Economics Committee

Manufacturing Division
Mr Peter Clarke, General Manager, TCF and Automotive Reviews

Senator LUDLAM-How much is the Australian government contributing to this initiative overall? You may have mentioned this figure in your opening remarks.

Mr Clarke-The Prime Minister's announcement was that the Australian government would fund the initiative at the rate of up to $100 million per year.

Senator LUDLAM-Is that going forward into the future for a specified period of time?

Mr Clarke-That program does not yet appear in the budget statements because we have not yet gone through the formal budget process, so I am unable to advise you on the longevity of that program at this time.

Senator LUDLAM-So it was just a policy announcement. You did mention before, in response to Senator Farrell's questions, that you were not seeking formal endorsement from other countries, but has there been any indication of financial support from other governments?

Mr Clarke-We are not seeking formal endorsement at this stage. There will very likely come a time when our request to governments, industry and stakeholders will change, but that would be in the implementation stage rather than in the consultation design stage. The question about financial contributions from governments, industry and other bodies is exactly one of the questions that we are exploring during this consultation and design stage. What is the business model of the institute? One of the key points, though, is that, by announcing essentially the underwriting of this initiative by the Australian government, we have removed the obstacle of financial contribution to participation by other bodies. What we have been saying to governments and industry is that of course we would welcome funding. The goal of testing the commercial deployment of CCS requires a large amount of funding. Funding for the institute would be very welcome. The real funding, of course, is the 20-plus demonstration projects. That is where the big dollars are needed and that is where very large-scale probably public-private partnerships will be needed.

Senator LUDLAM-Perhaps we will go there next. I recognise these are probably aspirational targets, as you are just unpacking this project, but your target was for-correct me if I am wrong-20 commercial-scale projects by 2020?

Mr Clarke-The number of 20 projects of a commercial scale by 2020 is the goal that was adopted by the G8 on the advice of the CSLF and IEA. We have been very careful in our consultations not to presume ownership of that goal. That is a G8 statement. We think it is a good statement. We think it is taken on good advice from the CSLF and the IEA. We are keying off it, would be the way that I would describe it. It is a point of reference for the scale and urgency of the task.

Senator LUDLAM-What would you qualify as commercial scale? Is that a 1,000 megawatt plant? 500 megawatt?

Mr Clarke-At this stage we have used two metrics. In the case of power stations-noting that is not the totality of it, but it is the largest part-we have said 250 megawatts and 1 million tonnes per year of CO2 to be stored.

Senator LUDLAM-Two hundred and fifty megawatts times 20-

Mr Clarke-Of generation.

Senator LUDLAM-Or thereabouts?

Mr Clarke-Yes.

Senator LUDLAM-Times 20. What proportion of global energy generation would you be sequestering at that scale?

Mr Clarke-I do not know that I can answer that question in a literal sense.

Senator LUDLAM-Just orders of magnitude. Twenty 250-megawatt power stations, given expected energy demand-

Mr Clarke-A very small number. That is demonstration scale, quite clearly. At that level it is not, of itself, making an enormous contribution to the global abatement task.

Senator LUDLAM-I would put it to you that it is not making any contribution at all.

Mr Clarke-The tonnes are the tonnes.

Senator LUDLAM-It is vastly less than one per cent, though.

Mr Clarke-I cannot do that arithmetic off the top of my head. It is a demonstration scale activity, though. I acknowledge that.

Senator LUDLAM-I was confused by the use of the term ‘commercial scale'.

Mr Clarke-Commercial scale refers to the individual plants, the individual projects. It is clear that, if the technology is to be successfully commercialised, industry needs confidence to invest in these things and needs to understand the economics and operation of this technology. The advice that the G8 took was that 20 by 2020 is an appropriate short-term goal to achieve that. Does your question go to what contribution CCS can make to the global abatement task?

Senator LUDLAM-I suppose that is where I was going-by 2020, which is not so far away.

Mr Clarke-2020 is the date on which the expert agencies are saying that commercialisation could commence at a very large scale. If you look at the projected scenarios of groups like the IEA, the IPCC and indeed others doing this kind of modelling, the CCS contribution curve takes off at around 2020. It really only starts to become measurable post 2020. In this week's IEA publication that I talked about, their low-emission scenarios suggest that CCS needs to contribute about one-fifth, or 20 per cent, of the necessary emission reductions to reduce global greenhouse gas emissions by 50 per cent by 2050 at reasonable cost. Their analysis is that CCS is an essential technology to achieve deep emission cuts.

Senator LUDLAM-But in terms of emission cuts between now and 2020 we are not really expecting anything to be on the radar.

Mr Clarke-It is demonstration work through that period.

Senator LUDLAM-I will leave it there.