Senator David Pocock's Additional Comments

Introduction

1.1Australia urgently needs to reduce emissions and take up the abundant renewable energy resources we have available to us. The Future Made in Australia (FMIA) policy framework provides the Australian economy some of the direction needed to move away from fossil fuels and towards green hydrogen and renewable electricity.

1.2The Guarantee of Origin Scheme (GO scheme) is a key part of the FMIA framework. I support its objective to transition Australian industry away from fossil fuels by encouraging the production of renewable hydrogen, and providing a certification stream for renewable electricity beyond the sunsetting of the Renewable Energy Target (RET).

1.3The GO scheme rightly intends to provide consumers with information about carbon-intensive products and low-emission equivalents, something markets do not currently achieve. Under the scheme, producers of hydrogen and renewable electricity will have the ability to market their low-emissions credentials and allow consumers to make informed choices about products.[1]

1.4Incentivising renewable electricity generation is a critical step towards a low‑emissions economy. But unless properly designed, the GO scheme risks being used to greenwash questionable products and support the fossil fuel industry.

1.5I thank the committee for the work done on this inquiry, and in particular the committee secretariat, who have done a huge amount of work in difficult circumstances and while dealing with a large number of other inquiries.

The GO scheme should not allow greenwashing of fossil fuel-intensive processes

1.6The extent to which greenwashing will be facilitated under the GO scheme hinges on the rules and methods made under the scheme. Accordingly, the need to establish safeguards in the bills was raised by many submitters. The committee heard that, in their current form, the bills do not contain necessary safeguards to prevent the greenwashing of products. Any opportunity for greenwashing will be exploited by the fossil fuel industry.

Carbon capture and storage

1.7Carbon capture and storage (CCS) is often used to greenwash polluting industries. The possibility that hydrogen could be greenwashed through claims of CCS was raised as a particular concern.[2]

1.8Research from the Australian National University has shown that hydrogen produced using fossil fuel sources, even if reliant on CCS, produces significant greenhouse gas emissions.[3]

1.9The use of carbon capture to mitigate fossil raw material should be excluded from the Product Guarantee of Origin (PGO) certificate stream. The previous iteration of the Australian Government’s Hydrogen Strategy, from 2019, defined ‘clean hydrogen’ as having been produced through renewable electricity ‘or via fossil fuel pathways with substantial carbon capture (greater than 90%)’.[4]

1.10WWF-Australia pointed out that the GO scheme’s lack of exclusion of fossil-gas is ‘not in line with other [Australian] Government initiatives’, and that the ‘production of fossil hydrogen and ammonia is not compatible with meeting Australia’s emissions reduction goals’. WWF-Australia called for the PGO certificate stream to specifically exclude fossil raw material.[5]

1.11The Australian Conservation Foundation (ACF) submitted that the design trials conducted by the Clean Energy Regulator (CER) included a pilot project to produce hydrogen gas from brown coal. This is exactly the kind of project that should be excluded from any future-focussed GO scheme in Australia.[6] The ACF called for all material sources of greenhouse gas emissions to be included in PGO methodology determinations.[7]

Carbon credits

1.12Carbon credits used to give the appearance that products are ‘clean’ or ‘green’ could also greenwash fossil fuel-intensive processes. In response to a question I put on notice to the Department of Climate Change, Energy, the Environment and Water (DCCEEW), officials confirmed that ‘the policy for the GO scheme is not to recognise offsets such as Australian Carbon Credit Units, Safeguard Mechanism Credits or international units such as Verified Carbon Units’.[8]

Product Guarantee of Origin certificates

1.13Under the GO scheme, only Renewable Electricity Guarantee of Origin (REGO) certificates would be able to be traded. This is a key difference between the two certificate streams provided for in the GO bill, as PGO certificates are intended to provide a way to trace the origin of a product.

