Lies, damned lies and … Environmental Economics?

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A single LNG development in Australia could raise the global temperature by a tiny amount. Should it be allowed? What has the ‘economics of substitution’ got to do with it?

By Peter Burnett

People frustrated by weak government responses to the Paris Agreement (with its goal of limiting global warming to ‘well below’ 2° Celsius and ‘pursuing efforts’ to achieve 1.5°’), continue to look for ways to pressure governments for stronger action. One strategy is to challenge fossil fuel developments in court.

In the latest Australian challenge, the Australian Conservation Foundation (ACF) is challenging the federal approval given to Woodside Energy’s $16 billion Scarborough liquefied natural gas (LNG) project, off the Pilbara coast in Western Australia.

The formal basis for the challenge is, in essence, that Woodside obtained approval from the wrong federal regulator. Beyond that, it gets complicated. But it’s worth considering the details here because there are some very important principles at play.

Offshore Approvals and the Reef ‘carve-out’

Under Australia’s national environmental law, the Environment Protection and Biodiversity Conservation Act (EPBC Act) the federal environment minister would normally need to approve major developments such as Scarborough. However, in 2014, then environment minister Greg Hunt switched off this requirement for offshore projects by, in effect, accrediting the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) to approve projects in his stead.

The basis for NOPSEMA’s accreditation is that its regulatory regime was assessed as meeting the requirements of the EPBC Act. But the accreditation had several ‘carve-outs’, including for projects likely to have a significant impact on the Great Barrier Reef (GBR). In other words, if a major offshore project was likely to have an impact on the GBR, then NOPSEMA could not approve it and the task but would revert to the minister for the environment.

ACF’s claim is that even though Scarborough is off WA, its total greenhouse gas emissions, especially the ‘scope 3’ emissions generated when the gas is burnt by overseas customers, will be so large that as to have a significant impact on the GBR, even though it lies on the other side of the country.

If the ACF win the case, this would trigger the carve-out and bounce the project back to Australia’s new environment minister Tanya Plibersek for a fresh approval process, something that could take years (which could well scuttle the proposal).

Overheating

An analysis by Climate Analytics found that the total emissions from the Scarborough project were just under 1.4 billion tonnes, three times Australia’s annual emissions. ACF argues that this will result in 0.000394 degrees of additional global warming that will harm the Reef.

Woodside may counter that this is not a significant impact, even on the back of existing emissions-driven climate change.

Is an extra 4 x 10,000ths of a degree significant? I think there is a good argument that when the GBR is already at a critical point, every additional measurable impact on the whole reef is significant. Keep in mind this is a single development which, by itself, has the capacity to create a measurable global temperature increase (at a time when the world is already overheating).

A second likely defence argument will be that 1.4 billion tonnes is a gross figure, which would be offset significantly, if not completely, by various factors, including that gas from Scarborough, relatively low in carbon intensity, will displace other fossil fuels with significantly higher carbon intensity. This is the ‘market substitution’ argument.

We have been here before. In 2015, environment minister Greg Hunt used a similar argument in successfully defeating ACF’s challenge to Adani’s huge Carmichael coal mine in Queensland. The Federal Court upheld the minister’s decision at both first instance and on appeal.

So, if this argument has failed before, why run it again?

Will the market substitution argument prevail?

The basic argument may be the same, but the legal context is different, notwithstanding that both cases concern the application of the EPBC Act. In the Carmichael case, the relevant arguments revolved around the meaning of certain words in the Act, including ‘relevant impact’.

However, the appeal judges did say that their decision was made on the basis of the particular arguments which ACF had put; they dropped a hint that a different argument might have led to a different result. With so much at stake, this alone is enough to make one think it was worth having another go at the market substitution argument.

I don’t know what arguments ACF and their lawyers have in mind this time around, but the Scarborough case turns on some different legislative words, especially on what is a ‘significant’ impact, as distinct from the meaning of ‘impact’ itself.

In this slightly changed context, I think the economic substitution argument could be attacked from a different angle to the one used in Carmichael. It goes like this:

If the total emissions from the Scarborough project, including scope 3 emissions, are ‘likely to have a significant impact’ on the GBR, the current approval from NOPSEMA is invalid and Woodside must refer the project afresh to Minister Plibersek.

