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Wayne Calder – Department of Resources, Energy and Tourism – CCS and carbon price policy in Australia

by Global CCS Institute on Jun 27, 2012

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Wayne Calder, General Manager, Australian Department of Resources, Energy and Tourism, presented on CCS and carbon price policy in Australia at the Global CCS Institute's Japanese Members' Meeting ...

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Australia faces significant costs as a result: Rising temperatures = more extreme weather (droughts, floods and bushfires). Australia's rising sea levels will also impact coastal cities. Climate change will impact water security, coastal development, agriculture and health. CSIRO and Bureau of Meteorology projections show that if the world does not take action to tackle climate change, Australia’s average temperatures will increase by between 2.2 degrees and 5 degrees Celsius by 2070 (compared with 1990 levels). This will have significant impacts on Australia’s ecosystems – for example, the survival of the Great Barrier Reef will be in jeopardy as higher ocean temperatures and acidity levels cause major changes to coral reefs. Australia’s carbon pollution: Australia’s total emissions were approximately 561 million tonnes in 2010 Australia’s carbon pollution represents around 1.5 per cent of global greenhouse gas emissions – this makes us one of the top 20 polluting countries in the world. This is driven by Australia’s use of fossil fuels – our energy sector is very emissions-intensive due to the availability of cheap and abundant coal. Many countries around the world are already taking action to reduce their pollution: 89 countries – representing 80 per cent of global emissions and 90 per cent of the world’s economy – have already pledged to take action on climate change. Globally, more money is invested in new renewable power than in conventional high-pollution energy generation. China is now the world’s largest manufacturer of both solar panels and wind turbines. 31 European countries – including the UK, Germany and France – have a price on pollution through emissions trading schemes. New Zealand started emissions trading in 2008. Carbon taxes are also in place in the United Kingdom, India, Switzerland, Denmark, Finland, Norway, Sweden, the Netherlands, Costa Rica and Ireland. Pollution reduction targets: The Government’s plan will reduce pollution by at least 5 per cent compared with 2000 levels by 2020 – this will require cutting net expected pollution by at least 23 per cent in 2020. This is equivalent to taking over 45 million cars off the road by 2020. By 2050, the Government is committed to cutting pollution to 80 per cent below 2000 levels.
The Australian Government is building a clean energy future and has a comprehensive plan which includes: Introducing a CARBON PRICE and returning every cent to assist households, support jobs and build a new clean energy future Promoting innovation and investment in RENEWABLE ENERGY Encouraging ENERGY EFFICIENCY Creating opportunities in the LAND SECTOR to cut pollution and improve productivity, sustainability and resilience This plan will provide a price signal to the market to incentivise investment in longer term abatement technologies that represent least cost from a firm/industry/economic perspective.
How the carbon price works This image shows how the carbon price works. From 1 July 2012, Australia’s biggest polluters will buy permits from the Government for every tonne of pollution they create. This, for the first time, will create an incentive to cut pollution. For the first three years the carbon price will be fixed, moving to an emissions trading scheme in 2015. In the fixed price stage (from 1 July 2012 – 30 June 2015), the carbon price will start at $23 per tonne and rise by 2.5 per cent a year in real terms. Under emissions trading, the Government puts a cap on pollution by restricting the number of permits. The price will be determined by the market. This will drive innovation and investment in low pollution activities. Businesses that lower their pollution will avoid buying a permit giving them a competitive advantage compared to those that do not. Some businesses are likely to pass on their costs to their customers, leading to modest price increases. The Government will be providing direct financial assistance to most Australian households through increased pension and family payments and tax cuts for low and middle- income households. Nine out of ten households will receive some assistance. Household assistance will be permanent. Australia will tackle climate change and build a clean energy future.
