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Australian National Registry of Emissions Units Bill 2011; Carbon Credits (Carbon Farming Initiative) Bill 2011; Carbon Credits (Consequential Amendments) Bill 2011

CHAIR —Welcome. The committee has received your submission as submission 15. Do you wish to make any amendments or alterations to your submission?

Mr Sweet —I do. I have got a three-minute presentation I would like to talk through, if that were possible.

CHAIR —Is that an alteration or an opening statement?

Mr Sweet —That is a very good question. It will be an opening statement.

CHAIR —So your submission stays the same and you will present an opening statement. Thank you, Mr Sweet.

Mr Sweet —First of all, thank you for this opportunity for our association to appear before your committee inquiry. Who am I? I have been directly involved with the waste service industry since 1995. I have managed many types of landfills, from very small council owned facilities to Australia’s second-largest landfill located in South-east Queensland. I am also chairman of the Australian Landfill Owners Association, having been elected to that position by the board, and I am a professionally qualified civil engineer and company director.

The Australian Landfill Owners Association or ALOA, as we like to think of ourselves, is the peak representative body for landfill owners across Australia and through its 28 member organisations operates 64 landfills across Australia. These sites receive over 15 million tonnes of solid waste per annum, or about 70 per cent of that generated nationally. ALOA members also provide services in waste collection, waste treatment and resource recovery and employ well over 12,000 people.

Landfill facilities owned by ALOA members have been active in reducing greenhouse gas emissions from their operations over the last two decades. In fact, the waste sector stands alone in its performance at reducing greenhouse gas emissions over this period. It has been the incentives provided largely by green electricity buyback tariffs, the national greenhouse gas abatement scheme and Greenhouse Friendly that have resulted in the reduction of these emissions. The landfill industry has proven that it will respond to such incentives by driving down its emissions. A reduction of 12.6 per cent has been achieved through a combination of an increase in landfill gas capture and combustion and the rationalisation of smaller sites into better managed regional facilities.

Today Australia’s larger landfills employ international best practice technologies to minimise their environmental impact. Aside from state-of-the-art leachate capture and management, this includes capturing methane generated from landfill organic waste to produce renewable electricity. Based on industry data, the waste sector now accounts for less than two per cent of Australia’s national greenhouse gas emissions. If properly structured, the Carbon Farming Initiative will reduce this even further.

ALOA supports the government in its attempt to reduce Australia’s greenhouse gas production and also supports the introduction of the Carbon Farming Initiative as a key initiative to achieve this goal. This support was expressed by way of a press release on 25 March which included an attempt—and I underlined ‘attempt’—to explain the preferred mechanism for unlocking further gains in this area. In short, depending on the value of the Australian carbon credit units, over three million tonnes of additional carbon dioxide equivalent gas could be abated.

It is important to understand that the production of landfill gas emissions is dependent on a wide range of factors such as the waste type, the design of the facility, the construction materials used, the capping, the operating procedures and rainfall, all of which vary from site to site. Current national greenhouse gas and energy reporting techniques for estimating the amount of methane gas emissions from landfill are expected to have a margin of error of plus or minus 30 per cent. This is obviously unacceptable. As a consequence, the landfill industry is working with the Department of Climate Change and Energy Efficiency to establish more accurate and precise estimation methodologies that are acceptable to both government and industry. The Carbon Farming Initiative, on the other hand, provides an incentive based on the actual capture and proper treatment of greenhouse gases, which is much fairer to all players and provides the greatest return for the largest capture.

In order to introduce some science in support of ALOA’s position on the Carbon Farming Initiative, a group of independent consultants were engaged to quantify the environmental benefit compared to the financial cost. The consultants modelled landfill gas emissions using independently gathered data from a national landfill survey undertaken by the Waste Management Association of Australia. Once the emissions were calculated, the consultants went on to prepare a sensitivity analysis, assuming a price for the Australian carbon credit units and a cost to install and maintain gas capture equipment.

The consultants also summarised raw data from the Waste Management Association survey and demonstrated that there are 49 landfills that receive over 25,000 tonnes of waste per year that do not currently collect landfill gas—that is, the current arrangements do not provide a sufficient incentive to encourage landfill gas capture. Taking industry standard costs to establish a landfill gas collection system, writing the costs off over the crediting period and including a maintenance cost, the consultants concluded that, with an Australian carbon credit unit value of $24, 3.2 million tonnes of carbon dioxide equivalent abatement could be achieved.

