The final package for the Carbon Pollution Reduction Scheme delivers significant additional assistance to help the coal industry – Australia’s largest exporter - make the transition to a low carbon future.

“This package is a win for both the environment and the companies and workers within the coal mining sector,” said the Minister Assisting the Minister for Climate Change, Greg Combet.

“The enhanced assistance package will provide increased job security to workers within the industry. Further, increased assistance for coal mine fugitive methane emissions abatement will assist the sector transition to lower emissions production and thus provide additional long term job security.”

“The inclusion of fugitive methane emissions from coal mining in the scheme is also a major win for the environment. Given the share of emissions produced by the coal mining sector in Australia (expected to be around 5% of total national emissions by 2011/12) it is vital it plays its role in reducing emissions. It also sends a strong message to the international community about our seriousness in combating climate change.”

“The Government always recognised that a small proportion of mines, specifically underground ‘gassy’ type mines, have high fugitive methane emissions and are likely to face a disproportionate cost impact on their operations from the CPRS.”

“To allow operators of these emissions-intensive mines time to implement abatement opportunities and to ease their transition to the introduction of a carbon price, the Government has been strongly committed to provide a transitional assistance package.”

In the White Paper, the Government set out a $750m transitional package within the Climate Change Action Fund, the Coal Sector Adjustment Stream, to assist the most gassy mines.

“As part of a negotiated agreement with the Opposition to pass the CPRS, the Government has agreed to enhance this package of assistance.”

“Under this enhanced package there will be $1.5 billion of assistance provided to the coal sector over 5 years.”

There will be two components to this assistance:

• A $1.23b Coal Sector Adjustment Scheme will be established to provide transitional assistance to the most emissions-intensive coal mines in the form of free permits; and
• A $270m Coal Mining Abatement Fund within the Climate Change Action Fund (CCAF) will provide grant funding for coal sector abatement projects and capital grants, with a priority for electricity generation from waste coal mine methane.

“The Coal Sector Adjustment Scheme will provide free permits to the most emissions intensive mines (also known as “gassy” coal mines) that have a fugitive emissions intensity above 0.1 tonnes CO₂-e per tonne of saleable coal.”

Eligible mines will be those where coal mining operations were carried out for some or all of the two years from 1 July 2007 to 30 June 2009.

The pool of permits that will be set aside to provide assistance to these mines will be equal to 9.72 million permits per year fixed for five years. The assistance will be targeted to the most emissions-intensive mines, limited to fugitive methane emissions, linked to production and capped at base period production levels.

As an indication of this quantum, this pool is equal to around 60 per cent of the fugitive emissions from gassy mines during 2008/09.

“This new package of assistance will enable the fugitive methane carbon liability for the gassiest mines to be reduced from around $20 per tonne of saleable coal to around $5 per tonne of saleable coal at a $25 carbon price. It should be noted that, looking across all coal mines, the median carbon liability in relation to coal mine methane emissions is 80c per tonne at a $25 carbon price.”

“The outcome of the negotiations is evidence of the fact that the Government and the Opposition consider this a sustainable outcome.”

It has also been agreed that the Independent Expert Advisory Committee will examine the impact of the CPRS on the coal mining sector in the first scheduled Review in 2014. This review will draw on analysis by the Productivity Commission, and take into account advice from the CSIRO on the availability of cost-effective abatement technology.

“In addition, it has been agreed between the Government and the Opposition that the Coal Mining Abatement Fund established within the Climate Change Action Fund will be allocated an additional $20 million, taking it to $270 million.”

“Funding for abatement projects and capital grants will be provided on a three for one basis, with coal mine operators required to meet three quarters of the cost of the project. This means that the Fund will have effectively over $1 billion of capital available for abatement of emissions in the coal mining sector.”

To ensure the continued utility of this Fund any permits not allocated under the Coal Sector Adjustment Scheme, due changes in production, will be auctioned, and those auction revenues will be added to the $270 million Coal Mining Abatement Fund.

In addition, the Government will monitor the carbon cost pass through of captive coal mines which solely supply electricity generators.  This will be important in ascertaining the impact that the Carbon Pollution Reduction Scheme will have on these mines. This issue will also be considered by the Independent Expert Advisory Committee in the first scheduled review in 2014.

The Government and the Opposition have also agreed that the current COAG process to review specific Renewable Energy Target (RET) issues consider whether new waste coal mine gas electricity generation projects should be eligible under the RET. Coupled with the Coal Mining Abatement Fund, this would provide further incentives to use waste coal mine gas to generate electricity that will offset coal fired electricity.  If agreed, the RET would be increased to ensure the integrity of the 20 per cent renewable target by 2020.