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A close relationship with the head of Santos has seen the Morrison government pursue a policy built around unproven carbon capture and storage. By Marian Wilkinson.

How the gas lobby captured Morrison’s Glasgow response

Scott Morrison listens to Energy Minister Angus Taylor (left) in parliament on Wednesday.
Credit: AAP / Lukas Coch

As the prime minister heads to the 2021 United Nations Climate Change Conference in Glasgow (COP26), many Australians will be surprised to know that a gas industry boss hailing from Scotland played a key role in the government’s plan being presented at the historic UN climate summit.

Kevin Gallagher, the head of energy giant Santos, is a University of Glasgow graduate and diehard fan of Glasgow’s Celtic Football Club. Along with his work for Santos, Gallagher is also chair of Australia’s powerful gas lobby, APPEA. He’s a loud voice in Canberra when climate and energy matters are discussed.

This was clear when Scott Morrison and his Energy minister, Angus Taylor, finally unveiled “the plan” to deliver net zero by 2050 this week. Support for Australia’s gas industry was at its core. Or, as Morrison put it, the plan, “will not shut down our coal or gas production or exports”. 

The plan’s fine print shows Australian coal exports will fall in the global push for net zero, but gas can thrive for decades to come. That’s if Australia’s booming gas industry can cut its emissions with the help of taxpayers. Government support for carbon capture and storage (CCS) – a controversial and costly technology for reducing emissions – is a central plank of Morrison and Taylor’s plan.

The government, like the gas industry, is proposing vast amounts of the greenhouse gas emissions can be permanently buried in the deep underground geological storage basins around Australia, which once held oil and gas reserves. Under this optimistic scenario, carbon capture and storage will help Australia’s liquefied natural gas exports continue to grow and allow Australian gas to be used to make new “clean” hydrogen.

The plan reveals a lot about Taylor and Morrison’s current thinking on climate change. Despite the entire G7 and Australia’s key trading partners ratcheting up their ambition to avoid dangerous climate change, the Coalition has barely moved in its approach over the past year. Morrison’s plan for COP26 in Glasgow is essentially the same plan Taylor released last September. It brushes aside the findings of the latest Intergovernmental Panel on Climate Change (IPCC) report, widely described as “a code red for humanity”. The plan also largely ignores the advice that the world needs to cut emissions almost in half by 2030 to reach net-zero emissions by 2050. And, critically, it allows Australia’s weak 2030 emission-cutting target to stand at just 26 to 28 per cent, well below most of the developed world, despite Morrison saying that Australia would “meet and beat” that target.

One of the few changes is even more government support for carbon capture and storage and the gas industry. During the past year, the gas industry has worked closely with the government to boost support for this fraught technology. At the gas lobby’s talkfest in June, Gallagher described Australia as “a carbon storage superpower based on our vast tracts of pastoral and cropping land, and our depleted oil and gas reservoirs”. As he put it, “Australia has a natural competitive advantage in CCS with known high-quality stable geological storage basins capable of injection at a rate of 300 million tonnes per annum for at least 100 years.”

With the climate crisis deepening, oil and gas companies such as Santos and ExxonMobil have stepped up their lobbying on CCS and are looking keenly at depleted gas reservoirs to make money from the CCS solution. Just last month, Santos signed a deal with Timor-Leste to investigate storing carbon emissions in its rundown Bayu-Undan gas reservoir, 500 kilometres north of Darwin.

Climate activists and energy experts have long questioned the economic and environmental credentials of CCS as a way to reduce greenhouse emissions for coal and gas. Despite decades of promises and billions spent, most CCS projects to reduce carbon emissions have ended up in costly failures.

While the technology is well proved, the challenge comes from needing to transport and store the emissions on a huge scale to have an impact.

But the gas industry knows the liquefied natural gas (LNG) business model can’t survive without dealing with its emissions – and CCS is one of the few cards it has to play. Australia’s major trading partners, Japan and South Korea, are big investors in Australian LNG projects and big customers. Unlike Australia, both countries have agreed to reduce their emissions by 2030 by 46 per cent and 40 per cent respectively. That means within nine years they will need to slash their emissions from burning fossil fuels. It’s why the push for CCS is so important.

The Australian gas industry needs to keep alive the prospect of large-scale CCS projects to persuade Japanese and Korean energy investors, financiers and customers that Australia can deliver carbon-neutral LNG and clean hydrogen in the not-too-distant future.

Just weeks before the Glasgow summit, Taylor gave the gas lobby’s CCS campaign a major boost. In a world first, the Energy minister announced companies such as Santos could get “carbon credits” from the government for new CCS projects. CCS, with all its problems, is now set to become part of Australia’s carbon offset system under the taxpayer-supported Emissions Reduction Fund.

