NSW EPA releases Climate Change Assessment Requirements and Guidance for Large GHG Emitters

CCARs to be in included in SEARs

The EPA intends to recommend that CCARs are included in the Planning Secretary's Environmental Assessment Requirements (SEARs) for projects which are likely to produce large amounts of GHG emissions. Where included in SEARs for a project, the CCARs will require that:

The proponent must carry out a Greenhouse Gas (GHG) Assessment and prepare a Greenhouse Gas Mitigation Plan in accordance with the EPA’s Greenhouse Gas Assessment Guide for Large Emitters (available on the EPA website).

The Guide makes it clear that the CCARs are to be recommended for both new projects likely to produce large amounts of GHG emissions, and for modifications to existing projects (the effect of which is that the project will likely produce large amounts of GHG emissions). According to the Guide, a project will be considered a large emitter, and therefore subject to the CCARs and Guide, if it meets the following three criteria:

1. The project requires a development assessment and approval (including for modifications) under the Act.
2. The project involves one or more scheduled activities under Schedule 1 of the Protection of the Environment Operations Act 1997 (NSW) and/or will be carried out at a premises with an existing Environment Protection Licence (EPL).
3. The project is likely to emit above the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) threshold of 25,000 tonnes or more of scope 1 and 2 GHG emissions (calculated as CO2-e) in any financial year during the operational life of the project (based on planned operational throughput and as designed).

Guide for Large Emitters

The Guide supports proponents by setting out the GHG assessment and mitigation requirements to be addressed in the EIA and approvals process of projects with large emitter status and assists in undertaking the required GHG Assessment and preparing the required Greenhouse Gas Mitigation Plan (GHG Mitigation Plan) contemplated in the CCARs.

The Guide also supports the EPA and the consent authorities by providing a framework against which they review the adequacy of GHG assessments, although it is not intended for the Guide to limit or fetter any statutory powers.

Identifying projects with large emissions

Projects likely to emit above the NGER Act facility threshold of 25,000 tonnes of scope 1 and 2 GHG emissions (calculated as CO2-e) in any financial year during the operational life of the project (based on planned operational throughput and as designed) will be regarded as large emission projects, where subject to the requirement to obtain a development consent or other planning approval, and an EPL.

The GHG assessment boundary for the project defines which emission sources and activities are included in the assessment and which are excluded. When a project involves a modification to an existing operation, the 25,000 tonne CO2-e threshold applies specifically to the activities falling within the GHG assessment boundary and not to the whole operation. The assessment boundary must be defined to account for the impact of the project on emissions elsewhere in the facility.

To ensure alignment with the NGER Act, project emission estimates must include energy savings measures and emission mitigations planned for in the project design. However, carbon offsets will not be counted towards the threshold criteria.

In assessing whether project emissions may exceed the NGER facility threshold, the Guide specifies that:

• Proponents must use the latest version of the Clean Energy Regulator (CER) Emissions and Energy Threshold Calculator and user guide or apply appropriate NGER methods.
• Proponents must consider the CER’s Supplementary Guide: Operational Control. However, the Guide notes that whilst the obligations under the NGER Act apply to controlling corporations only, the requirements outlined apply to all projects that exceed the NGERS threshold, whether or not the proponent is considered a controlling corporation.
• Only project emissions within NSW are to be considered when assessing whether to apply the CCARs.

GHG Assessment Report

Where the CCARs apply, a proponent is required to carry out a GHG Assessment. The purpose of this assessment is to provide detailed information about potential GHG emissions associated with the project. The Guide provides detailed guidance on the steps required when preparing a GHG Assessment Report. We summarise the main components of these steps below:

Step 1: Describe the assessment boundary and scenarios

Describe the GHG assessment boundary for the project accounting for GHG emissions associated with all relevant stages of the project. Projects involving new operations and modifications to existing operations should develop emission projections that address all sources within the assessment boundary. For proposed modifications, a ‘project only’ scenario must include both:

• new sources of emissions associated with proposed activities within the modification; and
• emission sources associated with existing activities to be altered by the modification.

Where a project involves a modification to existing activities, the GHG assessment must include a ‘business-as-usual’ scenario and a ‘modified-business’ scenario.

Step 2: Identify and prioritise sources of GHG emissions

Identify all sources of scope 1, 2, and 3 emissions within the assessment boundary and prioritise emissions sources for mitigation. The GHG Assessment must include all relevant GHGs regulated under the NGER Act, being carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulphur hexafluoride (SF6), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs).

