Australian LNG Producers Win Concessions on Emissions Costs

By Angela Macdonald-Smith

Dec. 15 (Bloomberg) -- Woodside Petroleum Ltd., Chevron Corp. and other liquefied natural gas producers in Australia won concessions that may reduce the cost to their businesses of Australia’s planned carbon trading system.

The LNG industry was included among emissions-intensive trade-exposed businesses that will probably qualify for some free permits under the design of the system announced today by Climate Change Minister Penny Wong. It wasn’t eligible for any free permits under the government’s draft proposal, causing companies to warn investments in new projects were at risk.

“This is a major step forward,” Belinda Robinson, chief executive of the Australian Petroleum Production & Exploration Association, said in a telephone interview. Concerns that the effect of the carbon trading system would threaten investment in new LNG projects “have been alleviated quite considerably,” she said.

Australia will aim to reduce carbon emissions by between five and 15 percent from the 2000 level by 2020, Wong said today. Australia’s LNG producers, alumina and oil refiners “appear likely” to be eligible for 60 percent free permits under the plan, while aluminum smelters and steelmakers may get 90 percent of their permits free, the government said.

Final decisions on the eligibility of industries for free permits will be made next year after a “thorough assessment,” the government said. Activities in the pulp and paper manufacturing industry, the iron and steel industry and plastics, chemicals and glass manufacturing may also be eligible for some free permits, it said.

Activities that emit more than 2,000 tons of carbon dioxide-equivalent per million dollars of revenue will get 90 percent of their permits free, while those that emit between 1,000 and 1,999 tons per million dollars of sales will get 60 percent free, according to the White Paper. The eligibility for free permits may also be assessed in terms of millions of dollars of valued-added, it said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net