar results to RepuTex in a separate analysis of the safeguard mechanism, finding it does almost nothing to limit emissions.

Tom Swann, senior researcher with the institute, said LNG facilities were responsible for the largest breaches of emissions limits. Chevron’s Gorgon development in the Pilbara, site of a long promised but to date unsuccessful carbon capture and storage project, and Woodside’s North West Shelf project emitted 680,000 tonnes and 160,000 tonnes beyond their limits respectively.

Heavy industry is responsible for about a quarter of Australia’s emissions. RepuTex expects it to pass electricity next year to become the biggest contributor to national pollution.