{"data":{"id":"sbm379a1fe032555d7a50817","short_id":54,"created":"2025-09-01T06:46:54.258Z","space_id":"spc36e573d0a3f7d764ba5a0","project_id":"prj36e56fbec442ea80abc09","org_id":"org25a4efd179c5b5ba55d6e","content":{"name_ba03fa":"Lauren Howell","submission_5bfc8c":"fil3954cd34e51514862290d","name-of-organisa_9974be":"Fortescue"},"is_topic":false,"title":null,"count_replies":0,"closed":false,"reply_to_id":null,"last_activity":null,"reactions":{},"_files":{"fil3954cd34e51514862290d":{"id":"fil3954cd34e51514862290d","bucket":"files-au-climate","remote_path":"cca/p/prj36e56fbec442ea80abc09/submission/spc36e573d0a3f7d764ba5a0/Fortescue.386246ef.pdf","url":"https://storage.googleapis.com/files-au-climate/cca/p/prj36e56fbec442ea80abc09/submission/spc36e573d0a3f7d764ba5a0/Fortescue.386246ef.pdf","filename":"Fortescue.pdf","transcribed":"1 September 2025\n\nMr Matt Kean\nChair\nClimate Change Authority consultation@climatechangeauthority.gov.au\nDear Mr Kean,\n\nClimate Change Authority Issues Paper: 2025 Annual Progress Report\n\nA proudly Australian company with balance sheet strength, Fortescue is a global leader in large-scale, ultra-efficient and highly complex developments with a proven track record in developing and operating assets in remote and isolated locations. Fortescue has a strong focus on decarbonisation, evidenced by its industry leading target to achieve real-zero carbon emissions across our terrestrial mining operations by\n2030. We are establishing a global portfolio of renewable energy, green iron, green hydrogen and derivatives, battery system and green technology projects and operations that are at the forefront of the global energy transition.\n\nFortescue welcomes the opportunity to provide comment on the 4th Annual Progress Report (APR) including an assessment of the performance of the Safeguard Mechanism from the Climate Change\nAuthority (CCA). We understand the report will provide advice to the Minister for Climate Change and\nEnergy’s annual climate change statement and believe our response addresses the key barriers currently being faced by industry in transitioning to net zero.\n\nAustralia has made great progress towards its emission reduction targets and is striving to do its part in addressing climate change. However, stronger policy intervention is needed to drive further reductions to achieve an ambitious 2035 target. In our submission to the CCA’s consultation on the 2035 emissions reduction target we argued for the setting of at least a 75% emissions reduction target if we are to meet the objectives of the Paris Agreement and limit warming to below 2 degrees and ideally below 1.5 degrees.\n\nFortescue considers an economy wide carbon price to be the most effective way to decrease Australia’s emissions and meet our international emissions targets. A carbon price would be more efficient than the current policies in place because it would cover the entire economy while incentivising industry to opt for the lowest cost technologies. This flexibility means that emissions reductions happen where they're cheapest and easiest to achieve, leading to a more cost-effective transition to a low-carbon economy.\n\nOur primary concern with the current climate policy framework relates to the disincentive that is created by the Diesel Fuel Tax Credit and how it undermines the Safeguard Mechanism’s incentive for large mining companies, like Fortescue, to invest in decarbonisation projects. The credit returns significantly more money to claimants per tonne of carbon created through diesel usage than the Safeguard Mechanism currently costs per tonne of carbon for a carbon credit. This is further explored in our responses below.\n\nClimate Change Authority Issues Paper: 2025 Annual Progress Report\nPage 1 of 12\nThe remainder of this submission will address the consultation questions relevant to Fortescue’s decarbonisation activities in Australia. Thank you for the opportunity to comment on this consultation. If you would like to discuss any of the issues raised in this submission, please contact\nor myself on the below details.\n\nYours sincerely\n\nBronwyn Grieve\nDirector of Global Sustainability & External Affairs\nFORTESCUE\n\nPage 2 of 12\n2. What changes could the Australian Government make to improve the effectiveness of existing policies or address gaps in supporting Australia’s transition to a low-emissions, climate-resilient, and prosperous economy? In your response, you may wish to consider areas such as:\n2.1 Delivering emissions reductions, including accelerating the deployment of low emissions\ntechnologies and practices\n\nFortescue’s top priority is addressing the decarbonisation disincentive created by the fuel tax credit scheme.