The Albanese government is resisting a push by Japan for a major new Northern Territory gas export development to be given special treatment under Australia’s revamped emissions reduction policy.
The Kishida government has lobbied the Albanese government over its concerns about Australia’s safeguard mechanism, a climate policy that requires major industrial polluters to either cut greenhouse gas emissions intensity – how much they emit per unit of production – or pay for carbon offsets.
Japan faces criticism for not doing enough to phase out fossil fuels, and analysts say it risks missing the 2030 greenhouse gas emissions reduction target – a 46% cut compared with 2013 levels – it submitted at international climate talks. The Japanese government says it needs new gas supplies to ensure its energy security.
Under changes that took effect on Saturday, Australia’s 215 largest industrial and resources polluters need to reduce emissions intensity by up to 4.9% a year. New fields for liquified natural gas (LNG) export have to offset all carbon dioxide emissions within Australia, adding to the cost of developing a project.
Japan’s concerns relate to the scheme’s impact on the proposed Barossa LNG development, which is majority owned by the Australian company Santos. Jera, a Japanese company partly owned by the national governments, owns a 12% share of Barossa.
The Barossa proposal involves drilling for gas in the Timor Sea and constructing a pipeline to pump it more than 200km to Darwin for processing. Initial drilling work has stopped since a landmark federal court case found Santos had failed to consult with Tiwi Islands traditional owners.
Japan’s largest oil and gas production company, Inpex, is the majority owner of Icthys, another major LNG development near Darwin already in operation.
At a press conference on 16 June, the Japanese economy and trade minister, Yasutoshi Nishimura, said he held talks with the Australian climate change minister, Chris Bowen, and requested “flexible measures” for LNG developments supplying Japan under the safeguard mechanism. He said the Japanese prime minister, Fumio Kishida, had made a similar request to Anthony Albanese.
Nishimura said his government was consulting with Australia “regarding measures for protecting Japanese investors and ensuring a stable supply of LNG, in order to find a mutually acceptable solution”.
On Monday, a spokesperson for the Japanese embassy in Canberra reiterated the country’s government believed “the proposed change in the safeguard mechanism could have a significant impact on Japanese LNG in Australia”. The spokesperson said Japan and Australia “thoroughly share the recognition of the importance of taking appropriate environmental measures”.
“Upon that premise, the Japanese government intends to continue to closely consult with the Australian government with a view of reaching a mutually acceptable outcome that protects investment and secures a stable supply of LNG from Australia to Japan,” the spokesperson said.
A spokesperson for the Australian government backed the safeguard mechanism’s current design and indicated it would not change in response to the lobbying.
The spokesperson said the reformed safeguard created a regulatory framework that allowed industrial emitters to help meet Australia’s emissions reduction targets – including a 43% cut by 2030 compared with 2005 levels – and “their own corporate commitments”. The changes had been widely supported by business representatives, including the Business Council of Australia and the Australian Industry Group, they said.
“The government engaged extensively in developing the policy and has worked closely with key trading partners including Japan to ensure the scheme design is well understood,” the Australian government spokesperson said.
Japan’s pushback against Australia’s policy has come as it has also resisted international agreements to stop fossil fuel developments. A meeting of G7 leaders in Hiroshima last month repeated their commitment to reaching net zero emissions by 2050, but following a demand from Japan said countries could pursue new investments in gas in light of the energy market disruption caused by Russia’s invasion of Ukraine.
Japan has relatively few domestic energy resources and is the world’s largest importer of LNG, using it for about a third of its electricity generation. It has been criticised for releasing a plan earlier this year that emphasised the role of imported coal and gas over renewable energy.
Analysts at the Climate Action Tracker said the Kishida administration had missed an opportunity to place renewable energy at the core of Japan’s decarbonisation efforts and needed to commit to phasing out fossil fuels if it hoped to meet its 2030 target.
The head of the International Energy Agency, Fatih Birol, in 2021 said no new gas and oil fields or coal-fired power plants should be developed if countries were serious about acting on the goals of the landmark Paris climate agreement.
Llewelyn Hughes, a professor at the Crawford School of Public Policy at the Australian National University, said the debate over the safeguard mechanism design showed the need for close engagement between the two countries on what a transition to a zero emissions future would mean.
“I do think this is an indication in a way of the importance of having regularised bilateral engagement on transition issues,” Hughes said. “It’s such a big issue.”
