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On 1 March 2021, the Commonwealth Minister for Energy and Emissions Reduction, Angus Taylor, launched the $50 million Carbon Capture, Use and Storage Development Fund (Fund) to support the growth of carbon capture, use and storage (CCUS) opportunities in Australia. The Fund is part of the Commonwealth Government’s wider $1.9 billion new energy technologies investment package, which was announced by Prime Minister Scott Morrison in September 2020.
The establishment of the Fund follows the release in September 2020 of the Commonwealth Government’s ‘Technology Investment Roadmap: First Low Emissions Technology Statement – 2020’ (Statement).[i] The Statement was developed following a public consultation process conducted in 2020 and sets out the Commonwealth Government’s strategy to accelerate the development of new and emerging low emissions technologies.
The Statement identified carbon capture and storage (CCS) as a priority low emissions technology. Under the Statement, priority low emissions technologies are technologies that are expected to have transformative economic and abatement impacts and that have high potential to reduce emissions across multiple sectors and applications.
The Statement sets out the Government’s ‘economic stretch goal’ for CCS, being its ambitious but still realistic goal to bring CCS to economic parity with existing mature technologies. That goal is for CO2 compression, hub transport and storage to cost less than $20 per tonne of CO2 sequestered. That goal does not, however, cover the cost of carbon capture processes.
It was recognised in the Statement that CCS deployed at scale is required to meet the global goals set out in the Paris Agreement. The Statement also noted that CCS will underpin new low emissions industries (including “blue” hydrogen) and provide a potential decarbonisation pathway for industries for which it is hard to abate CO2 emissions, such as natural gas processing and cement production. However, the Statement acknowledged that CCS is likely to add costs to projects compared to incumbent technology and, for that reason, requires targeted government support and incentives to increase its deployment.
The Fund will run over three years from 2020-21 to 2022-23 and will support CCUS pilot projects or pre-commercial projects aimed at reducing emissions. The Commonwealth Government has released the ‘Grant Opportunities Guideline – Carbon Capture, Use and Storage Development Fund’ (Guideline) to assist entities with applying for the grants available from the Fund and understanding how applications will be determined.[ii]
The Guideline notes that the Fund’s objectives include:
The Guideline sets out a range of requirements in respect of an applicant which need to be met in order for it to be eligible for a grant from the Fund.[iii] Income tax exempt entities, individuals, partnerships, unincorporated associations and certain other organisations are not eligible to obtain a grant from the Fund. To be eligible for a grant, the applicant will need to provide evidence:
The Guideline also sets out a range of requirements in respect of a project which need to be met in order for an applicant to be eligible for a grant from the Fund.[iv] Those requirements include that the project must:
The Guideline contains detailed provisions on what constitutes eligible expenditure.[v] Broadly speaking, to be eligible an expenditure must be a direct cost of the project or be incurred in respect of project audit activities.
The amount of the grant under the Fund awarded to an applicant for a project may be up to 100% of the eligible expenditure for the project, with the minimum grant amount for a project being $500,000 and the maximum grant amount for a project being $25 million.
If an applicant is successful, it will be required to enter into a grant agreement with the Commonwealth Government.[vi] The grant agreement will, among other things, set out the grant funds to be paid by the Commonwealth Government and the timing or milestones for such payment. The grant funds can only be spent on eligible expenditure incurred on an agreed project as defined in the grant agreement.
A successful applicant who enters into a grant agreement will need to provide progress reports, an end of project report, and such other ad hoc reports as may be requested. Such an applicant may also be asked to provide an independent audit report verifying that the grant funds have been spent in accordance with the grant agreement. Government representatives may also undertake compliance visits during the life of the project to ensure compliance with the grant agreement.
The deadline for submission of applications to participate in the Fund is 5.00pm AEDT on 29 March 2021. Given this deadline, potential applicants will need to act quickly if they wish to participate in the Fund.
Despite concerns regarding the effectiveness of existing CCS facilities, such as the Gorgon CCS project on Barrow Island (due to delays in commencing operations), the Commonwealth Government’s $50 million pledge to develop new and existing CCS facilities is a strong indication of the importance of this technology in Australia’s quest to meet its emissions targets under the Paris Agreement.
The adoption of CCUS technologies in Australia is also being incentivised by the Commonwealth Government’s pledge to introduce a new CCS methodology under its Emissions Reduction Fund. While work to develop this new method has begun, it is only in its initial design process and is scheduled to be released for public consultation in the second quarter of 2021. Release of the draft methodology will give further indication of the Commonwealth Government’s long-term strategy to incentivise investment in CCUS technologies in Australia.
[i] Available at https://www.industry.gov.au/data-and-publications/technology-investment-roadmap-first-low-emissions-technology-statement-2020
[ii] Available at https://www.business.gov.au/grants-and-programs/carbon-capture-use-and-storage-development-fund
[iii] See Section 4 of the Guideline.
[iv] See Sections 4.3 and 5 of the Guideline.
[v] See Section 5.2 and Appendices A and B of the Guideline.
[vi] See Sections 6 and 8 of the Guideline for a detailed description on the assessment criteria and process that the Commonwealth Government will consider and undertake in deciding whether to award a grant from the Fund to an applicant.
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