As an aside to this discussion, the Waste Management Association is a national body of professional waste management consultants, educators and operators. It is worth noting that, while the association funded the initial survey, the federal government has agreed to fund an update on the survey information every two years. The legislation is likely to introduce some regulations around the issue of additionality—that is, not providing additional carbon credit units for landfills that already have a requirement to install a gas collection system. Whilst this acts as a disincentive it also keeps a guard on those operators intending to make a windfall from the new legislation. The consultants determined that, once additionality was applied, the abatement available for Australian carbon credit units would reduce to 2.2 million tonnes. We still see that as an important contribution.

It is reported that there are over 600 licensed landfills across Australia, not all of which will be able to gain from the benefits forecast in the Carbon Farming Initiative. ALOA believes that a significant number of landfills and therefore the waste sector’s emissions will remain outside the Carbon Farming Initiative. Typically these landfills fall in the small, 25,000 tonnes or less per annum category. As such, ALOA calls on the government to establish a set of complementary measures to help combat greenhouse gas emissions from these smaller, uncovered sites. These measures ought to include but should not be limited to the introduction of gas capture and flaring incentives for all active sites; the further regionalisation of landfills and closure of smaller sites that do not have properly functioning gas collection systems; and the implementation of proper emission management systems on all closed landfills, especially those closed as a result of regionalisation. In conclusion, please let me reiterate that ALOA welcomes the recent proposed changes to the Carbon Farming Initiative legislation. Again, ALOA is enthusiastically committed to working with government to reduce greenhouse gas emissions from landfills and the waste sector.

CHAIR —Thank you, Mr Sweet.

Senator COLBECK —Effectively, you are saying you would like to be in on this process and, despite your attempts to date, you have not been able to achieve it.

Mr Sweet —We are saying this is an initiative that is going to provide Australian carbon credit units and if they are pitched at a certain level they are going to encourage the collection of methane gas which comes out of landfills. There is a relationship between methane gas and carbon dioxide—that is, that methane has a 22 times worse effect on greenhouse gases than carbon dioxide. Producing a tonne of methane and letting it liberate to the atmosphere is the equivalent of liberating 22 tonnes of carbon dioxide. A carbon credit unit of about $24 is going to provide an incentive for everyone to capture their methane. However, there are numerous regional landfills across Australia run by small towns that are below the 25,000 tonne threshold. We are also advocating having some additional rules in place so that we capture the rats and mice of the industry—lots and lots of small landfills.

Senator COLBECK —So when you are talking about it in the context of a rural initiative such as carbon farming, which is in some circumstances down to a relatively small scale, those regionally based small town type facilities could fit within the context of that sort of scale?

Mr Sweet —The sort of thing we would further advocate is regionalisation of landfills. Our company manages a landfill in Queensland where a single city council has been amalgamated with numerous shires around and they have consolidated all of their small landfills into one large, well-managed, engineered landfill which is capable of capturing all of those emissions. We would say that where the opportunity presents itself we should be using this legislation to try and consolidate the many small landfills into one large, regional, well-managed, well-engineered landfill.

Senator COLBECK —In circumstances where you perhaps have distance being a—

Mr Sweet —Tyranny.

Senator COLBECK —Yes, a tyranny or a factor inhibiting that, you could also have a combined management process that oversights them to help manage that overall efficacy, if you like, of aid management of the landfills but also collection and certification of the gas capture and storage.

Mr Sweet —That is correct. Our only concern with the very small landfills is that the carbon credit unit is not going to provide enough income for them to pay for all of the gas capture equipment. Some other mechanism will have to fund that process.

Senator NASH —Just on the issue of the methane: what is the process by which you collect it? Obviously, you do not do it at the moment. You talk about it escaping. What do you have to put in place to collect it? In light of what you just talked about, what is the cost for, say, a 25,000 type facility to put in that infrastructure to do what you want to do?

Mr Sweet —I love three questions in one. I will do my best, because I think by the time I have answered the first I will have forgotten the other two.

Senator NASH —That is all right. I might have forgotten the question!

Mr Sweet —Essentially, what we have is a large mound of putrescible waste which rots. When it rots it creates gas. To capture and control it, we generally have an impermeable, which means a clay or a plastic bottom, and then we have a cap, which is a plastic or clay cap. We have a very large mass of waste confined within essentially a waterproof outside layer. As we are placing our waste, we introduce pipe work into the waste mass and then we bring the pipes out to the surface where the impermeable layer is, and we pretty much hook them up to a machine which uses the gas as fuel. I hope I am not over simplifying it, but that is basically as simple as it gets.

