Woodside’s North West Shelf gas extraction project extension: a case study in how opacity in Australia’s Safeguard Mechanism increases costs to other companies as it enlarges the mitigation challenge

Steven Myburgh

Woodside’s North West Shelf gas facility was recently granted conditional approval to continue operations until 2070. Should the project receive the final go-ahead, followed by an approval of Woodside’s connected Browse-to-North West Shelf offshore gas project, significant quantities of greenhouse gases would be released over a roughly 40-year period, points on public record. The novel contribution of this work is to appraise such a scenario’s impact on other Australian companies participating in the Safeguard Mechanism (SGM), the country’s program with cap-and-trade characteristics, designed to reduce emissions from the highest-emitting industrial facilities.

Here, we use statistical approaches to extend Australian Government emissions projections relating to all SGM-covered facilities, for the twenty-year period leading up to 2050. In doing so, we assess the share of declining annual gross emissions taken up by both these projects, should they be actualised. Extending this, we use publicly available carbon credit price projections and internal abatement costs to estimate the total costs associated with the additional mitigation burden imposed on other SGM-participating companies.

We estimate that in the 20-year period from 2031 to 2050, additional on-site abatement and offsets will cost A$60.9 billion for all companies participating in the SGM, A$5.73 billion for the current highest emitting company, Chevron, and A$276 million for the company owning a hypothetical Safeguard-covered facility with mean annual emissions.

We relate this to the opacity behind modelled assumptions informing the baseline calculation that sets the rate at which SGM-covered facilities are expected to decarbonise. This is contextualised within the ambition associated with Australia’s Nationally Determined Contribution pledges, as well as the overall climate mitigation challenge. We posit that including new high emitters while keeping net-zero aligned interim targets steady, would mean other companies must reduce their facilities’ emissions more steeply to compensate. Finally, we argue for greater modelling transparency in setting components of the SGM baseline calculation, and that the SGM should be a vehicle to accelerate progress from an already credible decarbonisation trajectory—not a corrective mechanism for flawed approval decisions.