Public consultation has started on a key reform that, if implemented, will allow Australian carbon capture and storage (CCS) projects to generate carbon credits.

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The Australian government on Tuesday released for public consultation a draft CCS method to enable projects that capture and permanently store greenhouse gases in underground geological formations to participate in the nation's Emissions Reduction Fund (ERF) and generate Australian carbon credit units (ACCUs).

Chief executive of Australian independent Santos, Kevin Gallagher, has previously stated that the ability for CCS projects to generate ACCUs is essential for the company to proceed with its planned Moomba CCS development in South Australia.

He said in April that the US$155 million project was ready for a final investment decision, pending the new legislation, which is expected to be in place by the end of the third quarter.

Each ACCU will represent one tonne of carbon dioxide equivalent emissions stored or avoided and can be sold to the Australian government, companies, state governments or other private buyers.

In order for a CCS project to qualify for ACCUs under the draft method, all relevant infrastructure within the project, including capture facilities, pipelines and the storage site or sites, must be located in Australia.

The draft also notes that while most emissions avoidance methods allow for a crediting period of seven years, CCS projects will be allowed a crediting period of 25 years to recognise the very large upfront and ongoing costs of the projects, and the fact they are not expected to generate any revenue other than ACCUs.

ERF central to government strategy

The ERF is a voluntary scheme that aims to provide incentives for the adoption of new practices and technologies to reduce emissions.

“The Emissions Reduction Fund is central to our technology, not taxes approach to reducing emissions. We are continuing to support farmers, businesses and communities to adopt new technologies that reduce emissions and boost their economic opportunities,” Australia’s Minister for Energy & Emissions Reduction, Angus Taylor, said on Tuesday.

“Including CCS projects under the ERF will help unlock more low-cost abatement for Australia, underpin new and expanding industries, and lead to job creation and economic opportunities, including in regional areas.”

CCS is one of five priority methods being developed in 2021 under the ERF, with the other methods including blue carbon, soil carbon, biomethane or green gas, and plantation forestry.

CCS vital to Australia's energy exports

The body representing Australia’s upstream oil and gas industry, the Australian Petroleum Production & Exploration Association (APPEA), welcomed the move to include CCS projects under the ERF.

APPEA chief executive Andrew McConville claimed Australia needs to implement low-cost carbon abatement in order to maintain its position as a leading energy exporter, as well as its international competitiveness amid a global push to lower emissions.

“With scale and experience, the cost of CCS will decrease, creating the potential to deliver competitive, large-scale abatement for existing industries and new industries such as hydrogen and ammonia,” he said on Tuesday.

“Just as LNG exports are playing an important role in reducing global emissions, CCS in Australia can play an important role in securing the future of Australia’s oil and gas industry in a cleaner energy future.”

The public consultation on the draft CCS method is open for submissions from industry and other stakeholders until 27 July.