Senator NASH —No. I am just trying to get a sense of how it works. What would the cost be to install something like that, say, on a landfill?

Mr Sweet —It is very much a chicken and egg argument as to how big the landfill is and how big all that waste is. But, typically—if I could refer to my notes for a second; I probably have not got quite the right answer for your question—over 25,000 landfills they can get a payback on their capital over the life of the carbon credit. That means for as long as it is producing gas. Typically for a smaller landfill, less than $200,000 will give them the pipe work and a flaring capacity. The flaring capacity converts the methane into carbon dioxide, so it reduces its harm by a factor of 22. The small landfills do not produce enough gas to keep the engine operating. So what we do under those circumstances is just let it flare off.

Senator NASH —In your position paper, as part of what you have given to the committee, you talk about the introduction of a mix of responsive uniform regulations and abatement incentives rather than a market based or tax regime. I take it from that that you do not support the introduction of a carbon tax. What would you see that mix of uniform regulations to be? Can you give us a sense of what you are thinking of there?

Mr Sweet —One of the great frustrations in moving around Australia is the variable legislations. I have done a bit—

Senator NASH —From state to state.

Mr Sweet —I have done a lot of travelling around Australia. I have seen the education systems vary from state to state and the road rules vary from state to state. And, as one would expect, there are variations in the environmental rules for operating a landfill. What we see is an opportunity within this legislation to just put out some uniform regulations, even if it is just a uniform framework. For example, if you look at Victorian landfills, they have predominantly gas capture in place because the Victorian government pushed in that direction very early on in the piece. New South Wales and Queensland do not have as many landfills with gas capture mechanisms, because they were not legislated by the regulator. So we would see this as an opportunity to try and produce a uniform set of legislation so that when we go from one state to the next it is not like going on an international visit.

Senator NASH —As indeed happens across a range of areas! Harmonisation is something that comes up regularly. Finally, also in the last point of your submission, you say:

… any market or tax response to climate change should initially focus on reducing the use of fossil fuel based missions.

Through what sorts of measures do you see that happening? How would you see the reduction in fossil fuel based emissions happening?

Mr Sweet —We were making a gentle suggestion. Currently, most of the electricity in South-East Queensland, where our large landfill is, is produced from coal. We are saying we would like better recognition for the gas which is harvested from a landfill and then used to produce electricity—and, in that process, offset the use of coal. That is the sort of mechanism we are looking for.

Senator NASH —Thanks.

CHAIR —Senator Milne.

Senator MILNE —I could not agree more about a uniform regulatory application to landfill, across the country. That makes eminent sense, and it is one of any number of measures that need to be regularised around the country. I am interested in your contention that, so long as you can access or sell credits, you do not need a market. Doesn’t that just mean, though, that you are then dependent on what the government set as the price for whatever that abatement is, where they will just say, ‘Right; you’ll get this much per tonne, and that’s it’? If there is no market, doesn’t that leave you totally vulnerable to governments determining the price of the abatement?

Mr Sweet —Potentially, yes. But our view is that there is going to be a fairly solid market about the level that will encourage the use of—

Senator MILNE —Why would they be in demand without a market?

Mr Sweet —We might be slightly at odds there, because we believe there will be a market for them.

Senator MILNE —But what you are saying here, as I understand it, is that you do not think you need a market based mechanism, a market or tax based response, that you can be part of. So, if you do not want a market, I do not understand where you are going to get your price from.

Mr Sweet —We may be at cross-purposes. What we are saying is that there is going to be a price on the Australian carbon credit units. That is what we are—

Senator MILNE —Yes, that is right, because it will be determined by a market for that. If you are saying, ‘Let’s forget about having a carbon tax or any kind of carbon market,’ the price is going to be what the government is prepared to purchase them for under their international obligations, in the absence of markets—or else you are in the voluntary market, which is a low price.

Mr Sweet —Okay. I might need to get some further advice on that particular question.

Senator MILNE —It does not matter. It does not alter the fact that uniform regulation would be good; capturing the emissions would be good—

Mr Sweet —Yes.

Senator MILNE —and we would like to see it happen. It is one of the Kyoto compliance activities and so it is one that would be captured early to maximise the benefit. So, in the event that this deal went through in its current form, you would be a beneficiary, and that would be good for the climate.

Mr Sweet —That is correct—and what it will do is draw a greater group of landfill operators into collecting their methane gas.

Senator MILNE —Yes, which is good. Thank you.

