Safeguard Mechanism: International Best Practice Benchmarks

Environmental Defense Fund submission to the Department of
Climate Change, Energy, the Environment and Water’s consultation on international best practice benchmarks

Introduction
The Environmental Defense Fund (EDF) is a global environmental NGO operating in more than 30 countries, including a growing presence in Australia. As a leader on methane, it pioneered methane science and advocacy first in the U.S. more than a decade ago and has since grown its science and advocacy efforts across the world in partnership with a spectrum of stakeholders. We appreciate the
Department’s invitation for submissions on the consultation on international best practice benchmarks and in this document we provide comments relating to: (a) incorporating methane- specific standards into international best practice benchmarks; (b) process for identifying international best practice methane standards; (c) clarification of ‘new entrants’ to Safeguard; and
(d) the need for the principles to prioritise abatement objectives.

A. Incorporating methane-specific standards into international best practice benchmarks

Recommendation 1: EDF urges that best practice methane standards form a separate component of the emissions intensity calculation in fossil fuel facilities’ baselines because of methane’s unique characteristics and the strong imperative for its short-term abatement.

As part of the Safeguard reforms, the Minister for Energy agreed that ‘When setting the international best practice benchmark for the fossil fuel sectors, the Government will consider emerging international standards on methane emissions, such as the Metcoal Methane Partnership [MMP] and
Oil and Gas Methane Partnership 2.0 [OGMP 2.0], as well as data from Australian facilities that may exceed those standards.’ EDF considers that this involves identifying and providing in the Safeguard
Rules for specific methane standards applicable to fossil fuel facilities.

However, the consultation paper includes a proposed requirement that best practice GHG values identified for fossil fuel production variables be compared to relevant methane standards and adjusted if the methane standards are more stringent than the benchmark, which implies that international best practice methane standards will not form a separate and additional component of the baseline. EDF urges that best practice methane intensities should be identified and stipulated in the production variable calculation, even if converted to CO2-e on a 100-year global warming potential (GWP) basis. The methane and non-methane components should then be weighted according to facilities’ emissions profiles.

It is important for new fossil fuel facility operators in Australia to be subject to a clear expectation of low methane intensity from the outset, performance against which can be easily tracked:
1. Methane performance is not dependent on CO2 performance: There are specific, well-
understood and accepted practices for curbing energy sector methane emissions independent of
the CO2 emissions from particular activities. Best practice performance in these two areas
should therefore be separately assessed.
2. Where Australian facilities are reporting better performance than OGMP and MMP, best
practices should reflect that more stringent standard: Many Australian fossil fuel operators
report to be achieving methane intensity standards well below the standards set out in the
OGMP 2.0 and the MMP. As noted in Minister Bowen’s commitment, in setting best practice

1
standards, reference should be made to data ‘from Australian facilities that may exceed [the
OGMP and MMP] standards’.
3. Australia is falling behind its international peers if it fails to include a clear international best
practice methane intensity in legislation.: Fossil fuel operators in Australia currently lack a
specific performance standard for methane intensity or abatement, but our peer countries have
developed such standards in response to growing international pressure – the US has introduced
a methane fee for oil and gas industry emissions that exceed a 0.2% intensity for production
activities, and the same standard is included in the EU’s draft Methane Regulation, which is likely
to be passed later this year. In Australia’s own region, the Coalition for LNG Emissions Abatement
Towards Net-Zero (CLEAN) recently launched by Japan’s and Republic of Korea’s largest gas
buyers, Jera and KOGAS, will see major LNG producers asked to provide data on methane
emissions such as volume and intensity as well as reduction targets and abatement measures. In
addition, Japan and the European Commission have expressed their vision to create a globally
aligned methane emission assessment of LNG projects, which is likely to be based on a 0.2%
intensity standard. As the imperative for cutting methane emissions from the energy sector
increases in coming years, Australia’s regulatory architecture should be designed to allow for a
methane emissions intensity cap separate to overall GHG emissions.
4. Methane’s warming impact is undervalued in current emissions accounting, which increases
the imperative for abatement: Methane is a highly-potent greenhouse gas the abatement of
which in the near-term can deliver significant climate improvements. Separately accounting for
CO2 and methane intensities in production variables will also be useful if methane ’s GWP is
updated by the IPCC in coming years to reflect its near-term warming impact.

