The Western Australian Government announced on 28 August 2019 a new policy approach that seeks to limit greenhouse gas emissions from major projects as part of its "aspiration" to move all sectors of the state's economy to producing net-zero greenhouse gas emissions by 2050.
This policy announcement should be seen in the current political context in both the Commonwealth and in Western Australia. At the federal level, Australia has obligations to reduce emissions under international agreements such as the Paris Agreement. The draft policy recognizes these obligations, and also that the federal policies and commitments may change over time. At the same time, Western Australia is developing a broader State Climate Policy and has released an Issues Paper1 that outlines key sectoral issues and opportunities for Western Australia and invited submission by 29 November 2019. Separately, the Environmental Protection Authority (EPA) has been signalling its desire to take a significantly more muscular stance with respect to climate change and is currently consulting on Greenhouse Gas Assessment Guidance.
In our view, this new policy fits within a trend in Australia and internationally of requiring additional measures from major project proponents to more fully report their likely greenhouse gas emissions, and in some cases, to offset some or all of them.
In Western Australia, proposals that are likely to have a significant impact on the environment (known as "significant proposals") are assessed under the Environmental Protection Act 1986 (the Act). The Minister must refer these types of projects to the EPA, which then provides a report with advice and recommendations in relation to the proposal.
In determining whether to approve the project, the Minister must take the EPA's report and recommendations into account.2
The new policy will inform how the Minister approaches making determinations about projects that would emit significant additional greenhouse gas emissions in Western Australia. It will apply to new projects, and to project expansions.
The key element of the new policy is that, in relation to significant proposals, "the Minister may consider whether it is appropriate to apply a condition that sets out the requirements for a plan detailing the proponent's contribution towards achieving the Government's aspiration of net-zero emissions by 2050."
The plan, known as a Greenhouse Gas Management Plan, would:
- outline strategies to avoid, reduce, mitigate and offset the project's direct (scope 1) emissions contributing towards the State's aspiration of net zero emissions by 2050;
- be unique to a proposal's specific circumstances;
- allow proponents to propose their own time frames and interim targets;
- include requirements for periodic public reporting against their targets; and
- account for and align with Commonwealth requirements.
In terms of offsets, the policy recognizes the potential for offsets projects to provide diversification of regional economies, Aboriginal employment opportunities, as well as other co-benefits. However, it does say that Government will consider proposals that include "credible international offsets to limit abatement costs."
It is important to note that WA's EPA—an independent statutory authority— has previously indicated its desire and intention to take a strong stance on emissions reductions. It is undertaking consultations on new Greenhouse Gas Assessment Guidance after initially startling the market by announcing a plan that would have potentially seen large new projects having to offset their emissions.
Whilst the Environmental Factor Guideline - Greenhouse Gas Emissions and Technical Guidance - Mitigating Greenhouse Gas Emissions released in March 2019 were quickly withdrawn, it is likely that many of the elements of those documents will be included in the new Guidance being developed by the EPA, most notably the approaches to the content of environmental impact assessment; and expectations regarding greenhouse gas management strategies and continuous improvement.
One of the most contentious elements of the previous Guidance was a proposal that projects with scope 1 emissions greater than 100,000t CO2-e/yr offset residual direct emissions using offsets that meet the offsets integrity principles under the National Carbon Offset Standard. As noted above, the new Policy contemplates the possibility that offsets may be required for new major projects. However, we expect there may be greater flexibility built in to these requirements to ensure firstly, coherence between Commonwealth and State approaches to greenhouse gas emissions; and secondly, to enable offsets (if/where required) to be sourced from a wider range of domestic and international programmes.
The aspiration of net-zero greenhouse gas emissions brings Western Australia into line with all other Australian states and the ACT in having relatively ambitious emissions reductions goals. The only Australian jurisdiction without an emissions reductions target is the Northern Territory. (Please see map, below.)
West Australian conservation groups have welcomed the new targets, but have called on the state Government to go further by enshrining them in legislation.3 Without commenting on the likelihood of such a development, we note that several jurisdictions around the world have legislated various emissions reductions targets, either by including the specific targets within their various climate or energy laws, or by requiring government to meet the targets set out in various policies and/or international agreements—an approach that allows the targets to change over time.
In our view, these new requirements could raise additional commercial and legal considerations that may require expert assistance.
For instance, proponents may need to remain aware of cost and availability of carbon offsets in both the Australian and international markets, particularly given that demand is projected to outstrip current forecasts of supply. The price and availability of acceptable offsets could affect a project's financial outlook. For this reason, companies might also need to look at whether they need to disclose these considerations in various financial documents to comply with regulatory requirements, depending on proponent's specific circumstances.
The requirement to publicly report against targets in the Greenhouse Gas Management Plan will also need to be carefully managed by project proponents, especially in light of Australia's consumer laws with respect to misleading and deceptive claims.
Irrespective of whether (or when) WA's planning requirements shift to requiring disclosures and offsetting of all greenhouse gas emissions from new major projects, in our view, we are seeing a clear trend towards requiring greater disclosure and some additional offsetting.