Climate Change Authority Review

The Australian Pipelines and Gas Association (APGA) represents the owners, operators, designers, constructors and service providers of Australia’s pipeline infrastructure, connecting natural and renewable gas production to demand centres in cities and other locations across Australia. Offering a wide range of services to gas users, retailers and producers, APGA members ensure the safe and reliable delivery of 28 per cent of the enduse energy consumed in Australia and are at the forefront of Australia’s renewable gas industry, helping achieve net-zero as quickly and affordably as possible.

APGA welcomes the opportunity to provide comments on the Climate Change Authority (CCA) review of Australia’s climate change targets, and of the National Greenhouse and Energy Reporting Act 2007 (NGER) and the associated Scheme (NGERS). Overall, APGA anticipates that the gas supply chain can make a substantial contribution to Australia’s emission reduction ambitions through effective reform considered within this consultation.

APGA supports a net zero emission future for Australia by 2050 Renewable gases represent a real, technically viable approach to lowest-cost energy decarbonisation in Australia. As set out in Gas Vision 20502 , APGA sees renewable gases such as hydrogen and biomethane playing a critical role in decarbonising gas use for both wholesale and retail customers. APGA is the largest industry contributor to the Future Fuels CRC3 , which has over 80 research projects dedicated to leveraging the value of Australia’s gas infrastructure to deliver decarbonised energy to homes, businesses, and industry throughout Australia.

APGA appreciates the approach taken by the CCA in consulting on interrelated projects within one consultation process. APGA provided feedback to this effect during Safeguard Mechanism Reform consultation, the effectiveness of which was impeded by an inability to impact interrelated legislation via the reform process. Where highly interrelated legislation exists, it is entirely appropriate to undertake cross-legislation consultation.

APGA provides feedback on three of the four areas under consultation in this process and reaches the following recommendations:

Advice on Australia’s next Nationally Determined Contribution (NDC)

Australia’s gas pipeline industry strongly advocates for implementing a national Renewable Gas Target (RGT) with the potential to contribute 4% national emissions reduction by 2035.

Review of the National Greenhouse and Energy Reporting (NGER) Act 2007

APGA recommends a suite of reforms to NGER in support of emissions reduction via renewable gas uptake and in support of a Renewable Gas Target, without which gas customers are unable to access the emissions reduction benefit of renewable gases:

• Introduction of a National Renewable Gas Certificate Scheme;
• Consideration for a regional average emissions intensity for natural and renewable gas consumed in Australia; and
• Consideration of Market-Based Instruments under NGER for all renewable energy including renewable electricity and renewable gas.

Also, two reforms in support of more effective emissions reduction for existing gas infrastructure, including:

• Expansion of fugitive emissions calculation methods for gas transmission pipelines; and
• Avoiding unintended consequences of pipeline industry averages under the Safeguard Mechanism..

Review of the Carbon Credits (Carbon Farming Initiative) Act 2011

APGA supports implementation of all recommendations of the Chubb Review, in particular Recommendation 5 – the introduction of proponent led ERF methodology development.

Australia’s pipeline industry has a unique opportunity to support the nations decarbonisation journey. Facilitating 27% of Australian energy consumption accounting for 16.6% of total Australian emissions, this is an opportunity potentially enhanced through these reforms.

To discuss any of the above feedback further, please contact me on +61 422 057 856 or
jmccollum@apga.org.au.

Yours Sincerely,
JORDAN MCCOLLUM
National Policy Manager
Australian Pipelines and Gas Association

Advice on Australia’s 2035 NDC

Consultation question

• Question 1: What actions and enablers beyond those identified in the Strategic Framework could help Australia progress towards a prosperous and resilient net zero future? What are your highest priorities?

Australia must deliver decisive emissions reduction action to set a respectable 2035 NDC. With much of the low hanging fruit of coal fired generation emissions and large emitters well on the way to delivering strong reductions, Australia needs to break ground in new realms of achievable emissions reduction action.

