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AIGN Submission to the
Climate Change Authority’s review of the
National Greenhouse and Energy Reporting
Scheme
(NGERS)
September 2023
AUSTRALIAN INDUSTRY GREENHOUSE NETWORK 1
CLIMATE CHANGE AUTHORITY NGERS REVIEW AIGN SUBMISSION
TABLE OF CONTENTS
SUMMARY ........................................................................................................................................................... 3
ALIGNMENT WITH PARIS GOALS ................................................................................................................ 4
OBJECTS OF THE ACT ...................................................................................................................................... 4
COVERAGE: WHOLE-OF-ECONOMY APPROACH..................................................................................... 4
INTEGRITY .......................................................................................................................................................... 5
METHODS ............................................................................................................................................................................ 5
NEW METHODS .................................................................................................................................................................. 5
CHALLENGE MISPERCEPTIONS......................................................................................................................................... 5
SCOPE 2: STREAMLINED AND CONSISTENT ENERGY REPORTING ................................................. 6
GHG PROTOCOL: INTERNATIONAL ALIGNMENT .......................................................................................................... 6
MARKET-BASED METHOD FOR SCOPE 2 EMISSIONS..................................................................................................... 6
RESIDUAL MIX FACTORS ................................................................................................................................................... 6
BIOFUELS: INTEGRATING NEW ENERGY SOURCES ........................................................................................................ 7
SCOPE 3: SUPPLY CHAIN AND PRODUCT STEWARDSHIP .................................................................. 7
CONCLUSION ...................................................................................................................................................... 8
AUSTRALIAN INDUSTRY GREENHOUSE NETWORK 2
CLIMATE CHANGE AUTHORITY NGERS REVIEW AIGN SUBMISSION
SUMMARY
The Australian Industry Greenhouse Network (AIGN) welcomes the opportunity to provide a submission to the Climate Change Authority (CCA) for consideration during its legislated review of the
National Greenhouse and Energy Reporting Scheme (NGERS).
AIGN notes the questions contained within the CCA’s Survey 1 and recommends to the Authority that:
Objects and scope
• Any proposed changes are rigorously assessed against the objects of the Act.
• The credibility and integrity of Australia’s internationally regarded national reporting system are
recognised and continue to be endorsed by the Government.
• A phased expansion of NGERS is introduced to improve data collection across non-covered
sectors (40% of Australia’s emissions).
Integrity
• NGERS continue to uphold the highest integrity standards and to do so through open,
collaborative, and constructive dialogue with clients.
• Where reports emerge, scientific or other, that challenge or contradict NGER data or methods,
the Government should verify and respond promptly with either a public response to such
reports or a commitment to address the matters raised (via the determination process).
• The continuous review and improvement requirements embedded in the NGER determination
guidance are recognised and communicated as an effective instrument to annually review and
revise emission factors based on sound science and ground truthing.
• The emergence of remote sensing measurement should be rigorously ground-truthed against the
existing ‘bottom-up’ methods, and any measurement method changes should be assessed on a
cost-benefit basis.
Indirect emissions
• The framework and purpose for Scope 2 energy and electricity reporting should be reviewed, and
a working group of reporters and data users be established to advise on scope and format and
address issues such as double counting.
• Scope 3 emissions is an important data analysis tool to assess climate risk and a working group
should be established to advise on scope and format, recognising that NGER is not a suitable
frame for this purpose.
1(https://www.climatechangeauthority.gov.au/timeline-extended-authoritys-survey-national-greenhouse-and-energy-reporting- act)
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CLIMATE CHANGE AUTHORITY NGERS REVIEW AIGN SUBMISSION
ALIGNMENT WITH PARIS The purposes of this information include:
GOALS • informing the development of policy;
• informing the Australian public;
The Climate Change Act 2022 requires policies to have regard to Australia’s Paris-aligned net-zero • meeting international reporting by 2050 target and related matters (e.g., obligations;
Australia’s emissions reduction target of 43% • assisting government programs and below 2005 levels by 2030), to ensure consistent activities; and progress towards the world’s goal of limiting global warming. • avoiding duplication of similar
reporting.