\nWe recently partnered with the Australian Academy of Sciences and Technological Engineering in a report on Australia’s diesel use across five industry sectors including mining. The report found that\n\n“Diesel combustion contributes approximately 17% of Australia’s total carbon emissions, posing a\nmajor obstacle to meeting the country’s targets of a 43% reduction by 2030 and net zero emissions\nby 2050. Australia imports nearly 29 billion litres of diesel annually, reflecting a heavy dependence\non international fuel markets and diminishing domestic refining capacity.”1\n\nThe report examined diesel use across mining, freight, agriculture, fisheries and forestry and looked at the alternatives that have emerged including biofuels, electrification and hydrogen. It found a number of interconnected barriers to decarbonisation including cost, infrastructure, technology and policy. In particular, ATSE found that the fuel tax credit scheme is a major disincentive to diesel substitution for\nAustralian industry acting as a subsidy on the use of a significant fossil fuel and one of the top 20 expenses in the federal budget, costing the country almost $11 billion every year.\n\nFuel Tax Credit Scheme\n\nUnder the Fuel Tax Act 2006 (Fuel Tax Act), taxes and excises on liquid fuels (including diesel and petrol), are credited back to certain business users. The rate of the fuel tax credit is currently 51.6c/L (indexed to\nCPI) for off road users, while heavy vehicle users on public roads receive a credit of 19.2 c/L.2 Light vehicle commercial users and households receive no fuel tax credit.\n\nIn 2025-26, the federal budget forecasts fuel tax credits to cost a total of $10.805 billion.3 This will increase to $13.107 billion in 2028-29, while total fuel taxes collected will rise from $27.3 billion to $30.3 billion.4\nAccording to Treasury, the increase in fuel tax credits largely reflects an expected increase in the use of fuels that are eligible for credits.5\n\nThe mining industry – specifically metal ore miners – are the single largest industry beneficiaries of fuel tax credits. In 2023-24, 245 metal ore mining entities claimed $1.67 billion in tax credits.6 The remainder of the credits are claimed by more than 180,000 individual entities. The mining industry at large (including coal)\n\n1 ATSE, Decarbonising diesel industries\nTransition technologies and policy pathways for diesel reduction in Australian mining, freight and agriculture, fisheries and forestry, August 2025, https://www.atse.org.au/media/2swjt3wu/atse-decarbonising-diesel-industries-report-\n250827-final.pdf\n2 ATO Website Rates for fuel acquired from 4 August 2025\n3 Budget Paper No. 1 p 136\n4 Budget Paper No. 1 p 103\n5 Budget Paper No. 1 p 136\n6\nTaxation statistics 2022–23 Excise and fuel schemes: Fuel tax credits scheme – claims paid, by industry2, 2006–07 to 2023–24 financial years\n\nPage 3 of 12\nclaims approximately 47 per cent of tax credits, with 19 per cent claimed by the transport, postal and warehousing industry, and 12 per cent for the agriculture, forestry and fishing industries.\n\nWithin the mining industry some large miners, like Fortescue, have announced whole or partial decarbonisation of their mining activities. However, the fuel tax credit scheme is a significant disincentive to decarbonising diesel fuel assets. This disincentive does not support Australia’s goal of reaching net zero by\n2050.\n\nReducing the cost of diesel for the mining industry incentivises its ongoing use and disincentivises investment in decarbonisation. Using cheap diesel dramatically impacts the internal rate of return (IRR) on any investment in decarbonisation.\n\nFor example, if a large mine consumes 150ML of diesel per year at $1.50/L, the DFTC would provide roughly $75 million per year (150ML at $0.5/L rebate). This means that a mine investing $1.5 billion in eliminating diesel consumption, loses $75 million per year from its projected savings, increasing the payback period by 2.5 years, as illustrated below in Figure 1.\n\nThis is undermining the incentives in the Safeguard Mechanism which requires Safeguard Facilities to reduce their emissions in line with legislated baselines.\n\nA Safeguard Facility must manage any emissions above its baseline by surrendering Australian Carbon\nCredit Units (ACCUs), with each ACCU representing 1t CO2-e. Since the 2023 amendments, Safeguard\nFacilities that reduce emissions below their baselines can earn Safeguard Mechanism Credits (SMCs) with each representing 1t CO2-e below the baseline. SMCs can be surrendered, traded or retained for future use.\n\nACCUs can currently be purchased for approximately $37.00 each, while the first SMCs were issued in early 2025 and traded at a slight discount to the ACCU spot price.7 This price equates to approx. $0.10/L of\n\n7 Safeguard Mechanism - DCCEEW\nPage 4 of 12\ndiesel.8 In other words, the $0.50/L fuel tax credit received for burning diesel is approximately 5 times the cost of exceeding an emissions baseline under the Safeguard Mechanism, or the incentive for keeping or reducing emissions below the baseline.