Australia’s gas infrastructure industry strongly advocates for implementing a Renewable Gas Target (RGT) with the potential to deliver up to 4.1% of national emissions reduction impact by 2035 (Table 1). Adding this emissions reduction opportunity to others across the economy can help deliver a meaningful 2035 NDC for Australia.

Table 1: potential national emissions reduction impact with a Renewable Gas Target

* These levels of Renewable Gas Target are consistent with achieving Net Zero Gas by 2050.

Renewable gas can help Australia’s decarbonisation journey

Reaching Australia’s current emissions reductions targets will require a large and coordinated effort across the economy. To date, much of this has been focused on increasing renewable electricity supply and reducing the contribution of coal-generated electricity, and gas has been a critical component in maintaining grid stability as this transition progresses.

While electricity has been the most carbon intensive form of energy use in Australia to date, more energy has been used as natural gas in Australia for some time. This provides an almost entirely untouched energy supply chain with the ability to deliver and store renewable energy in the form of renewable gases.

‘Green’ hydrogen and biomethane can both replace natural gas consumption and do not contribute to increases in atmospheric carbon dioxide emissions when consumed.[1] In the case of biomethane, no modifications of infrastructure or supply chains are required; hydrogen behaves similarly, requiring some modification to supply chains and customer appliances. Importantly, modifications for hydrogen replacement have increasingly been seen as minor, especially in comparison to electric replacement alternatives.[2]^,[3],[4]

Alongside providing existing gas users a simpler and cheaper alternative to full electric appliance replacement, a renewable gas supply chain operating alongside Australia’s renewable electricity supply chain has the potential to support stability and reliability in both networks, helping to optimise Australia’s renewable energy transition.

Recent and ongoing research indicates that renewable gas supply chains are likely cost-competitive with renewable electricity supply chains in a net zero energy future. This is in no small part due to the lower cost energy transport and storage provided by pipelines in comparison to powerlines and other forms of electricity energy storage[5]. In particular, short to medium term (4hr – 24hr) energy storage costs between 10x and 100x less than electricity storage costs have the opportunity to deliver firm renewable energy at lower cost than battery or pumped hydro firmed variable renewable electricity (VRE) generation.

A Renewable Gas Target can help Australia firmly set an aspirational 2035 NDC

A renewable gas supply industry is anticipated to grow organically once NGERs appropriately recognises the emissions intensity of renewable gas consumption.[6] A Renewable Gas Target designed in much the same way as the Renewable Energy Target could ensure the Australian gas supply chain achieves net zero emissions by 2050.

Pursuing a net zero by 2050 trajectory could deliver 20% to 25% domestic gas use emissions by 2035, equating to 3.3% to 4.1% of total Australian emissions.

This reduction could be achieved by pursuing a Renewable Gas Target based upon the Diffusion of Innovation Curve.^[7] Followed by other new renewable technologies including renewable electricity, ensuring renewable gas uptake follows the diffusion of innovation curve will avoid unnecessary early-year delivery challenges while ensuring acceleration beyond the critical 20% uptake point (Figure 1). The Renewable Energy Target secured investor certainty in the renewable electricity generation market by ensuring 20% uptake was achieved – a success that could be replicated by a Renewable Gas Target.

Figure 1: Diffusion of Innovation curves for renewable electricity (left) and renewable gas (right)

Source: McCollum J, 2023, Why a renewable gas target is critical to gas use decarbonisation, The Australian Pipeliner 197.

Review of the National Greenhouse and Energy Reporting Act 2007

Consultation questions:

• Question 21: What do you see as the strengths and weaknesses of the NGER scheme? How could it be improved?
• Question 22: What aspects of methane measurement, reporting and verification should the Authority focus on as part of the NGER review?
• Question 24: How could the CFI, ERF and NGERs be improved in the context of the Paris Agreement era?

APGA are glad to see an intent to pursue NGER reform. Opportunities to allow market forces to drive greater renewable energy uptake have been missed across the past decade as a result of current NGER design. APGA flags the following opportunities to allow NGER reporting to influence market forces to ultimately drive more rapid and economically efficient emissions reduction across the Australian economy.

