Under the loupe: the case for carbon-offset LNG from Australia

Abstract

More than 2 million tonnes of carbon-offset (LNG) were traded in 2021, and we expect this market to exceed 25 million tonnes of LNG by 2030. A critical aspect to enable this growth will be the veracity of offset claims (which have come under increasing scrutiny from investors, lenders, and consumers), and compliance with the principles of additionality, permanence, and non-deterrence. This paper will examine broader trends in the decarbonisation of the LNG sector to prepare for a low-carbon world: renewables-sourced electrification, carbon capture, utilisation and storage (CCUS), and the use of high-quality offsets. We discuss the development of a cross-value chain downstream market for carbon-offset LNG in Australia’s North Asian customer-countries, such as in Japan where at least 47 downstream customers have signed carbon-offset GSAs (general security agreements) with 7 importers, and the advantages of Australian LNG to support this nascent market. Proximity lowers emissions from transportation, while the upcoming large-scale implementation of CCUS will lower well-to-ship emissions. For instance, CCUS at Moomba can remove more than 35% of the well-to-ship emissions from Darwin LNG, while the Ichthys CCUS hub will remove more than 22% of that from Ichthys LNG. Further, the existing participation from North Asian buyers in Australian LNG ventures ensures better visibility of the emissions profile that they take home. In addition, we discuss the advantages of purchasing LNG from high-accountability and high-transparency regimes as investors tighten scrutiny on ESG (environmental, social, and corporate governance) reporting, and how blockchain technology is being deployed to ensure robustness in carbon accounting.