AIGN supports this alignment and recognises that the NGER legislation is an important and The second object relates to the ‘safeguard effective component of the Australian outcomes’ which are specifically about the
Government’s approach to climate change Safeguard Mechanism achieving its intended management and its obligations under the Paris goal of reducing emissions, expressed as a
Agreement. ceiling of cumulative emissions, while trade-
exposed industries' competitiveness is
The level of ambition required to meet Paris supported.
Agreement goals will require deep and rapid action across the world.
The inherent uncertainty in this space justifies COVERAGE: WHOLE-OF- the Government’s attention to maintaining the ECONOMY APPROACH international competitiveness of entities operating in Australia, including in the As stated in the objects of the Act, NGERS is development of international best practice designed to inform and underpin Australia’s benchmarks. climate policy suite.
AIGN recognises the need to strike a careful This requires alignment across policies, which balance to satisfy multiple priorities and to can be seen in programs such as the Safeguard ensure that the underlying data on which Mechanism and the Emissions Reduction Fund.
domestic climate policies are based is credible, NGERS should also seek alignment with verifiable, and clearly reported. Australia’s National Gas Inventory, which forms
the core of Australia’s reporting to the United
Nations Framework Convention on Climate
OBJECTS OF THE ACT Change.
On this basis, AIGN supports expansion of
NGERS is key to underpinning a substantial
NGERS to non-covered sectors, to promote a part of the Australian Government’s climate
whole-of-economy approach to reaching our policy suite and supporting ambition in aiming
2030 and 2050 emissions reduction targets.
for net-zero emissions by 2050.
Expanding compliance reporting to these
The stated objects of the NGER Act are sectors (40% of Australia’s emissions) will twofold. facilitate the alignment with the actions needed
Firstly, NGERS was to: for a net-zero pathway and underpin Australia’s
international reporting obligations.
‘introduce a single national reporting framework for the reporting and dissemination of information related to While AIGN broadly supports the benefit of greenhouse gas emissions, greenhouse gas projects, energy having a more inclusive reporting base covering consumption and energy production of corporations.’ more of the economy, many factors will need to
be balanced to bring this about (e.g.,
transparency, cost, materiality).
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CLIMATE CHANGE AUTHORITY NGERS REVIEW AIGN SUBMISSION
It would require care and consideration To address this, a hierarchy of conservative consistent with the design of the current (overstated) estimation factor-based methods
NGERS framework. was developed.
As such, a phased approach is recommended to All methods were developed carefully and build capacity and allow time for learnings to be systematically to uphold the integrity of the data integrated into the design. being collected. Reporting entities can apply the
method best suited to their facilities.
To foster a whole-of-economy decarbonisation approach, the Government should also assess This approach is reinforced by the annual the suitability of the facility threshold of determination process, led by the Department,
25,000 tonnes. Any change to the threshold to review and revise emission factors where should be carefully considered; this would warranted.
require consultation and analysis of the amount of data and types of facilities a lower threshold would include in the scheme. New methods
Achieving net zero by 2050 is widely recognised The emergence of remote sensing measurement as a difficult and ambitious, albeit essential, should continue to be supported, and undertaking. All sectors will need to engage in improvements monitored. At the same time, it the transition. should be recognised that a ‘top-down’ method
Expanding the coverage of NGERS will aid must be rigorously ground-truthed against the
Australia’s efforts by improving our ability to existing ‘bottom-up’ methods.
monitor and verify abatement, and to design This is a highly complex area requiring appropriate incentives and limits to achieve our significantly more work to calibrate for emissions targets. background emissions sources. These
measurement methods should also be assessed
AIGN is in favour of all reasonable efforts towards this endeavour and recommends a on a cost-benefit basis.
consultation process with existing reporters, Potential new methods should be subject to the new sectors, and data users. same stringent standards that current methods
were developed by. If and/or when such
methods have the capacity to provide sound
INTEGRITY facility-level data suitable to the NGERS
framework, AIGN members will be interested
The NGERS framework deserves its high in being involved in a considered, sensible regard as a strong, credible, and comprehensive process to evaluate their inclusion in NGERS.
framework for reporting all six Kyoto Protocol recognised greenhouse gases.
Challenge misperceptions
The yearly NGERS Measurement
Determination process, as well as regular Greenhouse gas emissions reporting is complex legislated reviews, allow changes to be and requires sophisticated analysis and introduced to ensure the framework can be commentary.
improved in response to new information. AIGN is concerned that the strong history of
NGERS is being diluted by unchallenged claims.