Notwithstanding that significance must be decided on the basis of a likely net, rather than gross emission increase; the likelihood is that each of the factors said to offset the gross impact does not, on balance, reduce the gross figure significantly, for the following reasons.

Even if gas from Scarborough has a much lower carbon content than the fuel currently consumed by Scarborough’s customers, it is not enough to find that this low carbon gas would displace high carbon fuel for these customers. Rather, to achieve a net reduction, the high carbon fuel must be displaced from the entire market — ie, it must be likely that it will be left in the ground.

This is because, prima facie, if supplies of a fossil fuel are displaced by an alternative, basic economics (the principle that markets ‘clear’) suggests that the displaced fuel will be sold elsewhere, even if this requires a price reduction. This is especially true given that the global market for fossil fuels continues to grow, despite a Covid19-induced dip.

Then there is the policy argument, that because many countries have adopted Paris targets such as ‘net zero by 2050’, emissions from Scarborough will be offset by reductions that are driven by these targets.

Even if countries delivered on such targets in full and the 1.5° goal were achieved, the reef would still be under significant threat and Scarborough would still exacerbate that threat.

However, countries are not on a global trajectory for anything like 1.5°, so the backdrop to Scarborough’s impact is closer to a 3° increase. Worse, many countries have a history of promising more than they deliver, in some cases adopting targets that are little more than aspirations.

Finally, there is the argument that technological change will drive major emissions reduction through the shift to renewables. This is valid in some countries, but, globally, the renewables shift is more than offset by global increases in demand: otherwise, global emissions would not continue to rise.

At the end of the day, unless there is evidence that gas from Scarborough is leading directly to high-carbon fuels being left in the ground, the supposed offsets look rather vague at best, leaving it likely that Scarborough’s net emissions will be similar to its gross emissions.

Where are we headed with this?

I wouldn’t like to predict where the Federal Court will land, but I do think it is possible that the market substitution argument, at least under the EPBC Act, will prove to make little difference.*

If I were the federal government I would deal with cases like this by moving quickly to legislate a comprehensive climate policy regime, not to mention a wider and contemporary environment protection regime as recommended by the 2020 Samuel Review.

I would be thinking that it is better for governments to get on the front foot rather than risk the unpredictable results that can follow when people are driven to litigation by their frustration with outdated or missing laws.

*I know the argument has been rejected by the Land and Environment Court in NSW in the Gloucester Resources case (Rocky Hill). But the Court there had the power to review the decision on the merits, which makes a big difference, for reasons too complicated to explain here.

Banner image: New research shows global warming of 1.5°C relative to pre-industrial levels will be catastrophic for almost all coral reefs – including those once thought of as refuges. Should any new fossil fuel developments be approved in such a time? (Image by Maria Beger)

A tale of two wetlands – what a difference a minister makes

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Or is this about different approaches to political lobbying?

By Peter Burnett

This is the story of two ‘Ramsar’ wetlands, one on the west coast of Australia, and one on the east. And it’s also the tale of two large developments, one affecting each wetland.

Ramsar wetlands are listed under the Convention on Wetlands of International Importance, made at Ramsar, Iran, in 1971. Australia has 65 Ramsar sites and we tell the world we look after them.

Domestically, Australian Ramsar wetlands are listed under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) as ‘matters of national environmental significance’. This protects them from any developments that are likely to have a significant impact upon them, unless the environment minister approves the development, following an environmental impact assessment (EIA).

The two wetlands

The first wetland borders a part of Moreton Bay, near Brisbane in Southeast Queensland. This wetland is subject to a $1.3 billion residential and tourism development by Walker Corporation at Toondah harbour. Originally submitted to then federal environment minister Josh Frydenberg in 2015, this controversial development appears to be stalled, as a draft environmental impact statement forecast by Walker for release in ‘early 2021’ has yet to be submitted to the federal environment minister.

The other wetland is on Eighty Mile Beach between Broome and Port Hedland in Western Australia. This wetland lies near the proposed site for a large-scale wind and solar renewable energy project (known as the Asian Renewable Hub) being proposed by NW Interconnected Power Pty Ltd.

The Renewable Hub would occupy a huge area of 6,500 square kilometres in the East Pilbara and produce a staggering 26 Gigawatts from a combination of wind turbines and solar panels. This is equivalent to the output of 15 or more large coal-fired power stations.