• Introduction of a National Renewable Gas Certificate Scheme
• Consideration for a regional average emissions intensity for general purpose gas
• Consideration of Market-Based Instruments under NGER for all renewable energy
• Expansion of fugitive emissions calculation methods for gas transmission pipelines
• Avoiding unintended consequences of pipeline industry averages under the Safeguard Mechanism

Importantly, without the first three points it is not currently possible for customers of renewable gases transported via existing gas infrastructure to have the emissions intensity of renewable gases considered in their NGER reporting. This fundamentally undermines least cost gas use decarbonisation and the development of a renewable gas industry in Australia. These first three points must be implemented together and alongside a Renewable Gas Target to have the most positive emissions reduction benefit, or at least the first three points together.

Introduction of a National Renewable Gas Certificate Scheme

A National Renewable Gas Certificate Scheme reflecting the design and intent of the Greenpower Green Gas Certificate Scheme on trial in New South Wales is required to communicate the scope 1 emissions of consumption of renewable gases. This could form the basis of a Renewable Gas Target as suggested above, or simply communicate emissions intensity outside of a target scheme. Key points to note when implementing such a certificate are shortcomings of the current Greenpower Green Gas Certificate Scheme and the Product Guarantee of Origin Scheme.

Greenpower Green Gas Certificate Scheme

The primary shortcoming of the current Greenpower Green Gas Certificate Scheme is that the scheme prohibits some energy customers from using these certificates to register renewable gas use. In particular, Green Gas Certificates are currently specifically prohibited under the scheme to be surrendered to decarbonise household gas consumers.

APGA considers this restriction unconscionable. To prohibit households from accessing what could be least cost gas use decarbonisation is counter to the intent of green gas certification. All gas customers should have access to renewable gas. Market forces should determine whether or not any customer uses a renewable gas certificate, rather than a blanket mandate or ban.

Product Guarantee of Origin Scheme

As of the most recent Guarantee of Origin design consultation, the Product Guarantee of Origin design does not appear to support communication of information relating to the scope 1 emissions of consuming hydrogen certified under the scheme. If directly expanded to cover other renewable gases as well, it is unlikely that Product Guarantee of Origin certificates would provide sufficient information to inform those who purchase certificates of the scope 1 emissions of renewable gas use. This, of course, is the entire point of a renewable gas certificate from a domestic reporting of scope 1 emissions perspective.

Consideration for a regional average emissions intensity for natural and renewable gas consumed in Australia

In line with APGA’s recommendation of a Renewable Gas Target, APGA also recommends implementing combined natural and renewable gas emissions intensity in much the same way as is done in the electricity sector.[8] Much the same as in the electricity sector, this will ensure that all gas customers will receive the emissions reduction benefit of a national Renewable Gas Target. Without this, gas customers may find themselves subsidising decarbonisation of other energy users under a Renewable Gas Target.

Such a reform would need to take five key design features into account in order to avoid unintended consequences for natural and renewable gas customers.

One average emissions factor for all natural and renewable gas

APGA anticipates that all natural and renewable gas consumed in a region would be considered to have the same average emissions intensity regardless of what the actual emissions intensity of the gas is. This would reflect the approach applied in the electricity sector.

Appropriate gas emission averaging regions

Rather than the NEM Region approach used in wholesale electricity average emissions intensities, more appropriate regions would need to be considered for a gas emissions average. Noting that there are two interconnected gas transmission systems in Australia – one on the east coast and one on the west coast – APGA proposes that these two zones be considered for gas emissions averaging.

Weighted average emissions considering LNG and renewable gas exports

Additionally, weighted averaging of emissions would need to appropriately address emissions of gases which enter into then exit out of a region without being consumed domestically. An example of this is natural gas that enters a region but is then exported as LNG, or renewable gas which enters a region but is then exported.

Consideration of Market-Based Instruments under NGER

To ensure that direct use of 100% renewable gas is fairly considered under this approach, the Market-Based Instrument approach considered below must also be implemented. This would allow a facility directly using 100% renewable gas to use certificates received alongside their gas to reduce the regional average emissions intensity applied to the gas which it uses.