\n\nThe 51.6c/L rebate on off-road use completely undermines the Safeguard Mechanism. For every tonne of diesel burnt over a facility’s baseline, the diesel user will pay ~$37t while earning $191 in fuel tax credits.\nPut simply, that’s a ~$37t/CO2-e disincentive vs $191t/CO2-e incentive not to decarbonize.\n\nAs a company making large investments in decarbonisation Fortescue is calling for amendments to the fuel tax credit or the Safeguard Mechanism to remove the investment disincentive.\n\nWe recognise that reform could be challenging with 180,000 fuel tax claimants who are mostly small and medium sized businesses so an option may be to focus on the largest users first.\n\nIn its Interim Report Investing in cheaper, cleaner energy and the net zero transformation the Productivity\nCommission recommended filling gaps in incentives. It said that where no emissions-reduction incentives exist, governments should, if feasible, extend existing policies or create new incentives that achieve similar effects. Gaps raise the cost of meeting emissions targets. Emitters lacking an incentive to reduce emissions will not fully exploit low-cost options.\n\nIt is our submission that the disincentive created by fuel tax credits is creating a gap in the Safeguard\nMechanism that needs to be filled to incentivise decarbonisation by large users of diesel. There are several ways this could be done.\n\nOptions for Reform\n\n1 Cap the Fuel Tax Credit at $50m and convert the balance into a Transition Tax Incentive\n\nIn a recent report, Transition Tax Incentive: Reforming Fuel Tax Credits into a Decarbonisation Tailwind\nClimate Energy Finance has set out the details for their proposal that fuel tax credits be capped at $50 million per consolidated group9 with all additional credits converted to a Transition Tax Incentive paid to the group but which can only be invested in mine electrification and decarbonisation in Australia. This budget neutral approach would improve the internal business case for decarbonisation projects and effectively convert a decarbonisation headwind into a tailwind.\n\nThe $50 million cap would impact the 15 largest diesel users who would not lose any cash provided they invested amounts above $50 million into decarbonisation. Setting the cap at $50 million would mean only businesses using around 97mL of diesel or more per year would be affected and no farmers, fishers, foresters, freight operators or smaller miners would be affected. The large companies would be able to implement their decarbonisation plans at the same time as creating opportunities for Australian businesses to supply equipment and expertise. A Transition Tax Incentive would improve the internal business case for these companies by removing the distorted signals sent by the fuel tax subsidy when considering the internal case for decarbonisation projects in the mining sector.\n\n2 Other options for reform\n\n(a) Reform the Safeguard Mechanism\nThe Safeguard Mechanism is due for review in 2026-27 but the lack of incentive for diesel decarbonisation is already apparent. Under the Safeguard Mechanism mining Safeguard Facilities can exceed their\n8 1 litre of diesel produces 2.7kg CO2-e: Federal Register of Legislation - National Greenhouse and Energy Reporting\n(Measurement) Determination 2008, Schedule 1, Part 3 (Item 40)\n9 See their latest report Transition Tax Incentive: Reforming Fuel Tax Credits into a Decarbonisation Tailwind\n\nPage 5 of 12\nbaselines by more than 30% and be required to provide a statement explaining why they have not undertaken more on-site abatement.10 This is intended to deter facilities from excesses above 30 per cent but the value of ACCUs surrendered will still be 5x less than the value of fuel tax credits for the diesel burned to create the emissions - $37/t CO2-e vs $191/tCO2-e.\nThis deterrent needs to be stronger to improve the business case for investment. An option would be to amend the Safeguard Mechanism to cap the number of ACCUs that can be surrendered to offset diesel emissions. For example, a Safeguard Facility might not be allowed to surrender ACCUs or SMCs to offset an excess over the baseline of more than 30% where more than a set percentage of the emissions result from burning diesel. The result would be that the facility would be in non-compliance and would face a penalty unit (currently $330 under the Safeguard Mechanism) for each tonne over the 30 per cent excess.\nThis would strengthen the incentive for Safeguard Facilities to keep emissions well below a 30 per cent excess.