CHAIR —Thanks, Mr Sweet. One book that I have got here says that methane has about a 14 per cent share of global greenhouse gas emissions and that carbon dioxide has 77 per cent. You are not arguing that we should not deal with carbon dioxide, are you?

Mr Sweet —I am arguing for the lesser of two evils—that, if we are producing methane, we are better off liberating that gas as CO2, as opposed to liberating it as methane, on the basis that methane has a 22 times greater impact on the environment than CO2.

CHAIR —But CO2 is the bulk of the carbon pollution, isn’t it?

Mr Sweet —That is correct.

CHAIR —So are you saying you should not deal with the bulk of the carbon pollution?

Mr Sweet —No. I think your figures are 14 per cent for methane?

CHAIR —And 77 per cent for carbon dioxide.

Mr Sweet —Okay. What I am saying is that, if we liberated a hundred tonnes of gas and if 14 tonnes of that was methane and 77 tonnes was CO2, for the effect of the methane you would get the 14 tonnes and multiply it by 22.

CHAIR —Yes. But nobody is seriously arguing, other than you, that we should not deal with CO2.

Mr Sweet —Sorry. I am not arguing that we should not deal with CO2.

CHAIR —I just want to be clear on it.

Mr Sweet —That is a separate issue for me. The important issue for me is landfill gas capture and rendering it into a less harmful form.

CHAIR —Just to explore this and bit more I want to go back to what Senator Milne was saying. All the economists who have appeared at a number of the hearings I have been involved in have argued that a market price is the most efficient and effective way to deal with reducing carbon pollution. Do you have a different view on that?

Mr Sweet —Because we are landfill operators our view probably would be reasonably simple—that is, if the Australian carbon credit unit has a value which would provide the incentive to put in the landfill gas equipment, that will happen. If it does not, then it will not. So I am assuming that the economists are saying that the ACCUs will in fact be of sufficient value to provide the necessary incentive for industry to take the necessary steps.

CHAIR —Yes. Do you agree with that?

Mr Sweet —Yes. If we are in a position where we spend a million dollars on gas capture but we can sell only $10,000 worth of carbon credits, obviously we are not going to do that unless there is some other benefit somewhere along the line.

CHAIR —From the figures I have seen, there are about a thousand big polluters in terms of CO2 and you have to deal with them to actually get a price on the carbon pollution. Do you agree with the proposition that you have to deal with the big, what could be described here today as low-hanging, fruit?

Mr Sweet —Senator Cameron, I think you might be drawing me out of my field, out of my secure little cocoon of what I know about it.

CHAIR —I am not trying to do that deliberately; I am just seeking your view on this.

Mr Sweet —I would be prepared to not have a view at this stage.

Senator McEWEN —Mr Sweet, if this legislation does not get up and there is not a CFI, and in the context at the moment where there is not a price on carbon, would your members change their modus operandi to reduce methane gas emissions?

Mr Sweet —That is a very good question because there are other factors that cause you to put in a landfill gas collection. One of the incentives is the production of electricity and the sale of that into the grid. Some other measures, such as the Greenhouse Gas Abatement Scheme, have encouraged that kind of behaviour in the industry. If the price of electricity were to go up significantly, that of course would be another driver for people to recover their electricity in landfills which are big enough to produce enough gas to drive a generator.

Senator McEWEN —But it is possibly not a palatable thing for the community to have to experience higher energy prices to encourage landfill operators like yourself to reduce their methane emissions. So, from your point of view, is the CFI the way to go at the moment to encourage that behaviour change?

Mr Sweet —In short, Senator McEwen, that is why we are supporting the legislation. From our perspective, we think it is a very good way to go forward to capture our greenhouse gases. Some landfills will produce electricity and some landfills will just flare them off but, overall, there will be fewer fugitive emissions of landfill gas and greater consolidation of landfills and landfill gas, and better control can be exerted over them.

Senator McEWEN —I note from your submission that you are very keen for the start date of 1 July. Why is that?

Mr Sweet —We are pragmatic businessmen so the sooner the better. That will give us some certainty and we as organisations can get on with maximising our landfill gas capture.

Senator McEWEN —So certainty about these kinds of mechanisms is important to your members?

Mr Sweet —Certainly where it involves spending hundreds of thousands or millions of dollars in capital, yes.

Senator McEWEN —Thank you.

CHAIR —Mr Sweet, just for the record, the figures that I quoted were from the IPCC, not just my book.

Mr Sweet —I am prepared to accept that without any hesitation, Senator.

CHAIR —Thank you very much for your evidence today, Mr Sweet.

[11.47 am]