Some of Australia’s biggest heavy industrial companies – including BHP, BlueScope, Rio Tinto and Woodside – say urgent action is needed from governments, investors and business for Australia to cut greenhouse gas emissions in line with its goal of limiting global heating to 1.5C.
A joint statement signed by 17 members of the Australian Industry Energy Transitions Initiative follows their support for a report in February that found they could cut direct emissions in their supply chains by more than 90% by 2050 without relying heavily on carbon offsets.
The ETI lists several objectives necessary for heavy industry to reach net zero emissions at a pace consistent with limiting heating to 1.5C above pre-industrial levels, including the construction of a “large-scale, cost-competitive, renewable energy system of the future” and the development of “integrated net zero emissions industrial regions”.
The signatory companies did not specify what limiting heating to 1.5C should mean for the country’s emissions reduction targets. Scientists have said it demands an emissions cut of at least 57% and up to 75% by 2030 compared with 2005 levels – well beyond the Albanese government’s 43% target – and reaching net zero much earlier than 2050.
The statement – which was also supported by BP, Westpac, Australian Super, Orica, Wesfarmers, Fortescue Metals, the Australian Industry Group and the Australian Industry Greenhouse Network – said the February report prepared by the Climateworks Centre and the CSIRO showed how decarbonisation of heavy industry could be achieved, but that it would require a “significant stretch in ambition”.
The companies said they were “ready to seize this opportunity” and called on others to join them. “We will encourage and support federal and state governments as they develop an economy-wide suite of policies,” they said.
But the goals of the ETI statement appear at odds with the plans of some of the companies that have backed it. Woodside wants to open several large gas and oil fields in Australia and overseas. The Intergovernmental Panel on Climate Change last month again reported that existing fossil fuel infrastructure across the globe was enough to push the world beyond 1.5C heating and towards the more dangerous climate change that would involve.
The chief executive of the Australian Industry Group, Innes Willox, said 1.5C was an “enormous challenge” but the IPCC had shown “the costs of failure would be very high and each fraction of a degree matters”. He said emissions caps on business would “certainly have to tighten and apply more broadly over time to make net zero happen in industry and energy”.
The government last week passed changes to one of its signature climate policies, the safeguard mechanism, with support from the Greens and independents. The revamp means many of the country’s major industrial sites will be required to reduce emissions intensity by 4.9% a year, either directly or by buying offsets.
The safeguard mechanism was introduced by the Coalition in 2016. It was promised to put a limit on greenhouse gas emissions from about 200 major industrial facilities.
It applies to facilities that emit more than 100,000 tonnes of carbon dioxide equivalent a year. Each facility is set an emissions limit, known as a baseline.
The Coalition said companies that emitted above their baseline would have to buy carbon offsets or pay a penalty. In practice, facilities were allowed to change their baselines, few were penalised and industrial emissions continued to increase.
Labor won government planning to revamp the scheme.
It has set new baselines based on emissions intensity – how much a facility releases per unit of production. Baselines will be reduced by up to 4.9% a year.
Companies can choose whether to make onsite emissions cuts or buy offsets, including Australian carbon credit units.
New polluting facilities, including gas and coalmines, are allowed to open and enter the scheme and would be set baselines at “international best practice”. For new gas fields, that means offsetting all CO2 pollution so they are net zero.
Companies that emit less pollution than their baseline allows will be awarded a new type of “safeguard credit”. These within-scheme credits can be sold to other polluting facilities that emit more than their baseline and need offsets.
A deal between Labor and the Greens introduced an absolute "cap" so that total emissions under the scheme can not increase and need to come down over time. The pace of reduction is not stipulated, and will be set by the climate change minister
The changes start on 1 July 2023.
Several manufacturing companies released statements on Monday praising the government for adjusting the safeguard in response to their concerns. The changes included reducing the rate at which some non-fossil fuel businesses would have to cut emissions intensity to just 1% a year, and lifting public support for manufacturing industries from $600m to $1bn.
In a statement to the stock exchange, BlueScope’s chief executive, Mark Vassella, said engagement with the government on the safeguard had been “constructive”, and the company could now focus on finishing a feasibility study for a $1bn blast furnace and other decarbonisation projects at its Port Kembla steelworks.
Mark Irwin, the chief executive of cement and lime business Adbri, said he welcomed the government’s commitment of “additional funding to industries providing critical inputs to clean energy industries including cement and lime”.
Orica’s chief executive, Sanjeev Gandhi, said his company strongly supported the government’s reforms and they would lead to it rolling out emissions reduction technology at its manufacturing sites at Newcastle and Gladstone.
The statements highlighted the gap between major industry and business and the federal Coalition on climate policy. The Coalition climate change spokesperson, Ted O’Brien, last week said the safeguard mechanism would “decapitate” the economy. The opposition leader, Peter Dutton, told the ABC on Sunday the policy could lead to the cement industry leaving the country and was causing issues for steel businesses.
On Monday the climate change minister, Chris Bowen, said the government’s reforms had delivered the “certainty needed to make major investments in decarbonisation, future-proofing thousands of jobs onshore”.
O’Brien said “big government and big business” had agreed on “a big new tax”, and Australian consumers would be forced to pay.
The safeguard mechanism is not a tax. It requires companies to take steps to reduce emissions but does not involve the government collecting revenue.