\n(b) Align payment of fuel tax credits with the environmental objectives of the Safeguard Mechanism\nWhen the Fuel Tax Act was enacted in 2006 it contained a number of environmental considerations including that the fuel tax credit would not be available for on-road vehicles unless they met one of four environmental criteria11 and a requirement for large fuel users, receiving more than $3 million per year in fuel tax credits, to join the Greenhouse Challenge Plus Programme in order to receive payment of credit entitlements.12\nNow that Australia has the Safeguard Mechanism it would be consistent with these precedents to tie the payment of fuel tax credits to performance in the Safeguard Mechanism. Under this approach the Fuel Tax\nAct could be amended to provide that no fuel tax credit will be payable in respect of diesel burned by a\nSafeguard Facility that, in the preceding year, has exceeded its baseline by more than 30%.\nAgain, this would be expected to incentivise companies burning diesel to invest in decarbonisation to ensure emissions do not exceed baselines by more than 30%.\n(c) Road User Charging\nIn its Interim Report Investing in cheaper, cleaner energy and the net zero transformation the Productivity\nCommission recommended that Federal and State Governments consider a national approach to road funding to ensure that electric vehicles are also contributing to road funding.13\nIt has been reported that the Treasurer is working on a new road user charge for electric vehicles.\nThis provides an opportunity to reconsider the balance between road user charges and charges for other social costs. At present heavy vehicles users using diesel or petrol travelling on public roads pay a Road\nUser Charge (RUC) of 32.4 cents per litre and receive a credit of 19.2 cents per litre. The Productivity\nCommission recommends that this amount (18.4 cents per litre at the time of their report) should be seen as an emissions charge to be paid by heavy vehicles used on public roads. Small vehicles do not receive a credit and effectively already pay both the RUC and the emissions charge.\nThe Productivity Commission suggests that the Australian Government could also reduce the refunds received by users of heavy vehicles that do not use public roads. Their tax credit rate could be phased down until their rate of fuel excise is 19.2 cents per litre. This rate would match the emissions charge that public-road users would pay if their tax credits were phased out. According to the Productivity Commission\n\n10 https://cer.gov.au/markets/reports-and-data/safeguard-data/2023-24-baselines-and-emissions-data\n11 Fuel Tax Act 2006 s 41-25\n12 See Fuel Tax Act 2006 (as made) Div 45, this Division has since been repealed.\n13 https://www.pc.gov.au/inquiries/current/net-zero/interim/net-zero-interim.pdf see pages 20-28\n\nPage 6 of 12\nthis change would give these operators an incentive to switch to less emissions-intensive vehicles. (see page 26).\nThe Productivity Commission points out that renewable diesel currently attracts the same excise as diesel so this would need to be addressed so that miners are incentivised to use low emissions fuels as a substitute for fossil fuels.\nIf this approach is adopted it may still be necessary to amend the Safeguard Mechanism or the Fuel Tax\nAct to ensure the incentive to decarbonise is large enough.\n(d) Other options\nStill other options to address the disincentive could involve phasing down fuel tax credits or paying cash incentives to offset the disincentive. The disadvantage of the first could be that it would apply to all claimants so it would need to go slower and take longer to incentivise large emitters. A disadvantage of the second is that it would not be funded and would impose an additional burden on the budget.\nDiesel Decarbonisation - Conclusion\nIn conclusion, diesel accounts for 17% of national emissions and the fuel tax credit scheme continues to incentivise diesel use. In particular, there is a gap in operation of the Safeguard Mechanism which should be addressed as soon as possible to improve the return on the large investments that need to be made.\nThe proposal to cap the fuel tax credit at $50m and convert the balance to a Transition Tax Incentive would see the fuel subsidies used to decarbonise heavy industry which would be a positive outcome. A new system of road user charging provides another opportunity to rethink how industry can pay an emissions charge to incentivise take up of low emissions alternatives. The incentive provided by this approach in the case of diesel would need to be modelled to ensure the incentive is large enough.