Future gas projects in doubt as Labor-Greens climate deal fuels new energy row

The future of major new gas projects — including in WA — is under a cloud after the Albanese Government agreed to a “hard cap” on pollution from major emitters to secure the Greens’ support for its signature climate action policy.

Greens leader Adam Bandt is celebrating a “huge hit” to the fossil fuel industry after winning concessions from the Government during high-stakes negotiations on a redesign of the so-called safeguard mechanism.

Mr Bandt said the emissions cap would mean “many” of the 116 coal and gas projects in the development pipeline around the country would not be able to go ahead.

He warned the Greens were now “coming for the rest”.

The peak oil and gas lobby group has sounded the alarm about a deal that it said ignored the central role of natural gas in meeting Australia’s climate goals.

The Coalition has also accused Labor of placing a “hard cap on the growth of the Australian economy”.

But the Albanese Government is downplaying the potential repercussions, flatly rejecting the suggestion its deal with the Greens would push up power prices by killing off investment in new energy projects.

The Greens had been threatening to torpedo Labor’s plan unless it agreed to a blanket ban on new coal and gas projects.

The minor party ultimately backed down from that stance, settling for 13 concessions which should make it tougher for new projects to get off the ground.

The deal means the Bill crucial to implementing the new regime will pass the Senate if the Government can get two more crossbenchers on board.

The package of changes includes setting a “hard cap” on total emissions from polluters captured under the safeguard mechanism.

If new or expanded projects are tipped to blow the emissions budget, the Climate Change Minister could intervene to change the rules.

Climate Change and Energy Minister Chris Bowen would not speculate on how the powers could be used, telling reporters that “others can reach conclusions about the implications”.

New gas wells would also be required to be net zero from the start of operation.

“This is a big hit on coal and gas that has been delivered by the Greens,” Mr Bandt said.

The West Australian understands a number of oil and gas giants were on Monday meeting with the Federal Government to understand the changes, amid concerns it could add to the cost of doing business in Australia.

It’s understood Woodside’s Scarborough and Shell’s Crux projects, which are set to come online in the coming years, could face production output risks from hard emissions caps.

Investors were quick to sell off stocks in major gas companies as news of the Labor-Greens deal broke on Monday morning, with Woodside’s share price down 3.3 per cent and Beach Energy 3 per cent when trading closed.

Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch said the changes would create new barriers to investment in natural gas projects, which would make the Government’s climate targets harder and more costly to meet.

“We can’t let politics and ideology get in the way of sensible, evidence-based climate and energy policy,” she said.

Resources Minister Madeleine King said reforms to safeguard mechanisms would secure the future of the gas industry in Australia, which she reiterated was crucial to the transition to net zero.

“The reforms bring the certainty business has long called for and will allow our largest emitters to invest and stay globally competitive,” she told The West.

The Government also agreed to set aside an extra $400 million to support sectors needed to power clean energy industries, including cement, steel and aluminium.

That funding is on top of $600m to ensure industries facing overseas competition aren’t worse off.

The Coalition’s opposition to the Bill intensified after the Labor-Greens deal was announced.

“It’s one thing to decarbonise the Australian economy but you don’t want to decapitate it on the way,” Shadow Climate Change and Energy Minister Ted O’Brien said.