Chevron Australia, whose Gorgon gas plant failed to capture and store the amount of CO2 it was supposed to earlier this year, has announced it will be making up its shortfall via carbon offsets. What will this mean in practice?
In July, the carbon capture and storage facility at the Gorgon gas plant undershot the target it had been set by the West Australian government. It stored roughly five million tonnes of CO2 in the ground over a five-year period: some 30% of the total amount produced at the methane mine (for context, Australia as a whole emits roughly 500 million tonnes of carbon dioxide equivalent each year).
Gorgon’s initial Environment Protection Authority approval depended on storing 80% of the CO2 it produced, leaving a significant amount of CO2 to make up. After negotiations with the West Australian Government, the final shortfall stands at 5.23 million tonnes of CO2.
Chevron has now announced they’ve reached an agreement with the West Australian government, and will be making up the shortfall by buying carbon offsets for the 5.23 million tonnes, as well as investing $40 million dollars in lower carbon projects in Western Australia.
So: what do they mean by offsets, and what will this cost them?
Companies can offset their emissions by buying carbon credits. These credits, sold through different regulators, then spend money on schemes that either remove greenhouse gases from the atmosphere (such as via carbon farming), or prevent further greenhouse gases from getting into the atmosphere (such as via renewable energy projects).
There are varying levels of cost and reliability for these offsets. In a report, Chevron has stated that these offsets will be either:
- Australian Carbon Credit Units issued under the Carbon Credits (Carbon Farming Initiative) Act 2011;
- Verified Emission Reductions issued under the Gold Standard program;
- Verified Carbon Units issued under the Verified Carbon Standard program; or
- other offset units that the Minister has notified in writing meet integrity principles and are based on clear, enforceable and accountable methods.
The price of Australian Carbon Credit Units, which are sold and accounted through the Australian clean energy regulator, have reached prices of over $37 per tonne of CO2-equivalent recently, making the purchase of five million a fairly expensive endeavour.
The other units mentioned are lower in price, meaning Chevron is facing a bill of around $200 million – a significant fraction of the $3–4 billion required to build the plant in the first place.