Consideration of Market-Based Instruments under NGER for all renewable energy

APGA is aware that the Clean Energy Regulator has been considering the possibility of allowing Market-Based Instruments to be considered under NGER. APGA strongly supports this approach for both renewable electricity and renewable gas, recognising the value of the benefits alongside the risk of misapplication of this approach. In particular, the risk of double counting must be effectively addressed.

Market-Based Instrument Benefit

Enabling tradable renewable electricity or renewable gas certificates to be considered under NGER would provide a substantial benefit to all renewable energy producers. This would allow for stronger market signals to allow market forces to more effectively value and drive renewable energy purchasing.

Simply being able to recognise the emissions intensity of contracted quantities of renewable gases would result in immediate market uptake in the renewable gas sector, and foreseeably enhance uptake in the renewable electricity sector as well.

Market-Based Instrument Risk

The great risk in introducing Market-Based Instruments is the risk of double counting emissions reduction. If today’s electricity region average emissions or the above proposed gas regional average emissions are used unamended alongside Market-Based Instruments, double counting will occur. Luckily this is a problem that can be solved.

End of reporting period reconciliation of certificates surrendered is required to deduct the quantity of surrendered certificates from the pool used for average emissions intensity calculation. This is possible but may conflict with the current approach of forecasting average emissions intensity for a reporting period. This conflict would need to be addressed by allowing for retrospective confirmation of average emissions intensity rather than relying on forecasting alone.

While this would be a change and could introduce a level of uncertainty for those not surrendering renewable energy certificates, this downside for energy consumers who don’t participate in voluntary renewable energy markets would be outweighed by the positive impact on renewable energy investment.

Expansion of fugitive emissions calculation methods for gas transmission pipelines

For calculating fugitive methane emissions from natural gas transmission through pipelines (Division 3.3.7), the National Greenhouse and Energy Reporting (Measurement) Determination 2008 provides three methods. The first is a calculation using an emissions factor and the length of the pipeline – a basic and blunt method for estimating fugitive emissions. Methods 2 and 3 calculates emissions based on assumed emissions from gas passing through individual equipment along or components of the pipeline, and refers to emissions factors published in the American Petroleum Institute Compendium of Greenhouse Gas Emissions Methodologies for the Oil and Gas Industry (Compendium).

There are two primary concerns with this suite of methodologies:

• The referenced Compendium is both out of date and unrelated to the Australian experience; and
• There are higher fidelity, internationally-recognised fugitive emissions analysis methodologies which are unable to be used under the current suit of methodologies.

Compendium concerns

Based on calculations from North American facilities, the Compendium is a reference used by many companies and governments across the world in emissions accounting, and provides methodologies for calculating and reporting emissions from oil and natural gas operations.

The Compendium table references in the NGER legislation are only correct to the version of the Compendium published in 2009, which is out of date. The current 2021 edition contains numerous updates and revisions relevant to the legislation (including engineering calculations as a methodology for determining fugitive emissions for gas transmission pipelines) and completely supersedes the 2009 edition, however, the current version is not able to be used for calculating these emissions.

This could be temporarily resolved through updating the legislation to refer to the current version, however this would again become out of date at some point. Even with this change however, the Compendium references data from the United States industry which has a substantially different fugitive emissions track-record compared to Australia, making the relevance of this data to Australian emissions is tenuous at best.

Internationally recognised fugitive emission methodologies

Internationally recognised higher order fugitive emission analysis methodologies such as OGMP2.0[9] are being referenced by many OECD nations as appropriate approaches to fugitive emission analysis. Further, internationally recognised data collection models such as MARCOGAZ’s methane emissions model[10] (see guidance for usage[11]) are being recognised as an appropriate way to report the results of taking OGMP2.0 methodologies. Unfortunately, NGER does not currently recognise these methodologies or data collection models as valid reporting of fugitive emissions for gas pipelines.

OGMP 2.0 serves as basis for the European Commission’s 2021 methane regulation[12], with the 2020 EU Methane Strategy[13] (Oct 2020) described OGMP 2.0 as “the best existing vehicle for improving measurement, reporting and verification capability in the energy sector”[14]. OGMP2.0 Levels and MARCOGAZ templates demonstrate alignment with NGER Methodologies and IPCC Tiers (Table 2).