Until now, carbon offsetting in Australia has seen companies invest in projects such as reforestation, renewable energy, energy efficiency or efficient farming to reduce or remove greenhouse gas emissions. When investors put their money into an offset project they can get Australian carbon credit units (ACCUs), which can offset the emissions from their businesses.

While many climate scientists recognise carbon capture and storage will play a role in reducing emissions for a number of industries, they warn against using it as a way to expand the coal and gas industry. Its value is more likely to be realised as a way of recycling carbon for industry rather than storing it on a massive scale.

Taylor’s decision to grant carbon credits for CCS has been widely criticised by climate groups. “CCS is used by the oil and gas industry to justify large-scale projects that would inevitably result in far greater emissions that they sequester”, said The Australia Institute’s Mark Ogge.

Fortescue Metals Group’s chairman Andrew “Twiggy” Forrest echoes that criticism. At the same time as Santos was lobbying for CCS carbon credits, Gallagher hit the “go” button on Barossa, a huge new gas development 300 kilometres north of Darwin, which has been described as the most greenhouse-intensive LNG project in Australia’s history. Forrest attacked Barossa as one of the most polluting projects in the world. “It needs to be called for what it is,” he said. “It is an atrocious project.”

Gallagher hit back, saying he was proud of Santos’s effort to reduce emissions on the Barossa project – including plans to use CCS.

As Morrison leaves for Glasgow, his vocal support for Australia’s gas and coal producers stands in stark contrast to the overarching aim of the UN climate summit: “Keeping 1.5 Alive”. The Glasgow mantra used by the COP26 president, Alok Sharma, warns world leaders not to abandon the promise of the Paris climate agreement to hold global temperature rises below 2 degrees and as close to 1.5 degrees as possible.

But days out from Glasgow, Sharma’s optimism about keeping 1.5 alive is fading. In a downbeat speech aimed at G20 leaders meeting in Rome this weekend, Sharma warned that, “unless we act immediately, the 1.5 degree limit will slip out of reach”.

Morrison is among the G20 leaders who failed to raise their country’s 2030 targets. After the release of Morrison’s net zero by 2050 plan, Sharma tweeted with a call for Australia to be more ambitious in 2030, “to keep 1.5 degrees in reach”.

Sharma is pleading with world leaders that if they effectively abandon the 1.5 degree goal in Glasgow, the impact will be felt for generations. “At 1.5 degrees warming, 700 million people would be at risk of extreme heatwaves. At 2 degrees, it would be two billion. At 1.5 degrees, 70 per cent of the world’s coral reefs die. At 2 degrees, they are all gone. If temperatures continue to rise, we will step through a series of one-way doors. And the end destination of which is climate catastrophe.”

This week’s UN report on emissions plans by the 192 countries represented at the summit makes for bleak reading about the planet’s future. Even if all nations actually achieve their stated plans, global emissions are likely to rise 16 per cent by 2030 instead of falling by 45 per cent – the reduction needed to keep 1.5 alive. Unless this can be turned around, the global temperature rise could well be about 2.7 degrees by the end of the century, according to the IPCC.

While these reports made little impact in Canberra, investors are taking note, says long-time market observer Tim Buckley, of the Institute for Energy Economics and Financial Analysis. He says the market is shifting – not just to solar, wind and batteries but to green hydrogen as a replacement for gas and oil.

In the past month, huge new investments in green hydrogen have made global headlines. Asia’s richest man, Mukesh Ambani, head of India’s Reliance Industries, wants to produce competitively priced green hydrogen within a decade. China’s hydrogen industry is now vying with the European Union in a race for green hydrogen supremacy.

In Australia, the ubiquitous Twiggy Forrest has launched the Green Hydrogen Organisation – GH2 – installing former prime minister Malcolm Turnbull as its chair. Forrest and Turnbull took a whack at the government’s support for CCS in a joint statement.

“Carbon capture and storage has received billions of dollars in support over the past two decades,” they said. “There were high hopes for it, and we shared them. But it has failed to meet expectations on almost every occasion, and the most recent attempts have been some of the worst.”

Taylor is not impressed. “We won’t be listening to gratuitous and fact-free criticisms of gas, soil carbon, carbon capture and storage and clean blue hydrogen,” he insists.

But as world leaders make their way to Scotland, the physical reality of dangerous climate change caused in large part by fossil fuels is becoming impossible to ignore, even in Canberra. Despite decades of promises made at summits like this, greenhouse gas emissions hit another record high last year. That trend is set to continue this year. Without a serious commitment to cut these emissions in Glasgow, keeping 1.5 alive will sound like little more than a hollow slogan. 

This article was first published in the print edition of The Saturday Paper on Oct 30, 2021 as "How the gas lobby captured Morrison’s Glasgow response".

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Marian Wilkinson is an investigative journalist and author of The Carbon Club.