Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Hansard source

On behalf of Senators Cash, Back, Eggleston, Adams and me, I move amendment (1) on sheet 6022:

(1)    Page 214 (after line 3), at the end of Part 8, add:

Division 5—Modified formula for activities using a different type of feedstock

173D  Requirements for the emissions-intensive trade-exposed assistance program

                 The emissions-intensive trade-exposed assistance program must provide that a modified formula apply for the issue of free Australian emission units in respect of a facility that engages in an activity that is within a minority group in an industry based on the type of feedstock it uses, in accordance with this Division.

173E  Interpretation

                 In this Division:

general EITE formula means the formula for working out the number of free Australian emissions units to be issued to an applicant in respect of an emissions-intensive trade-exposed activity carried on during a specified period.

173F  Application

        (1)    The applicant may apply to the Authority:

             (a)    for a facility existing before 1 January 2011, no later than 1 July 2011; or

             (b)    for a facility which comes into existence on or after 1 January 2011, within 6 months of the commencement of construction of the facility;

for the Authority to issue a certificate (a varied feedstock certificate) modifying the general EITE formula for:

             (c)    the facility specified in the certificate; and

             (d)    the emissions-intensive trade-exposed activity carried on at the facility.

        (2)    The application must be accompanied by:

             (a)    a statement of the definition of the activity in respect of which the application is made, including details of:

                   (i)    a description of the defined activity; and

                  (ii)    exclusions such as sub-activities or elements of production; and

                 (iii)    any other information requested by the Authority;

             (b)    a statement, evidence and details of the type of feedstock the applicant activity uses;

             (c)    a statement of the type of feedstock the rest of the entities carrying out the same activity as the applicant activity use;

             (d)    a statement evidencing that the applicant’s activity is within a minority group based on the type of feedstock it uses. For this purpose, the facility forms part of a minority if:

                   (i)    less than 20% of the total participants undertaking the same defined activity in Australia as the applicant are using an alternative feedstock to natural gas; or

                  (ii)    less than 50% of the total participants in Australia, but no more than 3 participants, undertaking the same defined activity as the applicant use an alternative feedstock to natural gas,

             (e)    international evidence on the weighted average emissions per unit of production, pricing and trade across all of the possible feedstock types used in relation to the applicant’s activity, including natural gas feedstock;

              (f)    in relation to paragraph (e), a statement from an independent expert specifying:

                   (i)    the scale and scope of international data available; and

                  (ii)    how representative the evidence in paragraph (e) is of world production for that activity; and

                 (iii)    the consistency of data with the activity definitions; and

                 (iv)    the existence of knowledge gaps in the evidence and information; and

                  (v)    the existence of other evidence and information which may be useful in determining the efficiency of Australian producers with that of international counterparts, including information relating to energy or electricity intensity;

             (g)    Australian evidence from an independent expert on the emissions per unit of production, pricing and trade of the applicant’s type of feedstock for its activity;

             (h)    a statement evidencing that a Department of Climate Change registered assurance provider has been engaged;

              (i)    an explanation of how the modification, if permitted, will impact upon the applicant;

              (j)    an explanation of how the modification, if permitted, will impact upon the general EITE formula;

             (k)    a statement of what the baseline level of direct emissions per unit for the production of the relevant product should be and the calculations from which it was derived; and

              (l)    a statement evidencing that the baseline level of direct emissions in paragraph (k) will meet the expected carbon cost exposure of that feedstock.

        (3)    The Authority must:

             (a)    prepare a draft varied feedstock certificate in respect of the applicant’s facility, which sets out a new baseline level of direct emissions per unit which reflects the weighted average emissions per unit across all of the possible feedstock types in relation to the applicant’s activity; and

             (b)    give a copy of the draft certificate to the applicant; and

             (c)    notify the applicant, in writing, of the reasons why it has prepared the draft certificate; and

             (d)    invite the applicant to comment about the draft certificate within 30 days after the date of the invitation.

        (4)    The invitation is not an undertaking or guarantee that the Authority will make a particular decision on the application.

        (5)    If, after considering any comments about the draft certificate received in accordance with subsection (3), the Authority is satisfied that it is appropriate to issue a varied feedstock certificate, the Authority must issue a certificate which sets out, in respect of the applicant’s facility, a new baseline level of direct emissions per unit.

        (6)    On issuing the varied feedstock certificate under subsection (5), the Authority must also notify each member of the minority to which the varied feedstock certificate relates that the new baseline level of direct emissions per unit of production applies to each member of minority.

Food production is becoming increasingly challenging around the world. There is a growing need to get a better yield from our existing natural resources. Fertilisers, including urea, are a prerequisite for getting those better outcomes. Currently Australia imports a very significant proportion of its fertiliser. However, there is an emerging fertiliser industry in Western Australia which commenced with a first project on the Burrup Peninsula in north-west Western Australia and which is now expanding to Collie in the south-west of WA. This emerging industry could quickly grow into a global export market for Australia. Our products out of Western Australia would be in high demand, particularly from countries including India and China, where large populations have to be fed off land with declining productivity. Around the world, including in Australia, both natural gas and coal are used as feedstock for producing urea, which is then used in the production of fertiliser. Of late, of course, a majority of new global fertiliser projects have used coal as their feedstock, as natural gas becomes used for LNG markets and ever more expensive.

The Burrup project utilised natural gas as its feedstock; the Collie project, however, is seeking to use coal as its feedstock. In the Collie project, the coal would be gasified with the hydrocarbons producing urea and the waste product being CO2. Gasification makes the product much less emissions intensive and the CO2 emissions would be captured and ready for storage in the nearby proposed Harvey region aquifer storage facility. Notably, this project is likely to be the largest clean coal capture and storage project ever in Western Australia’s history. Despite the improved environmental outcomes from such a process and the huge economic benefits of such an industry, the Rudd government has chosen to disadvantage the coal gasification urea industry through the CPRS and, of course, coal as a feedstock is massively disadvantaged when compared to natural gas as a feedstock in the Rudd CPRS.

This amendment seeks to ensure a level playing field for this emerging industry while ensuring responsible environmental and social outcomes, which will continue to assist in providing food for the world’s population. This first amendment very specifically aims to set allocative baselines. This amendment seeks to ensure that emissions intensive trade exposed assistance is consistent with the government’s statement that activities should not be differentiated by the quality and types of feedstock used. There are few entities within Australian industry, compared to the balance of the industry internationally, that use a different feedstock to natural gas. By doing so, international competitiveness is maintained as reflective of world practice and a consistent approach towards the prevention of carbon leakage ensues.

In particular the amendment will permit applications to modify the allocative baseline for emissions intensive trade exposed activities which meet certain criteria, namely that the feedstock is different to that of the balance of the group, to reflect the weighted average emissions per unit of production across all of the feedstock available for that type of activity rather than natural gas alone. I understand that this is one of the amendments which has been put forward by Ian Macfarlane to the government and it is one of the amendments which did not make it up. It is an amendment that is quite important for an industry that can emerge in Western Australia where a process can be environmentally superior to what is currently being used in other parts of the world but, because of the way the Carbon Pollution Reduction Scheme is currently structured, this particular industry will not get off the ground if this CPRS legislation were to become law. On behalf of the five Western Australian senators who are moving this amendment I commend it to the Senate.