\n2.4 Overcoming the ‘green premium’, including market-based mechanisms and finance needed to facilitate and incentivise the transition\nAustralia needs to stimulate demand for green fuels and technologies to achieve decarbonisation goals and increase domestic productivity through using a mix of incentives and mandates. The vast majority of fuels are imported or produced in Australia from imported fuel products. Onshoring some of this production through establishing green fuel production will improve Australia’s economy and resilience. While the\nSafeguard Mechanism will drive emissions reductions in heavy industry, its broad approach may be slow and not target sectors with readily available decarbonisation solutions. Sector-specific mandates with incentives, like the EU's Sustainable Aviation Fuel (SAF) mandate, could provide a more effective and certain path for industries like aviation to invest in long-term decarbonisation and green fuel supply chains, complementing the Safeguard Mechanism's efforts.\nThe Government’s proposed sector decarbonisation / transition plans with added associated targets would be a strong approach to driving domestic decarbonisation. Such a policy would likely require support from the Commonwealth to assist these sectors with capital intensive upgrades to fuel switch. There are several mandate policy examples internationally the Commonwealth could draw from to shape this policy. The\nEuropean Union SAF mandate requires that 2% SAF be used in 2025 scaling to 63% by 2052. Importantly, this mandate includes a sub-mandate for a specific portion of these fuels to be sourced from eSAF production pathways providing critical support for scalable eSAF beyond bioSAF. Fortescue supports the ongoing Government work to consider a low carbon liquid fuels strategy that may introduce incentive policies in areas such as SAF, maritime fuels and renewable diesel.\n\nPage 7 of 12\n2.5 Developing Australia’s new low emissions export industries and contributing to decarbonisation of transnational supply chains\nGreen Iron\nTo secure the long-term green iron opportunity for Australia, it is essential to show that our Pilbara haematite ores can be used commercially to produce green iron. Currently, the more mature pathway to producing green iron uses very high-grade iron ore which Australia typically does not produce. The technical solution for\nAustralian ores is understood, however, these technologies need to be demonstrated to work at scale, and especially to work effectively with lower to mid-grade Pilbara iron ore.\nFortescue’s US$50 million pilot Christmas Creek Green Metal Plant Project, currently in development, will produce a high-purity pig iron (~95% Fe) using green hydrogen. From the first half of 2026 we aim to produce meaningful quantities of commercially representative green iron from Pilbara haematite, proving the technology and creating a catalyst for the next generation of the Australian iron industry. The second critical step in creating a green iron industry is to demonstrate the method at commercial scale, and we propose to do this with a larger plant ~ 10Mtpa green iron plant that combines hydrogen reduction and electric smelting furnace (ESF).\nBuilding a green iron industry to optimise the use of, and demand for, our Australian haematite ores requires targeted and substantial public investment across the following three components of the green value chain:\na) Decarbonising iron ore production\nb) Incentivising green hydrogen production\nc) Developing a commercial scale green iron industry\nAchieving each of these listed components above, as a first mover, is difficult, costly, high risk and requires public investment and support to achieve the desired green metals industry development. Fortescue is investing heavily in the first step of this process to decarbonise our iron ore operations by 2030. Our board has committed US$6.2 billion to achieve to this decarbonisation target without offsets.\nTo ensure a value-added industry with long term economic value to the nation, it is important that each component part is eligible for public investment programs rather than Government investing in only one area.\nThis is referred to as ‘stacked’ public investment to achieve a value-added metals product. Targeted public investment will secure private sector investment that will create the momentum to make Australia’s Pilbara region the global green iron leader. Fortescue commends the Government on its evolving policy suite including the $1b Green Iron Investment Fund ($500m available to industry) and the $750m Green Metals\nFund, along with the Hydrogen Production Tax Incentive and the Hydrogen Headstart Round 2 program.\nForeign investment is critical to establishing a green iron industry in Australia. Long-term relationships with foreign partners with common commercial interests are needed to support the achievement of Australia’s emissions targets, global emissions reduction and Australia’s continued economic prosperity. An Australian green iron metal industry will require technology and capital from partner countries like China. China has the manufacturing capacity, innovation, capital and interest in partnering with Australia to make a green iron supply chain a reality. We encourage the Australian Government to find the right balance regarding national interest considerations and continuing to support foreign investment and trade where it brings significant economic and emissions reductions opportunities to Australia.