Jobs and Competitiveness Program The Government’s Jobs and Competitiveness Program will support jobs in high-polluting industries with competitors in countries where those industries are not yet subject to comparable carbon constraints - worth $8.6 billion over its first three years This assistance will be in the form of free carbon permits. This will shield these business activities from the impact of a carbon price while maintaining incentives to invest in cleaner technologies, which will underpin their competitiveness as the world moves to price carbon pollution. There will be two categories of assistance under the Jobs and Competitiveness Program. The most emissions-intensive, trade-exposed activities will initially be eligible for free permits representing 94.5 per cent of industry average carbon costs. This will apply to manufacturing activities like aluminium smelting, steel manufacturing, flat glass making, zinc smelting and most pulp and paper manufacturing activities. Activities which have lower levels of carbon pollution, such as some plastics and chemical manufacturing, tissue paper manufacturing and ethanol production will be eligible for free permits to cover 66 per cent of the industry average carbon costs. Liquefied Natural Gas projects will also receive a supplementary allocation to ensure an effective assistance rate of 50 per cent. The Jobs and Competitiveness Program will provide support to activities that generate over 80 per cent of emissions within the manufacturing sector. The application process for the Jobs and Competitiveness program will begin 1 July 2012. Jobs created in a Clean Energy Future The Government’s plan will provide new economic opportunities for Australian workers Many businesses will invest in new technology to generate less pollution and become more efficient Jobs will be created in renewable energy generation, carbon farming and sustainable design to name just a few. Two new measures have been announced under the Clean Energy Future to will help the coal mine sector to reduce its emissions The Coal Sector Jobs Package This package will provide $1.26 billion in assistance to the most emission-intensive coal mines over the first five years of the carbon price. Assistance will be provided to eligible coal mines for up to 80% of their fugitive emissions exposure above a certain threshold. The Coal Mining Abatement Technology Support Package This package will provide $70 million over five years to support the development and deployment of technology to reduce fugitive emissions from coal mines; To support work on safety and regulatory issues associated with the introduction of abatement technologies, equipment and processes; and To help small and medium coal sector participants adapt and undertake feasibility studies to reduce emissions.
TREASURY MODELLING - The Australian Government is committed to achieving major cuts in greenhouse gas emissions. The Government has pledged to reduce Australia’s emissions by 5% below 2000 levels by 2020, regardless of the action taken by other countries. This target may be increased to as much as 25% if there is global agreement to limit temperature rises to 2 degrees Celsius. As part of the new Clean Energy Future package, the Government has adopted a new long-term target to reduce carbon pollution by 80% below 2000 levels by 2050. Given Australia’s heavy reliance on coal, these targets are a major challenge for Australia. Coal generates 80% of our electricity, and is responsible for around 32% of our emissions. CO2 emissions reduction is being tackled on a number of fronts including energy efficiency, expanding the role of renewable energy and switching to less greenhouse intensive fuels. Ultimately, carbon capture and storage (CCS) will need to be commercially available to achieve large cuts in emissions from coal-fired power and other emissions-intensive industries. Australia’s CCS policy reflects this challenge as a major coal supplier – to lead by example and to support the further development and commercialisation of CCS technologies. The introduction of a carbon price as part of the Clean Energy Future package will shape the long-term deployment of CCS projects in Australia. The Government believes that the introduction of a carbon price sends a strong signal to the energy market to encourage investment in a range of activities that reduce greenhouse gas emissions.
The Australian Government recognises that support is necessary to ensure CCS is available for commercial deployment from 2020 in order to meet our emissions reduction targets. Government policy is therefore aimed at providing the framework and investment support needed to accelerate the development and deployment of CCS. The puzzle on this slide summarises the six major elements of Australia’s policy approach to CCS - namely legislative certainty, storage issues, research and development, demonstration projects (at both the pilot and medium-scale stage, as well as commercial-scale demonstration stage), stakeholder engagement, and knowledge-sharing and collaboration. Australian policy is aimed at addressing these in integrated manner. I’ll go through each of these in more detail in this presentation, but there is one final element that is critical to the success of CCS in Australia - namely public perceptions and attitudes to CCS. It is a central issue that requires careful management. We may get everything else right but unless there is public support for CCS these pieces of the puzzle will not come together. For this reason, community consultation and engagement is a key requirement of any project funded by the Australian Government. The National CCS Council brings together key stakeholders to advise the Australian Government on the accelerated development and deployment of CCS in Australia to contribute significantly to GHG emission reductions.
