Consultants question mine site carbon calculations

There’s devil in the detail of legislation to reduce carbon emissions on mine sites. The reformed Safeguard Mechanism legislation came into effect in the new financial year and requires projects to reduce emissions intensity by an average 4.9 percent per year to 2030, with lower reductions after that. Underground mines, which tend to be much more emissions intense compared to open cut mines, will bear the highest cost of emissions reduction, according to the latest modelling from investment firm Wood Mackenzie. It's calculating the cost which has Wood Mackenzie scratching its head. Average Cost of Emissions - Wood Mackenzie The legislated limits or baselines for each mining facility will be based on a combination of each facility’s historic emissions and an industrial average component. Exactly how the ‘industry average’ will be defined in terms of coal mines has been contentious said Wood Mackenzie. Main image: Dugald River underground The intention of the scheme is that high emissions mines will need to purchase Safeguard Mechanism Credits (SMCs) - credits which are generated by other large industrial facilities. A significant portion of Australia's open cut mines will be receiving credits from the scheme every year over 2023 to 2030, said principal analyst at Wood Mackenzie, Rory Simington. Crinum underground coal mine scaled. “Meanwhile, underground mines will be subject to significant costs and need to purchase SMCs,” said Mr Simington. “Early closure of these emission-intensive facilities could significantly impact the demand and therefore prices of SMCs, which adds another layer of uncertainty to the economic assessment of abatement solutions.” The revised Safeguard Mechanism Scheme will allow facilities to earn SMCs by surpassing their emission reduction baselines. Producers have the flexibility to purchase SMCs and Australian Carbon Credits Units (ACCUs) as offsets for their emissions. In addition, facilities have the option to surrender up to 30 percent of their annual emissions reduction requirements through ACCUs. While international offsets are not currently accepted for compliance, the Australian Government scheduled the further consultations for late 2023 to explore potential frameworks for their inclusion. Wood Mackenzie analysis also shows that production-adjusted baselines play a crucial role in the Safeguard Mechanism, as they are tailored to a facility's production levels, ensuring adjustments align with actual output. However, reducing production does not reduce compliance costs, which therefore limits options for producers.

Consultants question mine site carbon calculations

Industry Queensland

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