The Morrison government has promised new measures to reduce greenhouse gas emissions, including introducing an incentive scheme to allow big industrial polluters to earn revenue by emitting less than an agreed limit.
It also plans to allow businesses to bid for funding from its main climate policy, the $2.55bn emissions reduction fund, for projects that capture emissions and either use them or store them underground.
Angus Taylor, the energy and emissions reduction minister, said the government had agreed to 21 of 26 recommendations in a review headed by former Business Council of Australia president Grant King, who was charged with coming up with new ways to cheaply cut emissions.
The appointment in October of the panel of business leaders and policy experts was not publicly announced, and was seen by observers as an effective concession the emissions reduction fund, now rebadged as a climate solutions fund, was failing to cut national pollution.
In a response to the review sent to Guardian Australia on Monday night, Taylor said the government would open up new opportunities to cut emissions across the industrial, manufacturing, transport and agriculture sectors using the fund.
He said it would build on the government’s “technology not taxes” approach to cutting emissions that encouraged voluntary emissions cuts without imposing a cost for releasing carbon dioxide.
Recommendations agreed by the government included allowing carbon capture and storage projects to qualify under the fund, a step the government said it had began consulting with industry on last month.
In a shift likely to be criticised by clean energy advocates, the government gave in-principle support for two agencies, the Australian Renewable Energy Agency (Arena) and the Clean Energy Finance Corporation (CEFC), to be given a “technology neutral remit” to support “the widest possible range of technologies that reduce emissions”. The Greens previously accused the government of planning changes to the CEFC to allow it to fund more fossil fuel projects.
The panel also recommended changing the “safeguard mechanism”, a policy that was promised to stop industrial emissions rising but that in practice has led to a 12% increase in pollution from the sector.
The King review suggested introducing a “below-baseline crediting mechanism”, which would reward companies that reduced emissions below a limit, known as a baseline.
To qualify, companies would have had to undertake “transformative” projects that reduce emissions intensity – the amount they emit per unit of production – so they were not rewarded for just producing less or shutting down.
In its response, the government said it agreed with the recommendation but used different language, saying it would establish a “low-emissions technology deployment incentive scheme”. It said there would be substantial consultation with industry on how best to implement it.
The proposal could be a step towards transforming the safeguard mechanism, which has been criticised as a pointless policy that did little to limit emissions, into what it was initially intended to become: an emissions trading scheme under which companies could buy and sell credits to each other. Whether that was the government’s intention was not immediately clear.
Experts have said the safeguard mechanism could become a meaningful policy that cuts pollution, but it would require setting emissions baselines at lower levels and reducing them over time as the country increasingly moved away from fossil fuels. Failure to tighten baselines below current levels could lead to companies being paid incentives without cutting pollution.
Taylor said the government would also develop a co-investment program with business to accelerate cleaner technologies in difficult sectors, such as heavy industry and transport.
Other changes recommended by the panel and agreed by the government included allowing companies to propose new methods under which they could be paid to reduce emissions, working with state and territory governments to encourage greater use of carbon offset credits generated using the emissions reduction fund, and subsidising the prohibitive cost of measuring emissions reductions through storing carbon in soil.
Taylor said the recommendations aligned with the government’s plan to release a “technology investment roadmap”. He said the roadmap would be out soon for public consultation.
Analyses have found the government is not on track to meet the 2030 emissions target set at the Paris climate summit, a 26-28% cut below 2005 levels, without using a carbon accounting loophole. Scientists have said the country should be making a deeper cut over that timeframe and reach net zero emissions by 2050.
Taylor has maintained Australia is on track to meet its 2030 target, and said these changes meant the government would beat it. “Our 2030 Paris target is a floor not a ceiling. These reforms will position Australia to overachieve on our 2030 Paris target while maintaining a strong economy,” he said.
Australia’s emissions had largely flatlined since 2014, when the Coalition repealed a national carbon price scheme, but are expected to dip this year due to the economic shutdown caused by the Covid-19 pandemic.