The funding of almost $1.7 billion for the Flagships program is to support commercial-scale demonstration projects in Australia. The National Low Emissions Coal Initiative (NLECI) commenced in 2008 and provides funding of $370 million over eight years to a range of initiatives, including: $75 million to ANLEC R&D, combined with matched funding from the coal industry through the Coal21 Fund; $50 million to the National Carbon Mapping and Infrastructure Plan, which was developed by the Carbon Storage Taskforce; $50 million to the Callide oxyfuel combustion project; and $150 million to low emissions coal demonstration projects in Queensland, NSW and Victoria. The NLECI also provides $20 million to support the activities agreed by the Australia-China Joint Coordination Group on Clean Coal Technology. The National CO2 Infrastructure Plan (NCIP) announced in the 2011-11 Budget provides further funding of $61, most of which is being directed to obtaining geological data to support detailed storage site assessment. Further funding for CCS activities flows from Government support for other activities, most notably support for the Cooperative Research Centre on CCS. I will discuss the various activities under these separately
As I just mentioned, demonstration projects are one of the six key elements of Australia’s policy approach to CCS. The Australian Government administers the CCS Flagships Program, which provides funding of almost $1.7 billion to support commercial-scale demonstration projects in Australia. Each of the projects has to meet three requirements. They must: have integrated capture, transport and storage; have matching State government and industry funding; and commence commissioning from 2015. In December 2009, the Government announced four shortlisted projects and the provision of up to $120 million funding for associated pre-feasibility work. The shortlisted projects are shown on this map – the CarbonNet project, the Collie South West Hub project, and the Wandoan project. In June 2011 the Australian Government announced that it had selected the Collie South West Hub project in WA for further funding under the Flagships Program. Earlier this month the Government announced the CarbonNet project as the second project selected for funding through the feasibility stage. The Government has agreed to reconsider Queensland’s Wandoan project in 12 months’ time subject to conditions predominantly related to progressing prefeasibility studies and the availability of program funding. There’s one further project identified on the map, which isn’t part of the Flagships Program – the $50 billion Gorgon Project in Western Australia. This will be the largest CO2 storage project in the world when it comes online, and represents a critical step towards demonstrating the viability of large-scale commercial storage of CO2. Community consultation will be a key part of the work programs for all large-scale demonstration projects ahead of any decision to make financial commitments.
Joint venture operator Chevron is developing the Gorgon and Jansz fields to supply a 15.4 million tonne/annum liquefied natural gas (LNG) plant on Barrow Island The Gorgon Carbon Dioxide Injection Project proposes to inject CO2 stripped from the reservoir gas into the Dupuy Formation below Barrow Island at a depth of some 2300 metres At 3.5 million tonnes of CO2 per year from 2015 this will be the world’s largest CCS project
Through the CCS Flagships Program the Australian Government is providing up to $52 million in funding to complete a detailed storage viability study. The South West Hub project is a proposal by a consortium of electrical power generators and industrial users of coal (Collie-South West CO 2 Geosequestration Hub) to store carbon dioxide from emitters in Collie and Kwinana. Participants include two coal miners, two alumina refiners, two power generators and a coal to urea project at Collie. The four year research and evaluation project proposes that CO 2 will be transported by a common user pipeline to an injection site within the Shire of Harvey where it will be injected into deep Lesueur sandstone strata.
On 10 February 2012, the Australian Government announced the CarbonNet project as the second project selected for funding through the feasibility stage. Up to $100 million ($70 million from the Australian Government and $30 million from the Victorian Government) will be available for the feasibility stage work which will be predominantly focused on modelling and testing of potential CO2 storage sites. The project is ideally situated in Gippsland - Latrobe Valley region, which has vast reserves of brown coal and a large electricity generation hub utilising the coal reserves. The project aims to capture carbon emissions from the area and store it in nearby geological basins. This project will bring new opportunities for the use of Latrobe Valley’s extensive brown coal reserves for making higher value coal by-products for domestic use and export.
Talking Points Project outline: The Callide Oxyfuel project aims to demonstrate the retrofitting of oxy-combustion technology to a 30 megawatt unit in an existing power plant in Queensland (Stage 1) and the capture and geological storage of up to 17,000 tonnes of CO2 (Stage 2). Status : Generation of electricity by oxyfiring coupled with CO2 capture is due to commence in March 2012 with the remaining capital works under Stage 1 due for completion prior to 30 June 2012. On current schedules, the project is expected to start capturing CO2 around the end of 2012. Participants involved: The Callide Oxyfuel Project is a joint venture between CS Energy, the Australian Coal Association, Xstrata Coal, Schlumberger, and Japanese participants, J-POWER, Mitsui & Co., Ltd., and IHI Corporation. The project was awarded $50 million from the Australian Government under the Low Emissions Technology Demonstration Fund. The Callide Oxyfuel Project has also received financial support from the Queensland and Japanese governments and technical support from JCOAL. Challenges and issues it had to overcome: So far the major challenge for Stage 1 has been proving the oxyfuel technology at scale. In addition, the lack of access to a suitable geological storage in Queensland has significantly impacted the project’s ability to move to Stage 2. While the decision earlier this year by the Queensland Government to grant CTSCo a GHG tenement permit will ameliorate this situation, it is unlikely that the logistics and infrastructure will be in place to conduct suitable storage during the project’s planned demonstration schedule. Therefore the projects intention to have an end to end project will not be realised within the projects timeframe. The project continues to work with Stakeholders to arrive at a workable solution
Lessons learnt from Government perspective There is a need to identify and address expected operational shortfalls for first-of-a-kind projects. Mitigation measures for overcoming these operational shortfalls will be important, particularly under a carbon price scenario.

