Fossil fuel subsidies: Two steps forward, one step back

by Alia Armistead

Labor’s Budget contrasts starkly with the Coalition’s March 2022-23 Budget, which committed up to $4 billion to fossil gas and carbon capture and storage (CCS) under the pretence of energy security, regional development and ‘low emissions technology’.

The significant redirection of over $400 million in CCS subsidies is a welcome measure. Labor’s Budget reverses $325.9 million in uncommitted, yet-to-be-initiated programs on the basis that “gas or carbon capture and storage pipeline investments [were] found to lack a case for government support”.

The Budget revokes $90 million for CCS deployments and redirects it towards technology development for hard-to-abate sectors. It also provides $141.1 million for carbon capture technologies for industrial sectors, such as cement manufacturing, and direct air capture – redirected from Angus Taylor’s Technology Investment Roadmap.

The focus on hard-to-abate sectors is an important part of emissions reductions – but let’s not forget that CCS is a technology developed and used by the fossil fuel industry primarily to increase oil extraction. In the words of the former Energy Minister Angus Taylor ‘CCS is critical to enabling gas production’. Two decades and billions in public support has been spent propping up CCS in Australia, only to have it fail. The only CCS project operating in Australia was used to justify new gas mining and it still unclear whether it has reached full operation.

While the promise of negative emissions technologies to support cement and steel production is alluring, agreed timelines, budgets and benchmarks to measure progress would improve transparency and integrity.

The Budget also provides an additional $2.2 million for a forthcoming Guarantee of Origin Certificate scheme to “track and verify emissions associated with renewable electricity, hydrogen and other low emissions commodities”. This will support large scale renewable energy by creating an ongoing certification of clean electricity for when the Renewable Energy Target ends in 2030, which will help solar and wind developers sell offtake agreements. Hopefully this also rids Australia of the ‘clean hydrogen’ language of the former Government by distinguishing between green and fossil hydrogen.

Unfortunately, the $1.9 billion commitment to the Middle Arm industrial precinct in the NT has remained. This ‘enabling infrastructure’ will include making petrochemicals from gas fracked from nearby basins. It is, in effect, a subsidy for gas.

Darwin is already home to Santos’ Darwin LNG and the INPEX Ichthys Onshore LNG processing facilities, with the new development likely to include CCS.

Originally funded in the March 2022 Budget, the $1.5 billion for Middle Arm was intended for developing a new port, with additional $200 million for enabling infrastructure and $300 million for water supply to the precinct. Labor’s Budget confirms the Australian Government’s investment in Middle Arm via a $1.9 billion equity stake in the precinct.

Minister Bowen previously committed to no government finance for new coal and gas fields. It is disappointing that this commitment won’t extend to former subsidies for gas made earlier this year.

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