Kylea Tink (North Sydney, Independent) Share this | Hansard source

Australia urgently needs to reduce emissions and transition to a zero carbon economy. My community of North Sydney have long realised that the net zero transition is not just an obligation but an opportunity to revitalise Australian industry, increase productivity and meaningfully improve the quality of life for all Australians. In that context, my community largely welcomes the Future Made in Australia policy package to attract invest investment in low-carbon technologies and projects in Australia and leverage the financial and industrial opportunities that arise from the global transition to net zero.

The Guarantee of Origin scheme will underpin the Future Made in Australia package by establishing a critical carbon accounting framework on products made under the package. Specifically, the scheme will function as an internationally aligned, voluntary certification program for low-emissions products and renewable electricity. Certification will initially focus on renewable electricity—through the creation of renewable energy guarantee of origin certificates, or REGO certificates—and hydrogen and associated products through the product guarantee of origin certificates. There will be potential for a phased expansion to low-carbon liquid fuels and green metals.

There's a real need for this. Within the Australian economy there is a lack of trusted, consistent information about low-emission Australian made products and no enduring mechanism to certify renewable electricity. I welcome the government's efforts to provide a legislative framework for a voluntary scheme to certify products such as hydrogen and renewable electricity. However, we must exercise a large degree of caution when implementing such a scheme.

Product guarantee of origin certificates can be likened to a nutrition label that accumulates information, as the product moves through each stage of production, and signals healthier food choices to customers. In this case, these new certificates will indicate lower emissions products. As with all ticks of approval that purport to certify a product, they run the risk of misrepresenting these products. We all remember the Heart Foundation's healthy heart tick which, while intended to help consumers make healthier choices when buying food, drew considerable criticism after ticks were awarded to McDonald's burgers and nuggets. Furthermore, food manufacturers had to pay a fee to get the heart tick on their products, leading to products that were just as healthy, if not healthier, being overlooked by consumers simply because the manufacturer did not apply and pay for the heart tick.

When it comes to certifying environmental credentials, a poorly devised scheme risks greenwashing products by providing a government tick of approval that consumers assume they can trust. The government's own Climate Active carbon neutral scheme has been criticised for lacking credibility and integrity in climate neutrality claims, with the climate neutral certification being awarded to Ampol, for carbon-neutral petrol, amongst others. Other international certification schemes like the Forest Stewardship Council and the Roundtable on Sustainable Palm Oil have also faced their share of criticisms. The lessons from these certification schemes are clear: we need to exercise caution when providing a stamp of credibility. A poorly designed scheme risks being used to greenwash products, undermining the intended benefits of certification, and ultimately to support the fossil fuel industry.

On the other hand, a well-designed Guarantee of Origin system could play a pivotal role in supporting the production and use of low-emissions products. It could allow manufacturers to make objective and credible claims regarding the emissions associated with their products and encourage more informed investments, spurring growth of market forces focused on cleaner energy and low-carbon products. It could boost Australia's competitiveness in emerging export sectors, such as clean energy and sustainable metals and fuels, while accelerating the global transmission to net zero emissions.

It could provide voluntary participants with significant advantages, including access to policy opportunities and funding support, such as the hydrogen production tax incentives, and reduced trade barriers through alignment with international market standards. This is particularly important as other economies bring in carbon pricing, making it increasingly likely that goods imported from countries, including Australia, with a lower carbon price or no carbon price will face new levies. Global markets such as the European Union are implementing policies like the Carbon Border Adjustment Mechanism, increasing demand for certified renewable electricity, hydrogen and other low-emissions products. Australia will need a reliable, transparent and trustworthy certification system to ensure our Aussie-made products meet these emerging global standards. Clearly, it's critical we get this right.

The enabling legislation creates two types of certificates: a product guarantee of origin certificate to record attributes of products including their emissions, and, as I said before, a renewable energy guarantee of origin certificate, or the REGO, a new form of personal property which can be traded, retired and used to support claims about the use of renewable electricity, largely replacing the Renewable Energy Target scheme from 2030. The bill also empowers the minister to make rules and administer the scheme, establishes the Clean Energy Regulator as the administrator and regulator of the scheme and provides the Clean Energy Regulator with associated mandates and powers.

Beyond this, however, much of the detail for the Guarantee of Origin scheme for different products will be set out in subordinate legislation, including rules made for the administration of the scheme and the methodology determinations. While it's appropriate that highly technical elements be housed in subordinate legislation, it's difficult to properly scrutinise the scheme given so much detail is left to later codes and regulations. This was explicitly noted by the Scrutiny of Bills Committee, which stated:

A number of provisions in the Future Made in Australia (Guarantee of Origin) Bill 2024 (the main bill) seek to allow for the rules, made for the purpose of the main bill, to determine or provide various matters that are relevant to the Guarantee of Origin scheme that the bill seeks to establish.

The committee went on to say:

Where a bill includes matters in delegated legislation, the committee expects the explanatory memorandum to the bill to address why it is appropriate to include the relevant matters in delegated legislation…

Yet in this instance the explanatory memorandum does not provide a justification for why this is appropriate for inclusion in delegated legislation rather than in the primary legislation.