Wayne Calder – Department of Resources, Energy and Tourism – CCS and carbon price policy in Australia Presentation Transcript

Australia’s CCS and Carbon Price Policy GCCSI Regional Members Meeting 8 June 2012, Tokyo, Japan Presented by Wayne Calder Department of Resources, Energy and Tourism
The need for action• Australia faces significant environmental, economic and social costs associated with global climate change• Countries around the world are already taking action to cut CO2 emissions and 32 countries already have emissions trading schemes• The Australian Government has committed to reducing CO2 emissions by at least 5 per cent compared with 2000 levels by 2020• New Australian target to cut CO2 emissions by 80 per cent below 2000 levels by 2050
Australia’s Clean EnergyFuture
How the carbon price works
Transitional Arrangements8.6 billion Jobs and Competitiveness Programincludes assistance for: • Emissions Intensive Trade Exposed Industries • Strongly affected electricity generators • Planned retirement of highly emissions intensive generatorshe $1.26 billion coal sector jobs package willassist the most emissions intensive coal mineshe $70 million Coal Mining Abatement
Australian CCS Policy• Australian support for CCS precedes a carbon price and includes: • Funding for the CO2CRC since 1999 • Coal industry contributions to the COAL 21 initiative since 2004 • Membership of CSLF and Asia Pacific Partnership • Callide Oxyfuel and other capture projects • Significant funding for R&D, demonstration projects and to establish the Global CCS Institute over 2008 and 2009• Why does Australia support CCS? – Heavy reliance on coal for power generation and growing profile of gas/LNG developments – Responsibilities as a major international energy supplier – Alongside energy efficiency and renewable energy, CCS is required to make deep emissions cuts at least cost to the economy ENHANCING AUSTRALIA’S ECONOMIC PROSPERITY
CCS Policy Elements in Australia – the puzzle Legislative Certainty Knowledge- Sharing Storage Community Acceptance Stakeholder R&D Engagement Project Demonstration
Australian Government funding• Major government funding support flows from: – CCS Flagships program ($1.7 billion) – National Low Emissions Coal Initiative ($370 million), established in 2008 – National CO2 Infrastructure Plan ($61 million) – Global CCS Institute ($315 million)• With additional support flowing from other programs.
CCS Flagships & commercial scale projects Callide Oxyfuel Project 10 KtpaGorgon LNGProject Wandoan CCS3.5 Mtpa project 1 Mtpa CarbonNetCollie South 3 – 5 MtpaWest Hub2.4 to 7 mtpa
The Gorgon Project
The CollieSouth West Hub • Major industrial area of WA generating 25 MT of CO2 p.a. • Sequestration of 300,000 tonnes of CO2 in bauxite residue • Storage of up to 6.5 MT of CO2 per annum for 40 years being investigated
CarbonNet Project Post Combustion CapturePre Combustion Capture IGCC Pipeline Concept route only Pre Combustion Capture IDGCC 20 km
Callide Oxyfuel ProjectBackground• Project involves retro-fitting oxy-combustion technology to a 30 MW unit of the Callide A power station in Queensland and the capture and geological storage of 10,000 tonnes of CO2 per annum.• Collaborative Project involving Australian and Japanese Governments and industry including CS Energy, JCOAL, Xstrata Coal, Schlumberger, IHI, Mitsui, and JPower.Status• Generation of electricity by oxy-firing commenced in March 2012. Project expected to start capturing CO2 around the end of 2012.Challenges• Proving Oxyfuel technology at scale and obtaining access to a suitable storage site.
Summary• A carbon price will commence in Australia on 1 July 2012• The policy is designed to transition the economy to a low carbon future and to incentivise investment in least cost abatement• CCS policy and programs precede the introduction of a carbon price and will complement long term abatement targets• Demonstrating CCS at commercial scale is critical to future deployment• Planning for and implementing demonstration projects requires consideration of all elements of the CCS puzzle and generates valuable knowledge
Thank you ENHANCING AUSTRALIA’S ECONOMIC PROSPERITY