IEEFA Warns Australia Faces Billions in Liability Risk from CO2 Import Plan

The Institute for Energy Economics and Financial Analysis has criticised Australian government proposals to amend legislation enabling the import of carbon dioxide from other countries for burial in geological formations beneath the seabed, warning that the plan could cost taxpayers billions and relies on a technology with a long history of failure. IEEFA oil and gas analyst Kevin Morrison says the financial and environmental liabilities created by such projects would be so large they would effectively become too big to fail.

The proposed Environment Protection (Sea Dumping) Amendment Bill 2023 relies on carbon capture and storage, a technology in commercial use since the 1970s that has repeatedly underperformed its proponents' projections. Morrison notes that CCS was originally developed to recover more oil and gas from depleted wells rather than as a climate management tool, and that in its emissions-management application it has generated significant long-term cost overruns. Recent IEEFA research documented serious geological containment issues at Norway's Sleipner and Snohvit facilities — the two offshore CCS projects most frequently cited as industry successes — raising questions about geological storage reliability at scale.

Reports emerging since IEEFA filed its submission in July 2023 indicate Australia's Gorgon CCS facility near Barrow Island — operated by Chevron — will capture less CO2 in 2023 than in any prior year and that Chevron is spending additional capital modifying injection wells while still falling well short of the 80% capture rate mandated under its operating licence. Global energy-related CO2 emissions totalled 36.8 gigatonnes in 2022, while all operational CCS worldwide sequestered approximately 40 million tonnes — a figure Morrison describes as a rounding error in the totality of annual atmospheric emissions.

A specific concern raised in the submission is Santos's planned final investment decision in 2025 on the Bayu-Undan CCS project in the Timor Sea, which would involve CO2 sourced from Australia being stored in the maritime territory of Timor-Leste under unresolved liability arrangements. Morrison urges the Senate to amend the bill to require full disclosure of transboundary project arrangements and to impose enforceable environmental and legal protections. If passed unchanged, IEEFA argues the legislation would put Australia's 2030 emissions reduction targets and the Safeguard Mechanism's objectives at risk.

Key figure — 40 million tonnes — total CO2 sequestered globally by all CCS projects in 2022, against annual global energy-related emissions of 36.8 gigatonnes