Originally aiming to supply power by undersea cable, the now-enlarged hub project will use renewable energy to extract hydrogen from desalinised water. The hydrogen will be converted to ammonia and piped 20 km out to sea, for loading onto tankers. The project was given ‘major project’ status by the federal government in October 2020 and is said to cost around $22 billion.

Both these wetlands provide important habitat for a range of water birds and migratory birds in particular. Migratory birds are also ‘matters of national environmental significance’, being protected by the Bonn Convention on Migratory Species. This meant that the species most affected by the developments are, in theory at least, twice protected.

Two recommendations for rejection but only one accepted

In both these cases the federal environment department advised the minister that the projects should be rejected upfront as ‘clearly unacceptable’, without going through the full EIA process.

In the Toondah Harbour case, minister Josh Frydenberg rejected the advice and allowed the project to proceed to its current assessment.

But it’s not as simple as that. Using Freedom of Information, The Australian Conservation Foundation (ACF) discovered that the minister received two consecutive briefs on the same topic, on the same day (see the ACF Submission to the independent review of the EPBC Act April 2020, pages 28, 29). One conveyed the department’s advice that the development was clearly unacceptable — this was the advice that Frydenberg rejected.

The second brief advised that the impacts on the Ramsar wetland and migratory species were significant and, in the case of the wetland itself, difficult to mitigate and offset. Frydenberg accepted this advice and decided that because significant impacts were likely, the matter should proceed to environmental assessment.

In the Renewable Hub case, current environment minister Sussan Ley accepted the department’s advice and stopped the project from moving into full EIA, at least for the time being.

In her official statement of reasons, she accepted that the installation of a marine infrastructure corridor through the Ramsar area would disrupt tidal flows, ultimately affecting the foodwebs on which the migratory birds depend. She also found that the foodwebs would be affected by ammonia spillage, desalination brine and a chronic increase in pollutants from a new town and shipping route.

Unusually, though not unsurprisingly given the identified impacts and uniqueness of the area concerned, the Minister also found that these impacts could not be compensated for by biodiversity offsets. Overall, there would be permanent and irreversible impacts to Eighty-mile Beach and its migratory species if the project proceeded in its current form.

Why the different decisions?

Why did one minister reject the department’s advice while the other minister accepted it? The differences might be down to simple differences in ministerial values or style.

But I think the two cases show different to approaches by developers to regulation.

Walker Corporation’s approach might be described as old style politicking, involving significant political donations to both major parties and backroom influence — Walker lobbied extensively against a ‘clearly unacceptable’ decision.

Frydenberg seemed so keen to allow the project to proceed that he wrote to a Queensland (Labor) minister floating the ‘option’ of the two governments working together to amend the boundary of the Moreton Bay wetland under the ‘urgent national interest’ clause of the Ramsar Convention. Frydenberg went on to note that ‘any proposed boundary change would need to have a ‘clear benefit to the ecological character of the wetlands a whole’, something that seems to me like clutching at straws to me (and also a bad look politically).

Walker Corporation sent executives to Geneva, to discuss a boundary change with the Ramsar Convention Secretariat, a most unusual move. The move was even more strange given that a file note subsequently released under FoI disclosed that Walker Corporation told the Secretariat that it could potentially reconfigure its development, including by restricting construction to an area outside the wetlands, or by looking ‘for other suitable development areas nearby’.

This was news to the department. ‘I wonder whether that is an error of what was discussed, given that it is at odds with Walker’s discussion with us to date, and the referral (which states that there are no alternatives to the proposal)’ wrote a senior department official to colleagues.

The hub consortium on the other hand appears to be playing with a straight bat. Despite the enormous size of the project, and its significance to Australia’s future as a ‘hydrogen superpower’, as Professor Ross Garnaut has termed it, apparently the consortium was not consulted about this unusual decision.

Yet the consortium issued a flat media release accepting the minister’s decision and committing to revising their proposal. ‘We will take [the Minister’s] concerns on board as we continue to work on the detailed design and engineering aspects of the project,’ they said. ‘[We] will address fully any concerns in preparing future project referrals.’

A tale of two approaches to political lobbying?

