On 8 February 2018, the Senate referred the provisions of the Clean
Energy Finance Corporation Amendment (Carbon Capture and Storage) Bill 2017 to
the Environment and Communications Legislation Committee for inquiry and report
by 8 May 2018.
The bill would amend the Clean Energy Finance Corporation Act 2012 (CEFC
Act) to remove the prohibition on the Clean Energy Finance Corporation (CEFC)
investing in carbon capture and storage (CCS) technologies.
Conduct of the inquiry
In accordance with its usual practice, the committee advertised the
inquiry on its website and wrote to relevant individuals and organisations
inviting submissions. The date for receipt of submissions was 13 March 2018.
The committee received 16 submissions. The submissions are listed at
Appendix 1 and are available on the committee's website: www.aph.gov.au/senate_ec.
The committee also held a public hearing for this inquiry on 18 April
2018 in Melbourne. A list of witnesses who gave evidence at the hearing is at
The committee thanks all of the individuals and organisations that
contributed to the inquiry.
Scope and structure of the report
This report comprises two chapters. The remaining sections of this chapter
provide background information relating to the bill and discuss the review of
the bill undertaken by the Senate Standing Committee for the Scrutiny of Bills.
Chapter 2 examines the principal issues raised by stakeholders regarding the
bill. The committee's overall findings on the bill are provided at the end
of Chapter 2.
Note on references
In this report, references to the committee Hansard transcript of
the 18 April 2018 public hearing are to the proof (that is, uncorrected) transcript.
Page numbers may vary between the proof and official Hansard transcripts.
This section provides background information on CCS technologies and the
creation of the CEFC.
What is carbon capture and storage?
CCS is a technological process in which carbon dioxide (CO2) from
fuel combustion or industrial processes 'is captured at the point of emission
and transported and stored to avoid its release into the atmosphere'. The captured
CO2 'can be stored in deep geological formations (like oil and
gas fields) or in products such as stable carbonates used as building
The Department of the Environment and Energy (the department) advised
that there are 'currently 19 large-scale CCS projects either in operation
or very close to operation around the world'. Most of these use captured CO2 for enhanced oil recovery (EOR), although there are two operational projects involving coal-fired electricity
generation. The department highlighted the following examples:
- Sleipner oil and gas project (Norway)—this project has been
capturing and storing CO2 since 1996. The captured CO2 is
injected into an offshore sandstone reservoir. As at June 2017, the CCS
project has resulted in the abatement of over 17 million tonnes of CO2 emissions.
- Chevron Gorgon LNG project (Australia)—it is expected that CCS
operations at this project will start this year. At full production, it is projected
that approximately 4 million tonnes of CO2 will be injected
into undersea storage, reducing emissions from the facility by around 40 per
cent. The department explained that the use of CCS was required by the Western
Australian Government as part of the development approval for the project.
The department advised that other projects in Australia are 'at the
demonstration or feasibility stage', including the CarbonNet and Surat Basin
projects (which involve coal power stations) and the CO2CRC Otway Project
(which involves gas processing).
In addition, on 12 April 2018, the Prime Minister announced that the Australian
and Victorian governments would contribute $100 million to a $496 million Hydrogen
Energy Supply Chain pilot project at Loy Yang power station and mine in the
Latrobe Valley. The project, which is co-funded by a Japanese consortium, will
turn brown coal into hydrogen for export to Japan. On carbon emissions, the
Prime Minister's announcement stated:
Our CSIRO hydrogen and energy experts will be working with
their Japanese counterparts, maximising the exchange of scientific knowledge
created from the pilot, including in carbon capture and storage.
Overview of the CEFC
The CEFC is a statutory authority that was established in 2012 with the
object of facilitating 'increased flows of finance into the clean energy sector'. The explanatory memorandum for the legislation establishing the CEFC
provided the following description of the CEFC's intended role:
[The CEFC] is a mechanism to help mobilise investment in
renewable energy, low-emission and energy efficiency projects and technologies
in Australia. [The CEFC] will finance Australia's clean energy sector using
financial products and structures to address the barriers currently inhibiting
The CEFC meets its statutory objective 'by making investments which
attract private sector finance, as well as through working with its strategic
co-financing partners to catalyse flows of money into the sector'. That is, the CEFC 'invests, applying commercial rigour, to increase the flow of
finance into the clean energy sector' and also 'invests with co-financiers to
develop new sources of capital for the clean energy sector, including climate
bonds, equity funds, aggregation facilities and other financial solutions'.
Overall, the CEFC describes its mission as being:
...to accelerate Australia's
transformation towards a more competitive economy in a carbon constrained
world, by acting as a catalyst to increase investment in emissions reduction.
The CEFC also explained that its strategic framework is designed to
support the 'sectors in the Australian economy that are the largest sources of
carbon emissions to reduce their emissions and ultimately to help to transform
the economy to achieve net zero emissions in the second half of the century'.
In total, the CEFC has received $10 billion in appropriations to invest
in clean energy. As at 30 June 2017, the CEFC had committed $4.3 billion to
projects with a total value of $11 billion. The CEFC is designed to be self-sustaining, with funds returned from
investments to be available to reinvest.