\nDecarbonisation and emissions reducing diversification requires the Federal Government to reaffirm that\nAustralia is open to Chinese investment, as concerns persist among Chinese investors, and FIRB approvals indicate Chinese investment is at record low points\nRenewable Energy\nReducing the cost of renewable energy in the Pilbara must be a key goal for a more productive sector. It is the biggest enabler for heavy industry decarbonisation and provides a pathway to green metal production in the region, securing the long-term viability of the Australian iron ore sector.\nPage 8 of 12\nToday's Pilbara renewable power cost of ~US$70/MWhr can't compete with lower cost jurisdictions - we need to get to <$25/MWhr (or <$35/MWhr firmed).\nThe timeframes to decarbonise are getting shorter as we approach the Government’s net-zero by 2050 target , yet the lead-time from site identification to commissioning is getting longer for renewable energy project delivery.\nGovernment can enable this through:\n Investment in fit-for-purpose common user transmission infrastructure designed to enable low-cost\npower that still meets an acceptable risk threshold for mining operations (enabled through Rewiring\nthe Nation).\n We note the Pilbara is not eligible for the Capacity Investment Scheme support given that scheme is\ndesigned for grid connected projects. Implementing a policy providing similar support to the CIS for\nthe Pilbara would enable swifter and deeper emissions reductions of an emissions intensive sector.\n Coordinated investment in port, water desalination, and road common user infrastructure would\nreduce potential bottlenecks for the import of necessary components. The rapid roll out of solar,\nwind, batteries and transmission infrastructure and green iron plant modules requires the import t of\nmassive components through the Pilbara Port and there are frequent logistics bottlenecks with the\nexisting infrastructure. Water desalination at Port Hedland is also critical for the development of\ngreen iron production.\n Greater investment access to foreign entities, particularly China, which can offer cheaper financing.\nThis will also facilitate access to cutting edge renewable energy technology which can further lower\ncosts.\n Streamlined State and Federal regulatory approvals for emissions reducing projects so transmission\nand generation assets can be brought online sooner.\nGreen Shipping Fuels\nInternational shipping currently contributes nearly 3% of global emissions. Australia as major exporter has a strategic interest in ensuring the shipping sector decarbonises in a way that supports green iron and green energy exports. Ambitious policy measures that send a strong signal to fast-track a shift to “zero or near zero” (ZNZ) fuels such as green ammonia are essential to decarbonise the global shipping sector. It also represents a significant economic opportunity for Australia as a producer and supplier of green shipping fuels.\nFortescue respectfully encourages the Australian Government to take a clear, ambitious stance at the upcoming IMO Marine Environment Protection Committee (MEPC) sessions at MEPC 83 (agenda item\nES.2) in October 2025. The IMO is advancing a global regulatory framework to deliver its 2030 and 2040 greenhouse gas reduction targets — combining binding fuel standards with an economic mechanism to incentivise low-carbon alternatives. Australia’s voting position will be critical in signalling its intent to lead as both a major commodity exporter and a future green fuels superpower.\nWith Australia’s abundant renewable resources and our deep expertise in clean energy production, we can build a cost-competitive supply chain that ensures shipping clients have access to sustainable, IMO- compliant fuels made in Australia. The Pilbara is uniquely well positioned. The right policy framework and economic incentives can turn it into a world-scale green energy and shipping hub. This includes enabling investment confidence in green ammonia production, certification, and export infrastructure. Together, these steps would demonstrate Australia’s readiness not only to comply with international rules but to capitalise on them — ensuring that our ports, fuels, and shipping align with the decarbonised trade flows of the future.\nTherefore, Fortescue seeks government leadership to support a green shipping export industry in two priority areas:\nPage 9 of 12\n MEPC Voting Intentions – Support the adoption of the IMO’s forthcoming global regulatory\nframework (fuel standards and economic measure) at MEPC 83 (agenda item ES.2) in October\n2025, ensuring Australia is seen as a constructive, climate-aligned voice in shaping international\nshipping rules that address climate imperatives. This is a significant opportunity to show climate\nleadership in support of Australia’s bid to host COP31.