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The APPEA Journal The APPEA Journal Society
Journal of Australian Energy Producers
RESEARCH ARTICLE (Non peer reviewed)

A strategic approach to reduce climate change risks for the LNG industry*

Michele Villa
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Ernst & Young 11 Mounts Bay Road, Perth, WA, 6000. Email: michele.villa@au.ey.com

The APPEA Journal 50(2) 694-694 https://doi.org/10.1071/AJ09058
Published: 2010

Abstract

The Senate rejection of the Carbon Pollution Reduction Scheme Bill 2009 (CPRS) for the second time in December 2009 caused key sections of Australia’s big business to express concern. The stalled legislation and the challenges associated with the Copenhagen Accord to deliver a clear post-2012 global climate change agreement have only fuelled uncertainty surrounding the future of climate change policy.

This uncertainty will come at a cost for the Australian LNG industry where a raft of new projects are fast approaching final investment decisions and the real impact of a carbon impost is difficult to quantify.

Despite this uncertainty, subsequent negotiations between the Government and the Opposition regarding the LNG industry, led to an amended version of the CPRS Bill. One of the amendments accepted by the Government was related to the allocation rate and states that LNG is expected to be a moderately emissions intensive trade exposed (EITE) activity and therefore eligible to receive free permits at a fixed rate per tonne of LNG produced.

Should this version of the CPRS become legislation in 2010, LNG producers will at least be able to calculate their liability under the scheme and confirm their compliance strategy.

Given the significant value at stake with existing and new investments, oil and gas businesses should act with urgency to develop strategies to respond to a carbon constrained future, irrespective of the final legislative design. Scenario planning is an important step in considering the range of regulatory outcomes—both domestic and international—that will impact on the supply and demand of carbon assets.

Keywords: Carbon Pollution Reduction Scheme, Copenhagen Accord, climate change, CPRS, ETS, emissions trading scheme, auction, LNG, Waxman-Markey, greenhouse gas, mitigation, policy, Villa, Ernst & Young, risk, Kyoto Protocol

Leading the Climate Change and Sustainability Services Practice for Ernst & Young in Western Australia, Michele has more than 18 years’ experience providing climate change, environmental and social impact consulting services to the oil and gas industry.

Working with companies to integrate environmental considerations into their financial planning processes, Michele specialises in identifying risk, improving business performance, environmental management systems, sustainability programs and waste management.

Michele was previously Managing Director of ERM Italia, the Italian branch of the largest all-environmental consultancy in the world.