Emissions policy confusing, toothless by design

Labor’s safeguard mechanism sets declining emissions targets for Australia’s largest industrial polluters. It’s a plastic houseplant, as I recently described it, left on the windowsill to “look vaguely like something real and respiring”.

This industrial emissions control policy, which excludes the power generation sector, is packed with loopholes. Companies can comply with targets by buying offsets. Companies can lobby for weaker emissions targets, claiming trade exposure or by “borrowing” from future years. And when companies over-perform on these weak targets, they receive a special offset that they can sell to other polluters.

In short, it’s climate regulation that ensures corporations are never regulated for polluting the climate.

No news ain’t good news

Earlier this month, the scheme’s first batch of official data was released. As I predicted, it showed almost no change in the “raw” reported emissions of Australia’s worst culprits.

Gross emissions were presented as having fallen, but the marginal shift from FY23 to FY24, seen below, is essentially just background noise for the scheme’s polluters. This is clear when you look at the longer-term trend (however, the Clean Energy Regulator only presents the past few years):

That emissions haven’t skyrocketed in the scheme’s first year is about as good as the news gets.

The majority of emissions — and the majority of carbon offsets purchased by corporations — come from the coal, oil and gas mining industries. Fossil extraction is responsible for the most emissions, and those companies are also responsible for buying the most offsets.

The offsets industry lobby group welcomed this new data as a sign of a “good start” for the scheme’s “training wheels” year. But how long can the industry tiptoe around the fact that it will cease to exist if big emitters actually start cutting real emissions? A steep drop would be the industry’s worst nightmare.

The numbers game

A new insight from this data is how much damage is being done through another loophole, rewarding companies with a special, limited-edition carbon offset designed for use only within the scheme.

These “safeguard mechanism credits”, or SMCs, were generated at an unprecedented scale under the first year of the reformed scheme (it is based on an earlier Coalition policy). Sixty-two facilities were granted 8.3 million credits, equating to being 8.3 million collective tonnes below each of their targets. Of those 8.3 million, 6.1 million were granted to fossil fuel extraction sites.

As Guardian Australia’s Adam Morton reported, the program’s worst polluter, Chevron’s Gorgon facility, was handed potentially more than $10 million worth of these in-scheme SMCs to sell to other polluters. Of the top 15 facilities granted SMCs, 10 saw an increase in their emissions from FY23 to FY24.

The simple reason these facilities can increase emissions while still meeting their targets is that those targets are formulated using “intensity”. Intensity targets don’t limit a company’s absolute emissions, but rather their emissions per unit of production. A coal company, for instance, could double the amount of coal it digs up and sells from one year to the next. If it makes that process somewhat more efficient, it will have a lower “emissions intensity” but higher absolute emissions.

Setting targets this way is a long-running greenwashing tactic used by companies like Netflix and Norway’s state-owned oil and gas firm, Equinor. But the atmosphere doesn’t care how efficiently we produce greenhouse gas emissions. The laws of physics heat the Earth according to the absolute volume of greenhouse gases mixed into the sky.

If all of this feels counterintuitive and confusing, that is intentional. You are meant to want to turn away. These layers of complexity are designed to discourage scrutiny.

And it gets worse. As Ryan Cropp from the AFR reported:

According to data published by the Clean Energy Regulator, Glencore’s Collinsville and Clermont mines in Queensland’s Bowen Basin reported emissions reductions of 52% and 59%, respectively, for 2023-24. However, neither facility recorded equivalent changes to production levels or operational efficiencies over the same period.

That’s because the method for measuring methane emissions has taken a huge, worrying step backwards. Coal mine methane dumping was estimated by extrapolating from state-based aggregates — you can guess how that could be shaky and inaccurate. But the cure is worse: fossil fuel companies conduct their own on-site “estimations” and self-report to the regulator.

One day after the release of the safeguard mechanism’s first-year data, climate think tank Ember published a satellite data analysis that showed “40% more emissions than national reports” for Australia’s coal mines.

The Mt Pleasant coal mine, owned by Mach Energy, saw its reported emissions plummet 76% in FY24, after a five-year upwards climb. It was issued 2,304 SMCs in FY24.

The Australian government actually clamping down on methane measurement wouldn’t just result in an eye-opening adjustment to our nationally reported greenhouse gas emissions — it would remove an extremely valuable loophole polluters use to adjust the nature of measured reality.

Industry greenwashing disguised as regulation

The flaws inherent in the safeguard mechanism are significant, not just in regard to its by-design regulatory failures, but also its style and tactics. It is greenwashing designed to dupe the centrist professional spreadsheet class, and it really works.

I don’t need to do any linguistic analysis to demonstrate that the power sector has dominated the climate discourse during this election campaign, with a shallow debate on nuclear ringing out for years now. The scheme’s covered emissions are higher than the power sector, but there is a quiet mutual agreement to memory-hole the policy, seemingly forever.

The climate movement has a good rapid immune response to obvious climate delay. The Coalition bringing a literal diorama of a CCS facility to COP26? Easy. But when the fossil fuel industry manufactures a policy suite of faux-regulation, filled with the jangling keys of formulas and acronyms to distract the climate professional class, it works disturbingly well.

If the Coalition wins, perhaps we’ll return to the old days of obvious villainy. But if Labor wins, the safeguard mechanism shouldn’t be allowed to continue existing as a shockingly deceptive piece of industry greenwashing disguised as climate regulation.

Should Labor be doing more to curb emissions?

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