Thanks to a deal done with landfill operators, the environment minister is set to receive a ‘free’ gift of at least 16m tonnes of greenhouse emissions cuts

This article is more than 4 years old

This article is more than 4 years old

The environment minister, Greg Hunt, is set to receive a free “gift” of at least 16m tonnes of greenhouse emission cuts, bringing him closer to Australia’s 2020 emissions reduction target and helping to explain his supreme confidence that Australia can meet it.

In August Hunt announced a deal he had done with landfill operators who had charged upfront gate fees for their expected liability under the former government’s carbon tax and were left with a windfall gain upon its repeal.

The announcement concentrated on promises by landfill operators to refund some of their $100m windfall to local councils (the local government association was also part of the deal) and to invest some of it in greenhouse reducing activities.

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But the landfill operators also promised to buy “high quality units” with a portion of the money – estimated by Australian Landfill Owners Association chief executive Max Spedding to be somewhere between $10m and $20m. These units would be given to the federal government to help meet Australia’s greenhouse targets.

In its fine print, the deal said landfill operators could “purchase high quality abatement credits – to be determined by agreement with the minister for the environment.”

While the former Abbott government was reluctant to allow international permits to be used towards Australia’s emission reduction targets, the deal did not spell out that the purchased permits would be international units. Most assumed they would have to be, but interviewed by Guardian Australia on Wednesday Hunt was still refusing to confirm this.

“Landfill will be a matter for the individual companies involved, it is a matter for them what high quality units they will buy,” he said.

He confirmed the government would determine what “high quality” meant but said “I am not going to speculate about it in any way shape or form.”

But Spedding was clear the companies only ever intended to buy international permits – certified emission reductions or CERs, generated under the international clean development mechanism.

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“It was always intended that we would buy international units. That was always the plan. None have been transferred yet but some companies have already bought and others are in the market.”

Transpacific Cleanaway has announced it bought $3m worth of permits for 80 euro cents each.

CERs sell for about 30 to 40 cents, if issued during the Kyoto Protocol period up to 2012, or about 80 cents if issued in the current commitment period. Even if all the landfill operators bought permits at 80 cents, the government could receive around 16m units, saving it from finding 16m tonnes of greenhouse gas abatement.

This is a significant amount. The first auction under the $2.5bn emissions reduction fund paid $660m for 47m tonnes of abatement at an average of $14 a tonne.

Adding to the government’s confidence that the 2020 target can be met is the constant downward revision in projected greenhouse emissions, reducing the quantity of abatement they are required to buy.

In 2012 the promise to reduce emissions by 5% of 2000 levels by 2020 was calculated to require the cumulative reduction of 755m tonnes of carbon dioxide from the atmosphere. In 2014 new government calculations reduced that figure to 421m tonnes. In March that figure was revised again, to 236m tonnes.

But according to energy market analysts Reputex, even the 236m tonnes is a huge overstatement, and the actual greenhouse gas reductions that have to be achieved by government policy could be just 50m tonnes or even less.

Reputex has predicted the second emissions reduction fund auction, to be held on 4 and 5 November, might see up to $1bn worth of contracts entered into for the delivery of emissions reductions from land-use and high emitting companies.