Tamar Hallerman
GHG Monitor
5/17/13
The Australian government proposed cutting more than $660 million from carbon capture and storage and ‘clean coal’ programs this week as part of its 2013-2014 budget, a plan that could deeply impact two CCS demonstration projects there that rely heavily on federal funding. Officials from the ruling Labor Party said May 14 that the government is looking to rescind $662 million in uncommitted funds from CCS and other ‘clean coal’ programs over the coming years. The lion’s share of that funding—about $500 million—would come from the coffers of Australia’s CCS Flagships program over a period of several years.
The Flagships program aims to bring two large-scale CCS demonstration projects online in Australia, the CarbonNet and the Collie South West Hub projects. The former, a multi-user CCS infrastructure planned for the southeastern state of Victoria, would capture emissions from multiple power generation and industrial sources in the area’s LaTrobe Valley for storage in nearby saline reservoirs. The Collie South West Hub project would initially store up to 2.4 million tonnes per year of CO2 also captured from multiple power generation and industrial sources from an industrial belt southwest of Perth. Both projects are currently completing feasibility and storage appraisal work, according to a source in the region. Instead, the government plans on funding that CCS program with a substantially smaller $1 billion budget over seven years. “This funding will enable at least one project to proceed beyond the feasibility stage with Government support,” the budget states.
In an address this week, Australian Climate Change Minister Greg Combet and Treasurer Wayne Swan said the government also plans on cutting $247 million in coal industry assistance, as well as $45 million over several years by ending its funding agreement with the Global CCS Institute. The Australian-based group announced an end to its funding agreement with the government earlier this year in its strategic plan, where it announced restructuring plans in order to become financially independent. The government provided the trade group with the vast majority of its seed money from its inception in 2009.
Stakeholders Criticize Funding Cuts
Several CCS and coal stakeholder groups were quick to oppose the funding reductions. John Connor, CEO of the Climate Institute, called the cuts to CCS initiatives “regrettable” in a statement. Meanwhile, the Australian Coal Association said the government “missed an opportunity to boost Australia’s competitiveness and productivity” by cutting ‘clean coal’ support. “The decision to cut $500 million from the CCS Flagships program was short sighted given the International Energy Agency’s recent call for Governments around the world to increase their investment in CCS,” Greg Sullivan, acting CEO of the Australian Coal Association said in a statement. ”As a global community we are massively reliant on fossil fuels and CCS is the only proven technology that can substantially reduce emissions from carbon intensive industry. Not only is cutting CCS counterproductive from a climate perspective it also undermines the future strength of our coal export industry which delivers vital jobs and revenue for Australia.”
During remarks at this year’s 12th Annual Conference on Carbon Capture, Utilization and Storage, held this week in Pittsburgh, Mark Weaver, manager for CCS Major Projects in the Australian Government’s Department of Resources, Energy and Tourism’s Clean Energy and Energy Efficiency division, acknowledged that the government’s CCS programs “took a bit of a hit” in the budget. “But I would like to stress that we’re still able to maintain current commitments and we’re fairly confident about certainly taking at least one large-scale demonstration project through to a final investment decision with the budget we have,” he said.
Gov’t Revises CO2 Price Forecasts
The Australian government this week also revised its forecasts for a future carbon price by more than 50 percent, slashing its estimates for 2015 from $29 to $12 per tonne. The estimate predicts the carbon price from 2015 to 2016—the first year Australia transitions into a cap-and-trade scheme from its current fixed carbon price. The government attributed the downgraded estimate to the recent collapse of prices on the European Union’s Emissions Trading System. “Profound economic weakness in Europe has had a significant impact on European growth and its carbon market,” Combet said in a May 14 statement. Australia and the EU announced plans last summer to eventually link their cap-and-trade systems by 2018. European lawmakers rejected a last-ditch proposal last month to temporarily prop up carbon prices, causing the value of carbon credits to plummet to an all-time low of just over €2 per tonne.