Table 2: alignment of OGMP2.0 Levels and MARCOGAZ Template with NGER methodology and IPCC tiers.

NGER fugitive emissions reporting methodology alignment with levels of OGMP2.0 compliance could support a rapid increase in fugitive emissions analysis capability by leveraging international intellectual property on fugitive emission analysis. Without this recognition, the Australian gas pipeline industry would need to work with the Clean Energy Regulator to create or amend methodologies from scratch on a first principles basis. As more rapid access to accurate fugitive emissions data is valued, reforms to allow NGER recognition of analysis under OGMP2.0 and its associated data analysis templates such as MARCOGAZ should be pursued. APGA reiterates that this is the approach being taken in equivalent regions including Canada, the EU and the USA.

Additionally, the lack of any equivalent to recognising OGMP2.0 Level 5 presents a challenge to operators who wish to adopt OGMP 2.0, as it is a requirement under the OGMP to progress to Level 5 within 3 years for operated assets and 5 years for non-operated assets. This could also be included as an optional step under NGER Methodology 3. Without some level of consideration under NGER, operators would be disincentivised from taking these steps towards additional measurement accuracy, also noting their additional cost.

Avoiding unintended consequences of pipeline industry averages under the Safeguard Mechanism

The Safeguard Mechanism is designed to consider emissions produced on a per-widget basis. As such, it has been reasonable for the recent Safeguard Mechanism Reforms to move most Safeguard Mechanism Facility (SMF) types to an industry average baseline production variable (PV) – the average widget, all else being equal, should be able to be produced with average emissions intensity. This does not hold for the widget of gas transmission through pipelines, as there is no such thing as the average gas transmission product.

As an industry average baseline PV will result in substantial winners and losers and transfer of wealth to and from pipeline SMFs, APGA proposes pipelines be exempt from the transition to an industry average baseline PV.

The reason that there is no such thing as the average gas transmission product widget is because all gas transmission is unique. Gas transmission occurs:

• Across unique distances via unique routes and unique elevation changes;
• In unique quantities, at unique capacities and variations of capacity across time; and
• Through unique pipeline diameters and unique compression configurations, both of which exist through multi-decadal investment horizons.

These differences mean that there is no industry average widget, hence no industry average emissions intensity of delivering this widget. The difference between individual pipeline site specific baseline PVs and a resultant industry average baseline PV is anticipated to be in the order of 40% to 60% variation above or below each pipeline SMFs site specific baseline PV.

APGA consider that this reality of the gas transport widget combined with the sizable differences between site specific and industry average PVs is reasonable basis to exempt gas transmission SMFs from the transition to an industry average PV. APGA recommends engagement with the pipeline industry to provide a pathway to legislative reform which can allow for this change.

Review of the Carbon Credits (Carbon Farming Initiative) Act 2011

Consultation questions

• Question 23: Following the Government’s acceptance of recommendations of the Chubb Review, what do you see as the strengths and weaknesses of the CFI and ERF?
• Question 25: Following adoption of the Chubb Review recommendations, what concerns about ACCU integrity remain?

Towards proponent-led method development

The Independent Review of Australian Carbon Credit Units (ACCUs) considered method development for generating ACCUs for the Emissions Reduction Fund (ERF), and noted the current process impedes timely and effective emissions reduction and that proponent-led method development is consistent with commonly accepted international practice.

APGA concurs with this statement. It is not currently possible to generate ACCUs from all possible emissions reduction opportunities, and the historic approach of past Energy Ministers deciding which emissions reduction opportunities were selected as valid is no longer consistent with Australia’s emissions reduction ambitions.

Recommendation 5 of the Independent Review, which proposed establishing a transparent proponent-led process for developing and modifying methods as soon as practicable, is key to addressing this issue.

APGA believes that proponent-led ERF method development will ensure that SMFs can access least cost emissions reduction from across the Australian economy. This will allow companies which own both SMF and non-SMF assets to transfer lower-cost emissions reduction from non-SMF assets to SMF assets, enabling individual businesses to pursue least cost emissions reduction internally as well as across the economy.