B. Process for identifying international best practice standards

Recommendation 2: for oil and gas, best practice should at least reflect the well-established global standard for methane intensity of 0.2% for production facilities, and should be more stringent where companies operating in Australia report better performance.

As outlined above, a 0.2% intensity standard for oil and gas production has been adopted in the US
Inflation Reduction Act methane regulations, and the European Parliament recently amended the
EU’s draft Methane Regulation to include a methane intensity target of 0.2%. The IRA legislation also includes the following targets for downstream facilities, which EDF recommends should be considered in calculating best practices for those supply chain segments:
• 0.05% for non-production facilities; and
• 0.11% for transmission facilities.

A large proportion of oil and gas companies across the world claim to be meeting 0.2% or below.
OGCI, which is a CEO-led organisation with 12 of the world’s largest oil and gas companies, has upgraded its methane intensity target to ‘well below 0.2% by 2025’, and it notes that OGCI members reported an average methane emissions intensity of 0.2% in 2020. And in the annual report of the
International Methane Emissions Observatory (IEMO), in which OGMP member companies report their emissions for 2022, most have adopted methane intensity targets, and of the 21 companies with such targets, most have adopted a target of 0.2% and only two companies have targets of a higher methane intensity – see Annex I of the IMEO 2022 Annual Report. Further information about the links between OGMP 2.0 and OGCI intensity targets is included in EDF’s letter to the Safeguard
Mechanism Taskforce of 5 May 2023.

Noting that Australia should have better methane performance than some global facilities, such as shale gas in the US, EDF emphasises that if Australian operations indicate stronger methane performance than global operations, Australian companies should be held to that standard.

2
For coal, EDF recommends that the emerging international standards set out in the Metcoal
Methane Partnership be considered, as well as data from Australian facilities that may exceed those standards.

Recommendation 3: processes used to identify and calculate international best practice intensities should be disclosed as part of the Department’s consultation on specific proposed baselines.
Given the lack of public data on company-reported emissions in Australia prior to the Albanese
Government’s Safeguard reforms, it is critical that the process for identifying and calculating best practice intensities is made public. This will help to address the information asymmetry between groups representing the public interest and entities with commercial interests in this important matter of emissions abatement.

Recommendation 4: global review of methane best practice intensities should include specific operations in Norway and the US
In terms of overseas facilities at which best practice intensities are claimed to be achieved, EDF recommends the Department consider:
• Norway: 21 offshore platform studied by Foulds et al. 2022 and measured to have methane
loss rates ranging between 0.003% and 1.3%. Also see comparison study of Southern
Norwegian Sea, Norway and Gulf of Mexico in Puhl et al. (2023) (Open discussion, paper
under review).
• Equinor (Norway) and EQT (US) are O&G producers with very low reported methane
intensity

C. New entrants should be clearly defined

Recommendation 5: Backfilling projects should be subject to new entrant/new product requirements

It is not clear from the best practice intensities proposal whether new fossil fuel extraction projects that backfill existing infrastructure (such as new gas fields that supply LNG processing facilities) are intended to be treated as new entrants and therefore subject to the requirements to meet best practice intensities. These new extraction projects should be considered new entrants for this purpose. For example, the Crux project which is intended to backfill Prelude FLNG should be considered a new entrant and therefore be required to meet international best practice methane standards, in addition to being required to meet net zero reservoir CO2.

D. Principles for determining international best practice should prioritise abatement goals

Recommendation 6: principles should be amended to prioritise science-based abatement

EDF recommends that the principles for developing production variables and international best practice intensities be updated to reflect the need for science-based emissions abatement. In relation to Principle 3, simplicity and low cost should not be prioritised over the need for that science-based abatement. Independent studies indicate discrepancies between actual and reported emissions from Safeguard-covered facilities, so the principles should emphasise robust, empirically- based measurement and reporting rather than avoiding excessive reporting. Principle 4 should also be amended to reflect the need for transparency of data.

3