1.14PGOs should flow with the hydrogen product from production to consumption, allowing the buyer to be assured that the product is truly the green commodity they expected to buy. Industry stakeholders, such as Fortescue, and clean energy organisations supported PGO certificates being non-tradable to increase the credibility of Australian green products which may be exported.[9]

1.15In response to a question I put to DCCEEW, officials reassured the committee that the bill’s provisions have been drafted in such a way as to ensure that it is not possible for PGO certificates to be traded in a way that is independent from the certified product.[10]

Ministerial discretion must be guided by the best available scientific evidence

1.16The bills contain wide-ranging ministerial powers that go to formulas relating to measurement, metering, and reporting, including a list of emissions sources for each product. The breadth of these powers has been noted by the Senate Standing Committee for the Scrutiny of Bills.[11]

1.17It is appropriate for highly technical matters and dynamic changes to be included as delegated legislation. This is certainly the case in the GO scheme. Flexibility will be required to ensure that new products and improved methods of analysis are reflected in the scheme.

1.18However, the flexibility must be constrained to ensure that delegated legislation achieves the objectives of the bills.[12] Ministers must be prevented from departing from the best available scientific evidence in creating production methods on the basis of emissions and without offsets.

Native forest products should be excluded from the GO scheme

1.19Under the bill, a range of renewable energy sources are eligible for REGO certificates. The REGO certificate stream is intended to incentivise renewable electricity, and should not be used as a way to support the use of native forest wood waste. While the bill explicitly excludes biomass from native forests, it does not extend this exclusion to wood waste.[13]

1.20The committee heard that while the exclusion of native forest biomass is positive, native forest waste should be explicitly excluded for other sources of biomass such as agricultural waste.[14]

1.21The ACF further called for the exclusion of wood waste in general, on the grounds that the Australian Government should not be incentivising the burning of wood, and WWF-Australia was not supportive of including wood waste or biomass as eligible sources under the REGO scheme.[15]

1.22The GO scheme should ensure there are no perverse incentives to destroy native forests to produce renewable electricity.

Concluding comments

1.23The Future Made in Australia framework is an opportunity to encourage investment in renewable electricity, and develop the industries of the future. These bills could bring greater integrity to the framework. The PGO certificate stream has the potential to certify the emissions intensity of products such as hydrogen and trace emissions from production to consumption. The REGO scheme has the potential to effectively certify and incentivise the development of renewable electricity resources.

1.24In doing so, the bills should safeguard against the scheme being used to support the fossil fuel industry and greenwash polluting products.

Recommendations

1.25The Future Made in Australia (Guarantee of Origin) Bill 2024 should be amended to prevent greenwashing of products where fossil fuels are used at any point in the production process. This should include greenwashing through the use of carbon capture and storage, carbon credits, or the use of renewable energy to reduce scope 2 emissions.

1.26The Future Made in Australia (Guarantee of Origin) Bill 2024 should be amended to ensure that ministerial powers are constrained such that production methods must be based on the best available scientific evidence.

1.27The Future Made in Australia (Guarantee of Origin) Bill 2024 should be amended to ensure that native forest material is explicitly excluded as a renewable electricity source under the Renewable Electricity Guarantee of Origin certificate stream.

Senator David Pocock

Participating Member

Footnotes

[1]Department of Climate Change, Energy, the Environment and Water (DCCEEW), Submission 10, p.4.

[2]Australian Conservation Foundation (ACF),Submission 25, p. 3.

[3]Thomas Longden, Fiona J. Beck, Frank Jotzo, Richard Andrews, Mousami Prasad, ‘Clean’ hydrogen? An analysis of the emissions and costs of fossil fuel based versus renewable electricity based hydrogen’, CCEP Working Paper 21-03 March 2021.

[4]Australian Government, National Hydrogen Strategy, p. 5, fn. 1.

[5]WWF-Australia, Submission 13, pp. 1–2.

[6]ACF, Submission 25, p. 8.

[7]ACF, Submission 25, p. 5.

[8]DCCEEW, answers to written questions on notice from Senator D Pocock, 16 October 2024 (received 28 October 2024).

[9]See, for example, Fortescue, Submission 19, p. 2; Clean Energy Council, Submission 6, p. 2; Clean Energy Investor Group (CEIG), Proof Committee Hansard, 15 October 2024, p. 11.

[10]DCCEEW, answers to written questions on notice from Senator D Pocock, 16 October 2024 (received 22 October 2024).

[11]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 12 of 2024, pp. 16–18.

[12]Proposed new section 3 of the bill.

[13]Proposed new subsection 69(1) of the bill.

[14]Australian National University Zero-Carbon Energy for the Asia-Pacific, Submission 23, p. 6.

[15]ACF, Submission 25, p. 14; WWF-Australia, Submission 13, p. 2.