Step 3: Select measures to avoid and reduce emissions

Identify and select measures to avoid and mitigate emissions from the project. The EPA expects proponents to apply the mitigation hierarchy to first avoid and then reduce GHG emissions as much as possible, before finally offsetting residual emissions to meet emission reduction objectives. The feasibility and effectiveness of mitigation measures is to be assessed, including cost-recovery options.

Step 4: Estimate emissions with mitigation measures

Give emissions estimates for the proposed project design, considering planned and committed emissions avoidance and mitigation measures. The GHG Assessment must provide annual estimates of:

• scope 1 emissions, by GHG and cumulatively for all GHGs, specified by source and categorised by the Intergovernmental Panel on Climate Change sectors as applied within Australia’s national emission projections;
• scope 1 emissions intensity per unit of production or activity for the primary scheduled activity under Schedule 1 of the POEO Act. These should be based on the Safeguard Mechanism: Prescribed production variables and default and best practice emissions intensities where applicable;
• total scope 2 emissions;
• scope 2 emissions intensity per unit production or activity for the primary scheduled activity under Schedule 1 of the POEO Act; and
• scope 3 emissions, by category, for all categories most likely to be relevant and representative of most scope 3 emissions, using the latest National Greenhouse Account factors where available.

Step 5: Emission benchmarking and goal setting

The GHG Assessment must address:

• the anticipated regulatory obligations for the project under the Safeguard Mechanism (including any expected baseline determinations and expected use of flexible compliance arrangements, such as Safeguard Mechanism Credits);
• projected annual and whole of life scope 1 emissions for the project must be compared against ‘Current Policy’ and ‘Base case’ projections for NSW, accessible on the NSW Net Zero Emissions Dashboard; and
• the overarching long-term and interim GHG emission goals for the project.

Step 6: Offsets strategy

Carbon offsets must be used only for residual emissions that cannot be avoided or reduced, with the purpose of achieving the specified emission goals. Domestic offsets under the Safeguard Mechanism, as well as voluntary offsets purchased for residual emissions may contribute to a proponent’s overall commitments in their GHG Mitigation Plan. 

Carbon offsets must meet offset integrity principles having regard to the integrity standards and principals set out in the Commonwealth Carbon Credits (Carbon Farming Initiative) Act 2011 and the Climate Active Carbon Neutral Standard for Organisations.

Step 7: Independent expert reviews

For projects with scope 1 and 2 emissions exceeding 100,000 t CO2-e per year at any time of the operational life, mitigation assessments must be the subject of independent expert review.

GHG Mitigation Plan

A proponent is also required to develop a GHG Mitigation Plan to reflect the analysis and findings of the GHG Assessment. A template for the GHG Mitigation Plan is provided in the Guide.

The GHG Mitigation Plan must address:

• scope 1, scope 2 and scope 3 GHG emission estimates over the life of the project as assessed;
• emissions goals, demonstrating a commitment to continuous improvement to ensure reductions over the life of the project;
• expected obligations for Safeguard facilities under the NGER Act, if applicable;
• expected obligations for electricity firming infrastructure under the Electricity Infrastructure Investment Regulation 2021, if applicable;
• proposed measures to avoid, reduce, or substitute emissions, demonstrating consideration of best available design, technology, and management measures;
• proposed strategies to offset emissions, after applying the mitigation hierarchy to first avoid then reduce emissions as much as possible before offsetting;
• proposed monitoring and reporting of emissions performance, to demonstrate progress towards meeting goals; and
• suitable timetable for review of the GHG Mitigation Plan.

Climate Change Mitigation and Action Plan

Existing large GHG emitters are not forgotten in the Guide, which notes that under Action 5(b) of the EPA’s Action Plan, large GHG emitters holding an EPL will soon be required to prepare a Climate Change Mitigation and Action Plan (CCMAP). The CCMAP will incorporate and expand on the GHG Mitigation Plans required by the Guide for new proposed developments. Guidance on CCMAPs is currently being prepared by the EPA.

Small emitters

Projects that are not anticipated to be large emitters - those that will have scope 1 and 2 GHG emissions below the 25,000 tonnes of CO2-e threshold - are not to be covered by the CCARs and Guide. However, the Guide notes that the EPA is preparing a General Greenhouse Gas Assessment Guide (GGAG) which will set out general requirements for projects not projected to result in large emissions. We anticipate that the GGAG will also apply to projects that require development consent and an EPL.

Next steps

The proposed CCARs and Guide will be under public consultation until 5pm on Monday, 1 July 2024. Please contact us if you would like to discuss the implications of the CCARs and Guide on your existing and future projects or would like assistance in preparing a submission to the EPA.