Methods The rationale and history for NGER methods
should be more broadly understood and
The design of NGER emissions calculation communicated.
methods was motivated by the first object – to create a framework for the measurement and This will correct the misperception (from some) reporting of data related to greenhouse gases. that there may be significant under reporting of
emissions, and that the application of emission
The Act recognised that direct measurement factors inherently implies this when compared was not always the most practicable, cost- to direct metering.
effective, or materially appropriate approach.
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CLIMATE CHANGE AUTHORITY NGERS REVIEW AIGN SUBMISSION
This assumption ignores the logic with which GHG Protocol: international
NGERS was designed and the conservative approach taken to develop emissions factors. alignment
Reporting entities that use estimation rather The GHG Protocol Corporate Accounting than direct metering are not withholding Standards allow for the removal of double information or completing their obligations to a counting of scope 2 emissions when they are lesser degree of veracity. Further, there may be reported as scope 1 emissions elsewhere within site-specific determinates that preclude direct an inventory.
measurement / metering. Examples include gross and net energy
The Act is objective-based rather than consumption within a facility, and when a prescriptive, and as such focuses on reporting facility within a controlling corporation reports greenhouse gas emissions rather than scope 1 emissions from generating electricity prescribing the method for each element within that is consumed at a second facility within the each facility. same controlling corporation.
Any reports that challenge the veracity of When facilities are aggregated in a corporate-
NGERS should be expediently reviewed and level report, this leads to double counting, which where proven, changes integrated through the should be addressed. A net scope 2 emission determination process, and where unproven, value for corporate aggregate reporting could be claims of this nature should be strongly refuted, considered before market-based reporting is as they threaten to undermine the integrity of incorporated into NGERS.
NGERS (and, potentially, reporting entities by extension) without due cause.
Market-based method for scope 2
emissions
SCOPE 2: STREAMLINED AND
The CCA’s previous consultation paper, which
CONSISTENT ENERGY covered several issues, included detailed
REPORTING technical content on a market-based method for
scope 2 emissions.
AIGN members have consistently requested a Despite the optionality of this proposed reframing of the energy produced and method, there is concern with the short consumed reporting element of NGERS as it is consultation period, and the limited consultation misleading and confusing for many due to an leading up to the detailed design before the inherent element of double counting of energy Department proposes to implement this consumed. A company therefore will report a method.
different energy figure to that which they report elsewhere e.g., an annual report or to another Additionally, there is some concern that the government agency. method still needs stress testing for soundness
and technical correctness. The consultation
Data users are highly likely to conclude that an timeframe does not allow enough time for these entity’s consumption and/or production of concerns to be adequately addressed.
energy is much higher than the actual energy produced/consumed.
The stated object of the act is to provide a single
Residual mix factors national framework for greenhouse and energy The use of a national residual mix factor (RMF) reporting. However, AIGN members note that is not universally supported, as it can give they are still required to report energy emissions inaccurate and skewed results, particularly in the for other compliance-related obligations e.g., states/territories with the highest and lowest
ABS, ABARE, and company annual reports. renewable electricity generation.
Some AIGN members also have an interest in Additionally, corporate dual electricity reporting revising the emissions factors used for reported would not be on a comparable and equivalent energy. basis, as these are completed using location-
based factors.
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CLIMATE CHANGE AUTHORITY NGERS REVIEW AIGN SUBMISSION
AIGN suggests state and territory-based RMFs Once biofuels and fossil fuels are mixed it is not should be provided, similar to location-based possible to track actual molecules, despite the factors available under NGERS. These would fuel mix proportions being known at the point allow for quality and comparability of reporting, of comingling.
much better than a national factor.
A key purpose of a market-based approach is to reflect commercial choices and the resulting SCOPE 3: SUPPLY CHAIN AND differences these may make to inventory. This PRODUCT STEWARDSHIP purpose would be better served by providing state and territory based RMFs. AIGN supports a sensible approach to scope 3
Where the facility purchasing electricity is not emissions reporting. A whole-of-economy one of the primary electricity grids, the formula approach to reaching net-zero should include for calculating market-based scope 2 emissions consideration of scope 3 emissions in Australia’s should allow the facility to use a factor provided carbon footprint, to better understand our by the supplier for the local electricity impact in both domestic and global contexts, generation grid. and to explore options for supporting
decarbonisation.