Establishment of the CEFC
The decision to establish the CEFC was announced in July 2011 as part of
the agreement to introduce the carbon tax reached by the then Labor Government,
the Australian Greens and two independent members of the House of
Representatives (Mr Rob Oakeshott and Mr Tony Windsor). As part of the
agreement, it was specified that the CEFC would not invest in CCS technologies. The terms of reference for the expert panel chaired by Ms Jillian Broadbent AO
established to provide advice to the government on the design of the CEFC
likewise stipulated that the CEFC would not invest in CCS technologies.
The CEFC was established by the CEFC Act. The CEFC Act provides that the
CEFC is to invest, directly and indirectly, in 'clean energy technologies'. Clean energy technologies are defined to include:
energy efficiency technologies (including technologies and
enabling technologies related to energy conservation technologies or demand
low-emission technologies that the CEFC Board considers qualify
as a low‑emission technology; and
renewable energy technologies (including hybrid technologies that
integrate renewable energy technologies as well as technologies and enabling
technologies related to renewable energy technologies).
The CEFC Act also gave effect to the July 2011 agreement that the CEFC
would not invest in CCS technologies (discussed below).
Statutory prohibition on CCS
Section 62 of the CEFC Act prohibits the CEFC from investing in CCS
technologies, nuclear technology or nuclear power. In addition, subsections
59(1) and (2) provide that the CEFC Board has a duty to take all reasonable
steps to ensure that the CEFC's investments 'are at all times complying
investments', which among other things, cannot be investments in the
technologies prohibited by section 62.
The CEFC's submission advised that the expert review on the design of
the CEFC acknowledged the then government's announcement that the CEFC would
not invest in CCS technologies. The expert review suggested that exclusions
would be examined as part of proposed periodic reviews of the investment
mandate issued by the ministers responsible for the CEFC. However, the CEFC
explained that the prohibition on CCS was subsequently 'elevated' to be
included in the legislation establishing the CEFC. The CEFC observed that the extrinsic
material used in the interpretation of legislation, such as the Minister's
second reading speech and the explanatory memorandum, 'contains no particular
guidance as to the reason for this approach'.
The CEFC's submission also discussed how the current prohibition on CCS
investments is interpreted. The prohibition in section 62 of the CEFC relies on
the definition of CCS used in the National Greenhouse and Energy Reporting
Act 2007. That definition is as follows:
carbon capture and storage means:
storage of a greenhouse gas substance in a part of a geological formation; or
injection of a greenhouse gas substance into a part of a geological formation
for the purposes of such storage; or
capture, compression, processing, offloading, transportation or piped
conveyance of a greenhouse gas substance, where the compression, processing,
offloading, transportation or piped conveyance is for the purposes of such
An expression used in this definition has the same meaning as
in the Offshore Petroleum and Greenhouse Gas Storage Act 2006. For this
purpose, assume that each reference in the definition of greenhouse gas
substance in section 7 of that Act to a prescribed greenhouse gas were a
reference to a greenhouse gas (within the meaning of this Act).
The CEFC explained that this statutory formulation means the CEFC is currently
not precluded from investing in:
- carbon capture without geological storage, such as industrial
processes that capture and uses carbon; or
- carbon capture and non-geological storage, such as
biological processes that capture and store carbon (for example,
'photosynthesis resulting in wood or soil carbon sequestration').
Rationale for the proposed change
The explanatory memorandum provides the following rationale for the
Government's decision to propose amendments to the CEFC Act to remove the
prohibition on the CEFC investing in CCS technologies:
Delivering emissions reductions under the Paris Agreement on
climate change will be a significant challenge, and will require deployment of
a portfolio of low emissions technologies across the world. Advice from the
International Energy Agency is that carbon capture and storage has an essential
role and can support a least-cost transition of the energy sector.
Here in Australia, applying carbon capture and storage
technology to non‑renewable electricity generation would help provide
security and stability for the electricity grid while significantly reducing
emissions compared to business-as-usual operation of fossil fuel fired
Carbon capture and storage technology can also help reduce
emissions from carbon-intensive industrial processes. Some major industrial
activities have a large emissions burden from the energy and chemical reactions
inherent in their production processes. The Bill provides a potential support
to industrial producers who wish to address such emissions.
Provisions of the bill
The legislative change required to remove the prohibition on the CEFC
investing in CCS technologies is straightforward: the bill would simply repeal
paragraph 62(a) of the CEFC Act. As noted above, section 62 of the CEFC
provides that the CEFC is prohibited from investing in CCS technologies,
nuclear technology or nuclear power. The proposed amendment would have the
effect of removing the reference to CCS technologies while keeping the
prohibitions on nuclear technology and nuclear power in place.
The EM notes that the bill 'does not alter the CEFC's legislated
appropriation or have the effect of actually requiring the CEFC to invest in
carbon capture and storage projects'. Following passage of the bill, the CEFC
Board would still make investment decisions independently 'in line with the
other requirements of the CEFC Act as well as the Government-issued CEFC
The bill would commence on the day after Royal Assent.
Reports of other committees
When examining a bill or draft bill, the committee takes into account
any relevant comments published by the Senate Standing Committee for the
Scrutiny of Bills (Scrutiny Committee). The Scrutiny Committee assesses
legislative proposals against a set of accountability standards that focus on
the effect of proposed legislation on individual rights, liberties and
obligations, and on parliamentary propriety.
The Scrutiny Committee examined the bill in its Scrutiny Digest No. 6
of 2017. That committee did not comment on the bill.
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