Both of these developer reactions are unusual. The chutzpah of Walker Corporation, to the point of taking its lobbying to Geneva, presumably to convince the Ramsar Secretariat that yet another Australian foreshore development represented an ‘urgent national interest’ is breathtaking.

And the environment department’s sending two briefs to minister Frydenberg, containing either conflicting or ‘alternative’ advice, is very suspicious. At a minimum, it represents an attempt by officials to avoid disclosure under FoI of a minister’s rejection of their advice by ‘splitting’ their brief. It should be investigated by the Public Service Commission as a possible breach of the Australian Public Service Code of Conduct.

On the other hand, the apparently mild (to say the least) reaction of the Asian hub consortium is also breathtaking. I would have expected the proponents of something this big to have been throwing their weight around with vim and vigour.

Perhaps these developers are cool customers playing a very long high stakes game and figuring that the best strategy is to hold the tongues and get on with the job.

Perhaps they are expressing outrage privately and we just don’t know about it. If so, there is no sign of it in a recent FoI release.

In any case, these two wetland decisions leave some significant unanswered questions, the most important of which concerns the power of lobbying. These cases provide another illustration of why the EPBC Act is badly in need of reform.

Banner image: Australia has signed international conventions committing it to protect migratory bird species and wetlands used by migratory birds. Proposals to develop on or near Ramsar listed wetlands deserve close scrutiny, and shouldn’t be allowed if they threaten these wetlands. (Image by David Salt)

The choir – lobbyists and powerbrokers

Who is singing and who is listening in the biggest environmental game in town?

By David Salt

The biggest environmental policy game in town at the moment is the review of the EPBC Act. That’s because the outcome of this review will have a major bearing on how governments deal with the perennial tension between economic development and environmental protection. It could influence how our nation looks after our environmental values for years, maybe decades, to come. It is a big deal.

Last week the government belatedly released the draft report of the review (led by Professor Graeme Samuel). This draft pointed out the EPBC Act was failing on multiple fronts. It was failing to protect the environment and it was too slow in processing development approvals. It proposed a range of reforms (and these have been discussed at length by many).

I’m always fascinated by what lobby groups say when reviews such as this are released. Their public statements come out so fast on the heels of the release I really wonder if they have even read the document (or even its executive summary). Reading their statements it quickly becomes apparent that most of their words are simple rehashes of their lobby platforms – what they want the public to think about them, and what they want the government to do in respect of the stakeholders they represent.

Let’s look at a few of those statements

Political statements

First up, there’s the draft review itself. It’s released by the Department of Agriculture and Environment (DAWE), the Department that oversees the EPBC Act (we’re already getting a signal even in the Department’s title on the priority given to the environment). The media statement provides a fairly good summary of the draft review with a link to the review itself.

Central to Samuel’s review is the belief that a set of National Environment Standards need to be developed, duplication between state and federal levels needs to be reduced and that an enforcement regulator needs to be established. On this final point, he said: “Community trust in the EPBC Act and its administration is low. To build confidence, the Interim Report proposes that an independent cop on the beat is required to deliver rigorous, transparent compliance and enforcement.”

Following simultaneously on this release comes the statement from the Government which thanks Professor Samuel for delivering the report, agrees we must end duplication and instantly squashes any idea that an ‘independent cop’ will be brought in. The government will not “support additional layers of bureaucracy such as the establishment of an independent regulator.” (It should be noted that when Labor was in government when the EPBC Act was last reviewed in 2009 that it similarly rejected the proposal for a ‘greenhouse trigger’ because it added layers of bureaucracy to the Act.)

The opposition party then follows with a statement saying it’s all the government’s fault: “In considering the Samuel Review Interim Report, it’s important to understand that Australia’s biggest problem in environmental management has been blue tape: delays and poor decision-making caused by Liberal and National cuts and mismanagement.”

Predictably, the Greens are also blaming the government for everything that’s wrong, and bitterly disappointed in their flat rejection of a regulator: “Environmental standards will be worthless if there is no one there to enforce them. This report shows the government can’t be trusted.”

Business statements

The Business Council of Australia was complimentary in its appraisal of the review: “What has been achieved in this review is a way forward that increases accountability, increases the transparency of decision making and retains the central goal of protecting the environment.” Pity the government’s already killed the prime mechanism for enhanced accountability.