Many stakeholders who contributed to the inquiry by the Senate Environment and Communications Legislation Committee on the Future Made in Australia (Guarantee of Origin) Bill 2024 and related bills submitted that it was essential there is a genuine consultation and opportunity for feedback on design features, noting that the detailed methodology underpinning the scheme should be released and consulted on properly. I agree with many of the submitters to the bill's inquiry who called for the timely passage of the legislation for the renewable electricity and product guarantee certification, balanced with proper scrutiny and consultation. It's important that the rules and methodologies underpinning the scheme are prioritised and finalised in a timely manner to ensure the scheme can commence as soon as possible. But it is equally important that they are available for proper public consultation so that industry and other stakeholders can provide feedback on the scheme's detailed operational elements.

To the product guarantee of origin certificate specifically: these certificates will track and verify the carbon intensity and other key attributes of products throughout the product's entire life cycle. This will include information on emissions associated with the supply of raw materials, production, storage and transport to the point of consumption or international departure. However, currently the legislation makes no mention of offsets or Australian carbon credit units. While the consistent position of the government has been to exclude offsets from the calculation of the embedded emissions of a product, under the GO scheme their use is not explicitly excluded in the legislation.

A number of experts, including the Australian National University's Zero Carbon Energy for the Asia-Pacific Initiative, have recommended including an explicit statement in the primary legislation that offsets cannot and will not be allowed to be used to lower product-embedded emissions in the PGO. They have warned that enabling offsets in the Guarantee of Origin scheme would compromise the scheme's integrity, facilitate greenwashing and potentially undermine the interoperability with international schemes and markets. While I don't believe it's the government's intention to allow offsets to be used for this purpose, I do believe the exclusion of offsets should be made explicit in the primary legislation to guard against potential future backsliding on this really important design feature.

I thank the assistant minister for his constructive engagement on this issue and welcome the government's amendments to this effect. It's particularly pertinent given the history of this scheme. Consideration of a hydrogen certification scheme first emerged as a key government action under the National Hydrogen Strategy under the last government in 2019. Back then much of the talk was around clean hydrogen, a misleading term that grouped green hydrogen, which is produced using electrolysis and zero-emissions electricity and does not create greenhouse gas emissions, with hydrogen, which used fossil fuel stocks—these do cause emissions—combined with unproven and unsuccessful carbon capture and storage.

The coalition has recently reiterated this in the coalition senators' dissenting report to the inquiry into this bill. There they stated that the Guarantee of Origin scheme's original intent under the then coalition government was to:

… cover a variety of ways in which clean hydrogen could be produced, including from renewable sources and from methods using gas or coal with substantial carbon capture and storage.

It's not unreasonable then to assume that a future coalition government might seek to use this scheme to facilitate greenwashing-polluting industries.

I now want to turn to the renewable energy Guarantee of Origin certificates. These REGO certificates will certify that the electricity linked to them is verified as renewable. They will be tradable, will enable the holder to claim the benefits of renewable electricity use and will offer detailed information about the generation and delivery of electricity, including the facility age, fuel source, time of generation and facility location. They are intended to operate alongside the existing large-scale generation certificates under the current renewable energy target until this system is phased out in 2030, after which they will function as the primary certification method for green electricity. This is widely welcomed.

The renewable energy target has successfully accelerated investment in new renewable supply, but continued investment in renewable generation is needed post-2023 in order to reach net zero. Continuity of a renewable energy certification scheme is essential so those investing have policy certainty. At the same time, expectations are changing as to which renewable energy attributes a certificate should contain, making it an opportune time to shift to a modern certification scheme. However, this shift has raised the controversial issue of how to deal with pre-1997 renewable generation capacity—specifically, whether those projects should be able to generate certificates or not. Ultimately, this issue goes to the purpose of the renewable electricity element of the Guarantee of Origin, and there are differing views as to what that purpose is.

If the purpose of the REGO scheme is to purely meet information needs for energy buyers and their stakeholders, then it would make sense to include all generation capacity. However, if the purpose of the scheme is to incentivise new renewable investments, as the current renewable energy target does, then it would make sense to exclude older capacity. Below-baseline certification inclusions in the REGO scheme would be a departure from the large-scale generation certificate scheme, which deliberately excluded old hydro and biomass projects built prior to 1997 because they didn't add to the renewable energy supply.

The result of this policy change would be a massive gain to two government-owned firms, Hydro Tasmania and Snowy Hydro, for projects that were built decades ago. In fact, the Smart Energy Council estimates that the windfall gain for old hydro and old biomass projects at 2023 large-scale generation certificate prices is approximately $200 million. This has raised concerns that allowing access to below-baseline generation may place downward pressure on the LGC price and may negatively impact the investment case for new projects. I know the government has considered this issue in detail and has responded in part, but, while the bill provides for rules to be created which could restrict the surrender of these certificates to new emissions-intensive trade-exposed entities, given the complexity of this issue and the ramifications of this policy decision, I believe the government's position should be made clear in the primary legislation.

In summary, the Guarantee of Origin scheme could play a really important role in Australia's energy transition and create an enduring renewables certification framework to empower the purchaser to purchase green energy, with the inclusion of energy attributes giving customers choice about the type of certificate they want to purchase. It's a welcome move—one supported by my community of North Sydney. But, to get it right and ensure the scheme is not used to facilitate greenwashing, it is critical there is proper scrutiny of the rules and regulations that will govern the operation of the Guarantee of Origin scheme. While it's appropriate for highly technical matters to be included in delegated legislation, I urge the government to ensure proper and detailed consultation on the rules and methodologies underpinning this scheme, to explicitly rule out the use of offsets and to make clear the government position on below-baseline credits within the primary legislation.

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