Safeguard Mechanism: International Best Practice Benchmarks

Submission to the Safeguard Mechanism: International Best Practice
Benchmarks Consultation
11 August 2023

Dear Safeguard Mechanism Team,

Ember welcomes the opportunity to make a submission to the Safeguard Mechanism: International Best
Practice Benchmarks consultation. Our submission is directed solely at setting international best practice benchmarks for new coal mine facilities regulated under the safeguard mechanism.

The setting of international best practice benchmarks should be determined primarily on whether the benchmark is compatible with Australia’s climate targets and the objects enshrined under the National
Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act). Ember emphasises that s 3(2) of the NGER Act outlines a list of safeguard outcomes that are to be achieved through the administration of that Act.

As such, Ember recommends against using only a comparison between foreign facilities and the domestic industry to determine international best practice benchmarks, as currently anticipated in the draft guidelines.
International best practice benchmarks should be consistent with the international consensus that coal mine methane emissions must be reduced significantly this decade to comply with a 1.5 degree pathway, and should be set in such a way that the safeguard outcomes will be achieved irrespective of new coal facility entrants to the safeguard mechanism.

Setting the International Best Practice Benchmark for Run-Of-Mine Coal Production
The International Energy Agency’s (IEA) Net Zero by 2050 report emphasises that no new coal mines or expansions should be approved in order to meet net zero by 2050. Ember’s analysis indicates that for
Australia’s coal mine methane emissions to align with a 1.5 degree pathway, coal production should fall from
500 Mt to 200 Mt by 2030, largely driven by a thermal coal phaseout. As such, any new coal mine entrants to the safeguard mechanism represent a significant risk to the achievement of Australia’s climate targets and should be held to the most stringent of emissions intensity standards.

Furthermore, according to the IEA, coal mines can mitigate approximately ~42% of their methane emissions by implementing onsite measures. In combination with electrification measures, we anticipate it will be feasible for new coal facilities to drastically reduce their emissions intensity, and offset the remainder.

Ember therefore recommends that the run-of-mine coal production variable should be set at net zero for new coal facility entrants to the safeguard mechanism, that is, 0 CO2-e per tonne of run-of-mine coal. This is not beyond scope for new coal entrants, given the government has already committed to net zero or zero baselines for other facilities including new shale gas projects. Such a baseline would also send a strong policy signal incentivising onsite methane emission reductions to the greatest possible extent.

However, if the government is committed to the current framework proposed in the draft guidelines, Ember urges the government to give appropriate weight to “adjusting for Australian conditions” in the context of coal
mining. The depth of Australia’s coal seams results in, on average, less gassy coal production than some foreign jurisdictions. Furthermore, as a developed country that has pioneered a range of coal mine methane mitigation technologies, Australia is positioned to be the world leader in decarbonising its coal production, and should strive for ambitious run-of-mine coal baselines that go beyond current international practice.

As such, Ember encourages the use of international standards to set international best practice benchmarks, notably the MMP.

Finally, data on the emissions intensity of coal facilities varies globally, and every endeavour should be made to collate a comprehensive database that ensures a representative sample of coal facilities. Ember urges the use of comprehensive databases to determine international best practice facilities. The IMEO is currently developing a global database on emissions from coal facilities. The European Industrial Production
Information Exchange has recently launched the EU Mine Data Viewer, and Ember is also developing a global database of coal mine methane emissions.

Engaging with the Best Practice Standards Set by the MetCoal Methane Partnership
Ember commends the Safeguard Mechanism Team for engaging with international best practice standards, including the MMP. The MMP draft standards, which have been developed collaboratively between the
UNEP/IMEO and participating companies, have proposed that a best practice intensity standard for metallurgical coal should be 1-3 kg of methane per tonne of marketed coal (MMP intensity standard).

Ember notes that this proposed intensity standard differs from the scope of the production variable being set by the Safeguard Mechanism Team in important respects. First, the MMP intensity standard is directed at metallurgical coal, rather than thermal and metallurgical coal. Second, the MMP intensity standard reflects best practice for underground coal facilities rather than open cut coal facilities, which should be required to comply with a baseline of 0-1 kg of methane per tonne of coal.

Ember encourages the setting of a more stringent benchmark for new thermal coal entrants given the impact of thermal coal on climate change, and similarly, a lower baseline for new open cut coal facilities given their expected lower methane intensity.

Appropriate Principles for Setting Benchmarks
The four principles (see 4 of the draft guidelines) are not entirely aligned with the objects of the NGER Act.
Ember commends the recognition that high quality data and robust methodologies should underpin the setting of international best practice benchmarks. However, Ember recommends that the principles of practical and consistent be revised.

The concept that benchmarks should be set with consideration of what is ‘simple’ and ‘low cost as possible’ is entirely unrelated to the NGER Act’s objects and the purpose of the safeguard mechanism. Indeed, the practical principle is likely to undermine the setting of robust standards that drive significant emissions reductions. Given the safeguard mechanism includes a cap on the cost of Australian carbon credit units, there is already a safety valve in the scheme to balance costs with emissions reductions.

Ember also considers the principle of consistent, as currently expressed in the draft guidelines, to be a missed opportunity to ensure international best practice benchmarks are set consistently with the international consensus on what emissions cuts are necessary to align with a 1.5 degree pathway. We urge the revision of the consistent principle to focus on consistency with Australia’s international climate commitments (expressed at the highest level under the Paris Agreement, namely the long-term temperature goal expressed in Art 2).
We recommend the inclusion of the principle of science-based to ensure that international best practice benchmarks are set with consideration of the best available scienti c knowledge regarding the extent of

fi emissions that is technically feasible to mitigate. This re ects the preamble and intention of the Paris

fl
Agreement.

In summary, Ember makes the following recommendations:

1 The emissions intensity for the run-of-mine coal production variable should be set at net zero for
new coal facility entrants to the safeguard mechanism, that is, 0 CO2-e per tonne of run-of-mine
coal. This is consistent with Australia’s international climate commitments.

2 Any international best practice benchmarks set based upon a comparison with foreign coal
facilities must be adjusted according to Australia’s geological conditions and likely comparatively
lower methane intensity.

3 The MetCoal Methane Partnership is an appropriate standard against which to set the run-of-mine
coal production variable for new coal facility entrants.

4 International best practice benchmarks should be set based upon the following principles:
effective, robust, consistent (revised) and science-based.

Ember has previously assessed the extent that Australian coal facilities can mitigate their emissions, and welcomes the opportunity to further consult with the Safeguard Mechanism Team and can be contacted via the below contact details.

Annika Reynolds, Climate Policy Advisor

Chris Wright, Climate Strategy Advisor

About Ember
Ember is an energy think tank that aims to
shift the world to clean electricity using data.

Its team and board of energy experts are
based in Australia, the European Union and the
United Kingdom.