Australian and New Zealand ESG Update
/Chevron’s carbon capture test case has failed
Activist group Sustainable Energy Now says the oil and gas industry needs to recalculate its net-zero forecast after Chevron’s carbon capture project was a failure. Chevron has agreed that it has failed to capture the greenhouse gas emissions it promised at the Gorgon oil and gas project. Its five-year report card was due on 18 July 2021. The carbon capture and storage project was the world’s largest and is a major test case for carbon capture technology.
Gorgon is supposed to be capturing four million tonnes of carbon dioxide per year, which is about 80 per cent of the carbon extracted from the reservoir gas. The gas burnt in the project is not counted.
The former chair of Sustainable Energy Now, WA, Ian Porter, says the report card that is overdue will show that the project has been a massive failure. Porter is a former oil, gas and power executive.
Porter says: “The five-year report on Gorgon’s CCS will likely find it has only managed to capture 30% of the carbon dioxide it promised. That equals a tiny fraction of its entire production if you include Scope 3 emissions from the ultimate use of its LNG.
“It’s a shocking failure of one of the world’s largest engineering projects. But, given the lack of rigour and testing around the technology that was used, I cannot say it is unexpected.
Porter is calling for Chevron to face hefty fines and be forced to offset more than six million tonnes of unauthorised legacy carbon dioxide releases.
The project used $60 million in taxpayer funds for the overall $3.1 billion project, part of a wider $70 billion LNG export operation. Gorgon is owned by Chevron (47.3 per cent), ExxonMobil and Shell (25 per cent stake each), with the remaining owned by Osaka Gas, Tokyo Gas and Japan’s largest power generator, JERA.
Climate change duty of care now law
Eight high schoolers have sat through a historic court case where the judge ruled that the Federal Environment Minister has a duty to avoid causing children harm when approving a new coal project.
In Sharma V Minister for the Environment, Justice Bromberg found that carbon emissions that would be released from mining and burning of fossil fuels will worsen climate change, ultimately causing personal injury and death to the children of Australia.
This is a landmark ruling that entrenches the duty of care into Australian law. The Minister must take reasonable care to avoid causing personal injury or death to Australian children when exercising her powers to approve the Vickery extension project - now set in national environment law. The Minister was also ordered to pay the students’ legal costs.
The case came about after Whitehaven Coal sought approval for an extension to its Vickery mine project in New South Wales. The May ruling found that emissions from the expansion would likely expose the children to risk of injury or death, thus any approval would breach the duty of care. The Environment Minister Sussan Ley now must decide how to proceed with the extension request.
While other countries are ruling out new coal projects, some corners of Australian politics continue to support coal mining and coal-driven power plants.
Renewables set Aussie record
Solar and wind power are setting new records in Australia, while also lowering electricity prices and reducing fossil fuel dependency and profitability. In 2020 wind took over natural gas in power generation for the very first time, with wholesale prices at their lowest since 2015, reports the Australian Energy Regulator in its annual State of the Energy Market report.
A massive 2.5 gigawatts of rooftop solar entered the National Electricity Market providing solar energy to most of Australia, with daytime solar energy influxes, electricity demand from the grid sinks, driving down prices. Coal-fired power plants are not designed to run at low output levels, thus deeply challenging the economics of coal-powered plants.
At the end of 2020, around 27 per cent of Australian buildings had solar systems on their rooves, the highest in the world (figures from Bloomberg New Energy Finance (BNEF)). There were 3,662 instances of negative prices in the net energy metering (NEM), according to the report.
Read a summary of BloombergNEF’s New Energy Outlook 2021
AGL ‘hastens’ coal exit with company transfer for Liddell
Liddell power station is to be put into a new company by its planned 2023 closure date after AGL Energy plans to ‘de-merge’ the power plant by putting most of the business into a new company, Accel Energy. BHP did a similar thing when it ‘exited’ Newcastle and Whyalla steelworks via OneSteel, and Port Kembla via Bluescope Steel.
The announcement formalises plans made in March with a change in chief executives and a drop in share price of about 20 per cent. Accel Energy will remain Australia’s biggest power generator. Three gas power stations across the country will remain with AGL, along with other energy assets. AGL confirmed a ‘material step-down in earnings’ in the last financial year, likely due to the uptick in renewable energy entering the grid.
Cruelty-free portfolios: ISS weighs in on animal testing in investments
ISS ESG has produced a Sector-Based Screening piece on animal testing in investing. There are over 2,000 companies currently involved in animal testing activities. The piece has the following main takeaways:
Animal testing-related ESG assessments can be tricky since there are many types of animal testing, differing regulatory frameworks, alongside company commitment and performance in the space
There is a lack of company disclosure on animal testing so analysis is complex
Animal testing is a values-based issue with individual investor approaches varying considerably in ESG strategies
Granular, high-quality data access allows more nuanced approaches to this issue
“Cruelty-Free Portfolios: How To Approach Animal Testing In Investments?” full paper is available for download from the Institutional Shareholder Services (ISS) online library.
