The Labor-Greens deal on the safeguard mechanism won’t put a stop to new coal and gas projects, but it will put a hard enough brake that we’ll hear the screech if any get the government’s go-ahead. For weeks the climate and energy minister, Chris Bowen, has been locked in negotiations determined to pass the signature climate bill without taking up the minor party’s “offer not ultimatum” of no new coal and gas.
Through rounds of interviews urging them to help reduce emissions, Bowen has ruled out a ban, a pause and a climate trigger in environmental approval laws.
But behind the scenes, the Greens were fashioning demands they say amount to the next best thing.
On Monday the deal was revealed. At its heart is a cap on participants’ emissions of 1,233m tonnes of carbon dioxide by 2030 or about 140m tonnes a year.
Instead of an obligation on the environment minister to consider the greenhouse gas emissions of fossil fuel projects at the approval stage, the Climate Change Authority will report on whether expanded or new projects will blow the carbon budget.
The climate and energy minister then has to respond, with flexibility to impose greater emissions reduction on existing industries or the new entrants.
With powers this broad, it’s easy to see how requiring “best practices” from new entrants (such as reducing emissions every year) could morph into carbon neutrality.
In fact, the Greens have locked in net zero for the direct scope one emissions of projects in the Beetaloo basin in the Northern Territory and new liquefied natural gas export projects.
No public funds from the Powering the Regions Fund or the existing energy department grants will be spent on fossil fuel extraction.
These measures are designed to allow Labor to say that new gas projects for domestic consumption are still possible, while the Greens argue that they have made giant carbon bombs like Beetaloo unviable.
To be successful, fossil fuel projects must run the gauntlet of two ministers. They’ll either be blocked, or if they get through, the Greens will hang them around Labor’s neck like an albatross.
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.
When the then opposition leader, Bill Shorten, faced a difficult decision about whether to promise to block the Adani coalmine, he said the project had to “stack up commercially and environmentally”, as if the environmental considerations could be determined as objectively as a financial balance sheet.
In reality they can’t. The balance between whether to squeeze a new lithium or a new coalmine into the carbon budget, or whether to impose tougher rules on existing industries or new fossil fuel projects is properly the domain of politics.
One Greens parliamentarian observed to me what a unique position they find themselves in: a green party in the balance of power (in one house at least) in a fossil fuel exporting nation.
The global system of carbon accounting does not put emissions of gas we export on our account. Perhaps it should, but it doesn’t.
The Greens’ bargaining position isn’t strong enough to rewrite the rules entirely or force Labor to overturn election commitments not to ban new coal and gas.
What the safeguard deal shows, though, is they are strong enough to tilt the field and make it harder for projects to “stack up”.
After the deal was revealed, the prime minister, Anthony Albanese, and Bowen were peppered with questions about power prices.
This will be the Coalition’s line of attack: anything that makes fossil fuel projects harder must increase power prices. In reality, most of our gas is exported and extending supply to meet that global demand does almost nothing to domestic prices.
They won’t care. Question time is already chewed up by grandstanding aimed at lambasting Labor for power price rises that are occurring mainly due to the Russian invasion of Ukraine.
The Coalition is also upset the $275 power price improvement from renewable energy Labor promised by 2025 hasn’t materialised yet.
And the fact that power prices went up after the government’s coal and gas price cap intervention to the opposition is evidence the policy isn’t working – instead of the more logical conclusion that they would’ve gone up by more without it.
Expect to hear these lines all the way to the election: “we tried to stop new coal and gas and they wouldn’t let us” from the Greens; “Labor has caved to the Greens, hobbled our industries and hurt households” from the Coalition.
In the meantime, a deal is a win for the government, which somehow continues to find a way on climate change despite sky-high demands.