The Federal Government has commenced an implementation process[15] for the recommendations of the Independent Review, including Recommendation 5. As proposed by DCCEEW, the new method development framework will incorporate extensive consultation and review of proposed methods by the new Carbon Abatement Integrity Committee, which will ensure the process is transparent and maintains the integrity of the ERF. APGA looks forward to participating in in the consultation for the future method development framework.

[1] For biomethane, see National Greenhouse and Energy Reporting (Measurement) Determination 2008, Schedule 1—Energy content factors and emission factors, Part 2—Fuel combustion—gaseous fuels, item 29A.

[2] APA, 2023, Parmelia Gas Pipeline Hydrogen Conversion Technical Feasibility Study, https://www.apa.com.au/globalassets/our-services/gas-transmission/west-coast-grid/parmelia-gas-pipeline/3419_apa_public-pipeline-conversion_v6.pdf

[3] Frontier Economics, 2022, Cost of switching from gas to electric appliances in the home: a report for the Gas Appliance Manufacturer's Association of Australia, https://gamaa.asn.au/wp-content/uploads/2022/07/Frontier-Economics-Report-GAMAA.pdf

[4] Australian Pipelines and Gas Association, 2022, Pipelines vs Powerlines: A Summary, https://www.apga.org.au/sites/default/files/uploaded-content/field_f_content_file/pipelines_vs_powerlines_-_a_summary.pdf
GPA Engineering, 2022, Pipelines vs Powerlines: A Technoeconomic Analysis in the Australian Context,

https://www.apga.org.au/sites/default/files/uploaded-content/field_f_content_file/pipelines_vs_powerlines_-_a_technoeconomic_analysis_in_the_australian_context.pdf

[5] Australian Pipelines and Gas Association, 2022, Pipelines vs Powerlines: A Summary, https://www.apga.org.au/sites/default/files/uploaded-content/field_f_content_file/pipelines_vs_powerlines_-_a_summary.pdf
GPA Engineering, 2022, Pipelines vs Powerlines: A Technoeconomic Analysis in the Australian Context,

https://www.apga.org.au/sites/default/files/uploaded-content/field_f_content_file/pipelines_vs_powerlines_-_a_technoeconomic_analysis_in_the_australian_context.pdf

[6] This topic is addressed in the National Greenhouse and Reporting Act 2007 section of this submission

[7] McCollum J, 2023, Why a renewable gas target is critical to gas use decarbonisation, The Australian Pipeliner 197, available at https://issuu.com/primecreativemedia-2016/docs/tap0523_lr/12

[8] CER, 2022, Measurement Determination: Amendments for 2021-22, available at https://www.cleanenergyregulator.gov.au/NGER/Legislation/Measurement-Determination#Amendments-for-202022

[9] United Nations Environment Programme, Oil & Gas Methane Partnership 2.0 (OGMP2.0), available at https://ogmpartnership.com/

[10] MARCOGAZ, 2023, Methane emissions, https://www.marcogaz.org/technical-work/sustainability/methane-emissions/

[11] MARCOGAZ, 2020, Guidance for using the MARCOGAZ methane emissions reporting template, https://www.marcogaz.org/wp-content/uploads/2021/04/WG_ME-710.pdf

[12] European Union, 2021, Proposal for a regulation of the European Parliament and of the Council on methane emissions reduction in the energy sector and amending Regulation (EU) 2019/942, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2021%3A805%3AFIN&qid=1639665806476

[13] European Union, 2020, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on an EU strategy to reduce methane emissions, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020DC0663

[14] OGMP2.0, 2022, New technical guidance documents & news related to OGMP 2.0, https://unece.org/sites/default/files/2022-04/Ferrini%20-%20UNEP%20OGMP%202.0.pdf

[15] DCCEEW, 2023, Independent Review of Australian Carbon Credit Units: Implementation Plan, https://www.dcceew.gov.au/sites/default/files/documents/accu-review-implementation-plan.pdf