\n Pilbara Green Energy Hub – Prioritise policy and investment support to position the Pilbara as a\nworld-scale production and export hub for green fuels, capturing first-mover advantage through the\nAustralia/Asia Green Shipping and Digital Corridors in the global transition.\n\n3. What are the main challenges to deploying the renewable energy and related infrastructure needed to reach Australia’s targets, including:\no the 82% renewable energy target by 2030\no the Capacity Investment Scheme targets (at least 26 GW of renewable generation\ncapacity and 14 GW of clean dispatchable capacity by 2030)\no net zero by 2050.\n\nDiesel Fuel Tax Credit as a barrier to decarbonisation\nSee points made above at 2.1.\nEPBC Act Reform\nThe Commonwealth Government has stated its commitment to reforming environmental planning processes under the Environment Protection and Biodiversity Conservation Act 1999 (the Act) in this term of government. Fortescue welcome this intent and is eager to support the Government through industry consultation. We see these reforms as vital to achieving the confidence of the general public and project developers, which will in turn support the developments required for energy transition and increased national productivity. Fortescue supports the adoption of reforms that balance the need for efficiency and certainty of process with environmental outcomes. Similarly, we are eager to see reforms that remove duplication, enhance transparency, and establish robust processes to accredit States and Territories.\nWe are keen to seek projects that reduce or contribute to reducing global emissions be given priority status for rapid assessment and approval.\nWe are eager to see collaboration with the Western Australian Government and consultation with key mining industry players on a regional planning approach for the Pilbara that enables fast-track approvals under the Act in areas deemed suitable for development.\n4. What can the Australian Government do to address these challenges?\nOn Diesel Fuel Tax Credit and the investment barrier it creates, please see 2.1 above.\nOn EPBC Act reform, Fortescue has recommended formal industry consultation on policy change directly and not to limit consultation to industry associations who do not have direct experience of the approvals systems. Fortescue has been and remains a strong advocate for reform of the Act undertaken in consultation with industry and environmental stakeholders, and our positions on key areas of reform – a\nFederal EPA and climate – reflect our commitment to fully decarbonising our terrestrial mining operations, and ensuring Australia captures the economic benefit of global demand for green iron.\nRegarding the establishment of a Federal EPA, we agree with others that there are concerns about the proposed structure and wide-reaching power of an EPA in decision making if it is not accountable to the\nMinister for the Environment and Water. We are supportive of a model similar to the West Australian EPA, where the independent board makes a recommendation to the Minister, who is the final decision maker.\nWe appreciate the Government’s commitment to establishing the Federal EPA and are supportive in principle if the Minister retains the power of final decision maker.\nPage 10 of\n12\nCritically, we remain a steadfast advocate of the inclusion of a climate trigger in any contemplation of reform as the single largest environmental issue of our generation. In our view it is not enough to say that climate is a matter dealt with in the legislation establishing the Safeguard Mechanism. All parts of\nGovernment and the regulatory process should have climate as a top priority, or we are not going to reach our targets. The Government has legislated an emissions budget, and it needs all policy levers pulling in the same direction to achieve it.\nWe simply cannot keep approving new projects without focussing on the impact that they may have on our ability to reach our national targets and emissions budget. In this regard, in our view, Australia should be giving priority to the assessment and approval decision making on projects that will lead to a reduction in global emissions and, ultimately, we should be discouraging projects that will add to emissions without providing or contributing to a credible path to emissions reduction.\nOur preference would be to see a climate trigger based on Australia’s greenhouse gas emissions reduction targets under the Climate Change Act 2022 as a Matter of National Environmental Significance. We suggest that any project that would increase Scope 1 and 2 emissions by more than 100,000 tonnes in any one year be required to be assessed for impact on Australia’s progress toward meeting its greenhouse gas emissions targets. Conversely, projects that will reduce or contribute to reducing global emissions should be given priority status for rapid assessment and approval.