Budget 2021: Federal government will implement scheme to pay big carbon emitters to reduce output

Australia’s biggest carbon polluters will be paid to reduce emissions with $280m set aside to encourage Australian corporate giants to reduce their carbon output.

Picture: Getty Images

Australia’s biggest carbon polluters will be paid to reduce emissions as the federal government sets aside $280m to encourage Australian corporate giants to reduce their carbon output.

Only $81.7m of the cash will be available over current four-year budget period, but Energy Minister Angus Taylor said the new scheme will spend up to $280m over the next 10 years to major industrial plants, smelters, mines and power facilities, to adopt new technology to reduce emissions.

The scheme will apply to the more than 200 Australian facilities that currently emit more than 100,000 tonnes of carbon from their own operations each year, and report ongoing emissions to the government through the current “safeguard baseline” mechanism, which requires companies to acquire carbon credits if they exceed agree levels.

The new mechanism was recommended in the expert panel review of the operations of the government’s Emissions Reduction Fund, chaired by former Business Council of Australia and Origin Energy boss Grant King and delivered almost a year ago.

Energy and Emissions Reduction Minister Angus Taylor. Picture: John Feder

Energy Minister Angus Taylor said on Tuesday the details of the new mechanism are still subject to industry consultation, but the review proposal suggested that big emitters could earn tradeable carbon by implementing “transformative” projects or technology that permanently reduce emissions.

To earn credits companies would be required to make a new investment in the plants to reduce emissions intensity and change normal business practices, to avoid companies getting credit for natural reductions in production or facility closures.

Under the review’s proposals, big emitters will be able to sell or trade these credits to the government, or to other emitters, for cash.

Mr Taylor said the new “below baseline crediting mechanism” would support large industrial facilities to reduce energy consumption and emissions, while improving productivity and international competitiveness.

The idea was heavily criticised when the Morrison government signalled its support for the concept in 2020, for its emphasis on voluntary participation by companies as opposed to establishing a formal “cap and trade” system for big carbon polluters.

But Mr Taylor said the latest federal budget continued its emphasis on giving incentives to reduce carbon output in industry, rather than taxing emissions”

“Australia is focused on investing in commercialising technologies, not harmful taxes, in the global effort to reduce emissions. Our 2021-22 Budget measures continue this approach, while strengthening our energy security and supporting the growth of new industries and jobs into the future,” he said.

The new emissions reduction scheme comes on top of a slew of pre-announced budget measures aimed squarely at the government’s “technology over tax” strategy to reduce carbon emissions.

A $639m co-funding plan to back low emissions international technology partnerships has already been announced, along with $275.5m in funding for development of hydrogen export hubs, and $263.7m towards the development of carbon capture technologies.

At the same time, resources Minister Keith Pitt said the government would introduce a “temporary” levy on offshore petroleum producers to fund the clean-up of the Northern Endeavor floating platform and associated oilfields.

The fields were once operated by Woodside Petroleum, but were sold to a far smaller player as they neared the end of their life. The new owners promptly went bust, leaving a clean-up bill that could eventually cost hundreds of millions to the taxpayer.

Mr Pitt said the government would consult with industry on the details of the levy.

The budget papers did not include the levy’s estimated size, nor did they give details of the likely clean-up bill for the Northern Endeavour, out of concern for “commercial sensitivities”.

“The government has previously announced an enhanced decommissioning framework, to make sure Australia has effective oversight and robust financial and accountability safety nets in relation to future offshore oil and gas decommissioning projects,” Mr Pitt said.

The budget papers show that the government expects to spend $47.4m on maintaining the Northern Endeavour in the current financial year.

Originally published as Budget 2021: Federal government will implement scheme to pay big carbon emitters to reduce output