Carbon Capture and Storage (CCS) Update

Found in: Blog

Carbon Capture and Storage (CCS) projects are an important component of the energy transition to a lower emissions future. The concept has been gaining momentum in recent years as a method of not only reducing overall greenhouse gas emissions but also as an alternative to purchasing Australian Carbon Credit Unit’s (ACCU) for many hard to abate sectors.

A CCS project must be operated under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) or other qualifying state based scheme. In addition, to qualify for ACCU’s the project must satisfy the requirements set out in the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (Carbon Act), Carbon Credits (Carbon Farming Initiative) Rule 2015 (Cth) (Rule) and Carbon Credits (Carbon Farming Initiative—Carbon Capture and Storage) Methodology Determination 2021 (Cth) (Method). In the following piece we summarise the legislation regarding:

  • Crediting Australian Carbon Credit Units (ACCUs);
  • Eligibility to claim incentives for capturing carbon; and
  • Reporting requirements.
Emissions Management (The Safeguard Mechanism)

The National Greenhouse and Energy Reporting Act 2007 (NGER Act) sets out the thresholds for determining whether a company has an obligation to report on its greenhouse gas emissions, they are at a high level:

  • for an individual facility, emitting 25kt or more of greenhouse gasses (scope 1 and scope 2) or the production or consumption of 100TJ or more of energy per reporting period; and
  • for a corporation, emitting 50kt or more of greenhouse gasses (scope 1 and scope 2) or producing or consuming 200TJ or more of energy per reporting period.

If a company satisfies either of these thresholds, then it may be subject to a baseline greenhouse gas emissions level set by the Clean Energy Regulator (CER). At the time of writing this article, the baseline for facilities with scope 1 covered emissions set by the CER is 100,000 tonnes of carbon dioxide equivalent per year.

If a company exceeds the baseline set by the Clean Energy Regulator it may choose to acquire ACCU’s to avoid incurring any penalty points under the NGER Act. At the time of writing this article, the current spot price of an ACCU is approximately $28 per ACCU (per tonne of CO2).

Crediting ACCU's (Part 5 of the Carbon Act, Part 5 of the Rule and Part 3 of the Methodology)

A company that invests in a CCS project may apply to the Clean Energy Regulator to receive credits in the form of ACCU’s from the Federal Governments’ Emissions Reduction Fund in respect of such project for a period of up to 25 years (contrasted with most emissions avoidance methods, which allow for a 7 year crediting period).

At a high level, the steps for participating in this initiative are:

  1. Confirming the eligibility of the project
  2. Registering the project with the Emissions Reduction Fund
  3. Delivering the project
  4. Reporting on project and claiming ACCU’s
Eligibility (Part 3 of the Carbon Act, Part 3 of the Rule and Part 3 of the Methodology).

To be eligible to receive ACCU credits from the Emissions Reduction Fund, a CCS project must:

  • be registered with the Clean Energy Regulator prior to beginning any implementation activities (newness requirement);
  • not be a required project under Commonwealth, State or Territory Law (the regulatory additional requirement); and
  • not be likely to receive benefit from another Commonwealth, State or Territory government program in the absence of registration with the Emissions Reduction Fund (the government program requirement).

Further to the above, if the CCS project requires any regulatory approvals or permits, they must be obtained prior to the commencement of the project. The approval of the CCS project by the Clean Energy Regulator is solely for the project to be eligible to earn ACCU’s through the abatement of greenhouse gas emissions.

Reporting (Part 6 of the Carbon Act, Part 6 of the Rule and Part 5 of the Methodology

There are several reporting requirements that proponents of eligible CCS projects must meet under the Carbon Act, Rule and Methodology in force at the time of writing this article. The reporting regime is concerned with ensuring that the CCS project is meeting its objectives and that any claims made by the CCS project have been independently verified through an Audit process. In summary, the two main reporting requirements are:

  • to provide an offsets report; and
  • to provide an accompanying audit report

The necessary detail of each report is subject to the particulars of the related CCS project. However, generally there is a focus on calculating the carbon dioxide equivalent net sequestration amount, for the CCS project for the reporting period.

Importantly, whilst the credit reporting period ends at the earlier of the 25 year crediting period or the end of the CCS project, the extended accounting period requires that a proponent continue reporting on the CCS project for an extended accounting period that is the earlier of the decommissioning of the site and a further 25 year period.

For more information on this topic or to have a confidential discussion about your CCS project’s commercial needs, please contact James Bruining or Yvonne Jansen at Grondal Bruining. 

Phone: +61 8 6500 4300 

Disclaimer and Terms of Use

Liability limited by a scheme approved under Professional Standards Legislation.