THE KYOTO PROTOCOL- THREATS AND OPPORTUNITIES

Abstract

In 1997, Australia signed the Kyoto Protocol under which it had been assigned what will become a legally binding emissions cap of 108% of its 1990 emissions. This target may be appropriate for our national circumstances but will be challenging to meet. This paper examines the way Woodside Energy Ltd is addressing the threats and opportunities raised by the Kyoto Protocol.

The major risk to Woodside's business arises from the division of the Protocol into Annex B and non-Annex B. Australia is in Annex B, which is composed primarily of developed countries that have assigned emission amounts that will be legally binding when the protocol comes into force and is ratified.

Meeting the Australian target and the global greenhouse emission reduction objective will require increasing the substitution of gas into national fuel mixes. Natural gas, including LNG, has the lowest lifecycle emissions of any fossil fuel.

The Australian LNG industry is the only major Annex B supplier of LNG to Japan and thus would be at a severe competitive disadvantage if the costs of unilaterally imposed abatement policies and measures were applied to the industry in Australia that were not applied to its international competitors. The LNG industry is seeking differential treatment to alleviate this risk. Woodside has proposed a solution, put forward in this paper, that a scheme be negotiated into the Protocol at CoP6, allowing for the repatriation of credits from the LNG fuel cycle to the exporting country. This would permit fair competition across all LNG exporters.

Woodside is keen to undertake its fair share of emission reduction and has already implemented some projects that have been successful in this regard. Further implementation of beyond no regrets projects relies on the Commonwealth resolving the recognition for early action question. A trial framework for making decisions on early abatement projects is described.

Woodside is also investigating potential opportunities arising from the Protocol. Progress is reported on early investigation into clean development mechanism (CDM) projects and greenhouse abatement research and development (R&O). Sink enhancement studies are nearly complete and a detailed business case is under preparation.