The Minerals Council of Australia sees it as a greenlight for development: “Faster approvals, greater national cooperation and clearer guidelines on environmental management will boost jobs and investment and improve biodiversity outcomes.” They’re delighted by the government’s commitment to develop a ‘single touch’ approach to assessment: “The interim report highlights the need to address unnecessary regulatory complexity and duplication – including overlapping state and federal processes which deter investment.”

The Association of Mining and Exploration Companies and the Australian Petroleum Production and Exploration Association pretty much parrot the Minerals Council’s thoughts. Less duplication and faster approvals are essential; though they don’t have much to say about improved environmental outcomes beyond suggesting they think they are important too.

But it’s not just the miners who see gold in the report, the farmers see carrots. The National Farmers Federation said: ““For too long the regulatory stick has been preferred, despite biodiversity outcomes actually declining. The solution is in a market-based approach rather than a stronger stick. It is time for some carrots.” I think the NFF are also not a fan of the ‘independent cop’ idea.

The foresters are also keen to support the report’s call for greater clarity, in their case clarity between the EPBC Act the Regional Forestry Agreement process. The Australian Forestry Products Association said: “This is our chance to ensure the right protection for our environment while also unlocking job-creating projects to strengthen our economy and improve the livelihoods of every-day Australians.”

Environmental sector statements

So business interests everywhere are in furious concord, the review is good if it reduces transaction costs around environmental protection. What are environmental NGOs saying? They are somewhat worried.

The Australian Conservation Foundation said: “the Federal Government would be lining up Australian wildlife for extinction if it rushes to devolve environmental approval powers to states”.

The Wilderness Society is also concerned by an apparent devolution to the states. It said: “Professor Samuel’s report outlines that environment laws are rarely policed, that endangered species recovery plans are rarely implemented, that Australia’s most important environmental values are in decline and yet the central Government response is to seek to hand environmental approval powers to the states with no concrete proposals to address any of the main environmental challenges facing Australia.”

The Invasive Species Council’s response was that it welcomed what it said was a “less reactive, more comprehensive response to Australia’s growing biodiversity crisis”. It supported the call for ‘strategic national plans’ and ‘regional plans’ but was “greatly disappointed that the Environment Minister today ruled out Samuel’s proposal for an ‘independent monitoring, compliance, enforcement and assurance regulator’.”

The choir

These were just the statements I saw in response to the release of the draft review of the EPBC Act. I’m sure there were many more but they give you a good flavour of the push and shove following such an announcement.

Most people never see these statements beyond, maybe, a quote here and there used in news stories, normally to add a bit of colour to the otherwise drier reportage. However, these statements are always coming out from the different lobby groups whenever the government makes a statement on anything, the story being reported here is just one from the environment sector.

These statements telegraph to the government what different stakeholder groups are expecting from our political leaders. You’ll often see lobby groups repeating phrases used by the government (like ‘single touch’ approval processes) giving them credence and solidity. Sometimes it’s the other way around; the government will pick up on phrases coined by a lobby group.

And, of course, this is just the visible signs of the lobbying process. There’s a whole industry based on cultivating influence of the government and most of it happens behind closed doors and is unseen by the public.

Having worked for many years in science communication connected with biodiversity conservation I’ve seen this game of duelling public statements many times. It amazes me the seeming co-ordination with which it happens, with each side singing to their own constituency and maybe pulling the strings behind some of the important decisions.

In this current situation relating to the EPBC Act, the industry groups seem to be at one with the government’s message of shorter approval times, less regulation and less bureaucracy. This is only an interim report but it provides a clear idea of what the final report will contain, and we also have a good idea which bits the government will act on (and which bits it will reject).

Missed the boat

The review is currently calling for public feedback on the interim report. But you’ll have to be quick. Having been given the report by Graeme Samuels last month but only releasing it last week, the government will only accept feedback till 17 August. The final report is due in October.

Though, even if you respond through the official channels, it could be you’ve already missed the boat. It seems the Government is not waiting for the final report and have promised legislation in late August. The Prime Minister’s statement from the most recent National Cabinet yesterday said the Premiers were all on board and keen to sign up to ‘single touch’ asap (why wouldn’t they)?

It is quite clear which choir the Government is listening to.

Image by stanbalik from Pixabay