Scope 3 reporting includes the entire supply
Biofuels: integrating new energy chain (on an equity rather than operated basis) – sources and the supply chains of entities’ suppliers; an
administratively complex, expensive, and
AIGN welcomes the implementation of the methodologically challenging reporting exercise.
proposed changes that relate to the addition of new biofuels on 1 July 2023. There are many views from stakeholders
regarding the purpose of scope 3 reporting,
AIGN notes that a significant outstanding pointing to a fundamental need for stakeholders element still to be resolved, both for new to come to a better understanding of each biofuels and for biomethane (added last year), is other’s positions and concerns.
the application of location-based accounting.
AIGN supports the urgent development of a For AIGN members, scope 3 reporting makes solution to this issue. the most sense in the context of managing risk.
Scope 3 emissions, by definition, are emissions
The Safeguard Mechanism would certainly that occur outside an entity’s direct control, and benefit from a method to recognise and therefore they represent a potential risk (or a incentivise the use of lower emissions fuel potential opportunity) to the entity’s operation.
mixes. A mass-balanced accounting approach is preferred to reflect the emissions reduction For this reason, AIGN is engaging on scope 3 benefit associated with the purchase and/or use reporting within the Treasury’s consultation on of biofuels. designing a climate-related financial disclosure
framework. This will effectively include climate
Some AIGN members have raised concerns that risks and opportunities to the suite of financial if a market-based approach were taken for the risk and opportunity reporting obligations of replacement of fossil-derived feedstocks for entities.
biofuels, a ‘precedent’ approach could be taken for all alternative feedstocks. The concept of operational control is the
foundation on which the NGERS framework is
In the case of pyrolysis oil derived from tyres or built. Companies report emissions that are waste plastic, the economic viability of some of produced at their operated facilities – which these projects would be severely limited in a they control, both in terms of measurement and market-based approach. Therefore, a mass- output.
balanced approach for all alternative feedstocks is supported. Given the NGERS framework is facility-based,
and entities report on the basis of operational
In many cases, biofuel distribution sees the fuels control of a facility, AIGN does not consider comingled with their fossil fuel alternative, often NGERS to be the correct tool for reporting via shared infrastructure. scope 3 emissions.
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CLIMATE CHANGE AUTHORITY NGERS REVIEW AIGN SUBMISSION
One of the challenges of reporting scope 3 In considering this written submission and other emissions in NGERS would be the difficulties contributions to this conversation, please for reporters to obtain emissions information recognise AIGN’s broad membership base. Our from third parties – it would not be feasible to engagement reflects our long-held climate expect an entity to track and disclose the change policy principles and is reflective of the emissions information of other businesses. common views of our members but does not
Scope 3 emissions are furthermore not limited directly represent any individual industry to Australia, and acquiring reliable data from association or corporate members.
other jurisdictions for NGERS would be
AIGN members are best placed to provide problematic at best.
detailed, specific feedback relevant to their
Despite scope 3 reporting being unsuitable industries, locations, and other circumstances.
within the NGERS framework, AIGN is in
Thank you for taking AIGN’s feedback into favour of exploring how scope 3 emissions can
consideration in your review of NGERS.
be most appropriately reported.
AIGN welcomes future opportunities to engage
AIGN recommends the Government form a
with the CCA.
working group to explore the many issues related to reporting scope 3 emissions.
Reporting entities should be strongly represented in such a working group, and complemented with end users (e.g., the investor group on climate change and similar) and auditors to assist in bringing balance to their output.
Issues for the working group to explore should include the purpose of reporting scope 3 emissions, the materiality of different sources of scope 3 emissions (e.g., supply chain emissions versus emissions associated with the administration and operation of a business), and the use of scope 3 emissions data by governments and other end users.
The working group should support the
Treasury’s work on climate-related financial disclosures and the Department’s work on carbon border adjustment mechanisms, advising on an approach to scope 3 reporting and seeking workable solutions that meet the needs of reporting entities and end users in a credible reporting framework.
CONCLUSION
AIGN is a network of industry associations and individual businesses. Our focus is on collaborative discussions on key climate policy issues and providing a forum for information- sharing and analysis.
AIGN is a unique community of highly experienced professionals, bringing together our collective knowledge and expertise in international, national, and local climate policy.
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