\nFinally, we are eager to see collaboration with the Western Australian Government and consultation with key mining industry players on a regional planning approach for the Pilbara that enables fast-track approvals under the Act in areas deemed suitable for development.\n5. How effective is the Safeguard Mechanism in driving onsite emissions reductions at Australia’s largest industrial facilities since its 2023 reform?\nThe Safeguard Mechanism has the potential to drive meaningful emissions reductions across Australia’s largest industrial facilities, which are responsible for approximately 30% of national greenhouse gas emissions. Since its 2023 reform, the Mechanism has introduced a more ambitious and structured approach, with legislated baselines declining at a rate of 4.9% per year for most covered facilities, aligning with Australia's 2030 and 2050 climate targets.\nHowever, the current design allows significant flexibility in how facilities meet their obligations, which may limit the mechanism’s effectiveness in driving onsite emissions abatement in the near term. Key factors include:\n Unlimited offset use: Facilities can meet their obligations entirely through Australian Carbon Credit\nUnits (ACCUs) or Safeguard Mechanism Credits (SMCs), without a cap. While facilities must\nexplain if offset use exceeds 30%, there is no enforced limit, and companies can just write a letter\neach year stating they have exceeded their facilities baseline by 30% or more. This weakens the\nincentive to invest in direct emissions reduction technologies or process improvements which are\ngenerally more costly than ACCUs but drive real emissions reduction.\n No early evidence of emissions impact: As the reforms only began in 2023 and allow up to five\nyears for compliance in some cases, there is limited data available to confirm whether the\nmechanism is materially reducing facility-level emissions so far. As set out above there is a gap in\nthe Safeguard Mechanism when it comes to diesel. This gap requires urgent reform.\nWhile the reforms represent a significant step forward in policy ambition, their effectiveness in driving immediate onsite abatement will depend on future tightening of offset use, stronger accountability for high emitters, and support for industrial decarbonisation projects. In reference to earlier comments on the Diesel\nFuel Tax Credit, the strength of the incentive to use very cheap subsidised diesel completely overwhelms the incentive to decarbonise created by the Safeguard Mechanism\n\nPage 11 of\n12\n6. What changes could the Australian Government make to the mechanism to help achieve\nAustralia’s emissions reductions targets, considering for example:\nTo enhance the Safeguard Mechanism’s effectiveness in meeting Australia’s emissions targets, Fortescue recommends a suite of targeted reforms focusing on ACCU use, baseline settings, coverage, and the transition to a more integrated emissions trading framework.\n1 . Rules on ACCU Use\n Currently, facilities can meet 100% of their compliance obligations using ACCUs, unlike international\nbest practice systems.\n It is recommended that the SGM set an initial annual cap on ACCU use of 30% of their baseline\nexceedance, with a managed further reduction in this cap over time. .\n The Mechanism should provide a clear phase-down timeline for ACCUs to drive genuine onsite\nemissions reductions.\n Where companies fail to meet baselines, they should have alternative compliance pathways, such\nas investing in their own renewable energy capacity or decarbonisation investment for other\nfacilities, given documented integrity issues with carbon offsets.\n2. Prioritisation of Safeguard Mechanism Credits (SMCs)\n SMCs should be used as a priority over ACCUs when available.\n ACCUs should be phased out quickly once SMCs reach a critical mass, and no later than 2040.\n3. Coverage\n The SGM should be expanded to cover a larger number of facilities, increasing its emissions\nreduction reach. This has been recommended in recent reviews undertaken by the Productivity\nCommission and by the Business Council of Australia. However, issues with the subsidisation of\ndiesel under the Diesel Fuel Tax Credit should be addressed first and as a priority.\n4. Transition to an Integrated Scheme\n The SGM should gradually transition into a shared Emissions Trading Scheme (ETS) aligned with\ninternational systems such as the EU and China.\n\nPage 12 of\n12","size":179619,"redacted":[],"meta":{"name":"Fortescue.386246ef.pdf","local_path":"files/B2kxs-2R2DfRzEovYpmHYsJB.pdf"},"config":{}}}}}