Australia’s biggest industrial climate polluter – Chevron’s Gorgon gas export plant in Western Australia – received the equivalent of millions of dollars in carbon credits from the federal government last year, despite increasing its emissions.

The revelation in government data last week has sparked calls for changes to the safeguard mechanism, the government policy applied to the country’s 219 largest industrial climate polluting facilities.

The safeguard mechanism was introduced under the Coalition to stop industrial emissions increasing, but was not enforced as initially promised and emissions continued to increase. Labor revamped the safeguard with the support of the crossbench so that most polluting facilities were required to reduce their emissions intensity by 4.9% a year, either by making on-site pollution cuts or by paying for carbon offsets.

Data for the first year after the changes showed direct emissions across all major polluting facilities fell nearly 2% compared with the previous year, from 138.7m tonnes to 136m tonnes.

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The estimated emissions reduction was larger – about 7% – if businesses’ purchase of carbon offset created through sometimes contentious methods, such as regenerating forests and preventing greenhouse gases leaking from landfill sites, were counted.

Labor and some analysts said this showed the changes to the safeguard had begun to make a difference, and that industrial pollution had finally begun to fall after years of increasing.

Climate campaigners pointed out the changes across the facilities were uneven. Activist group the Lock the Gate Alliance said 70% of the approximately 100 coalmines and gas facilities covered by the scheme increased their direct emissions released on site.

Lock the Gate’s head of research and investigations, Georgina Woods, said it showed there were problems that needed to be fixed. “There are persistent loopholes in the safeguard mechanism when it comes to coal and gas facilities that undermine Australia’s efforts to prevent worsening harm to the country from climate change,” she said. “Every company, every facility, every industry in this country must do its part to minimise that harm.”

‘Appalling example’

Chevron’s Gorgon liquified natural gas processing facility was the biggest polluting site for the third year running. It increased its emissions to 8.8m tonnes of carbon dioxide, up from 8.1m tonnes.

But its government-set emissions baseline – the level up to which it is allowed to emit without penalty – also increased, from 8.3m tonnes to 9.2m tonnes.

This may have been due to increased production. The safeguard is designed to reduce emissions intensity – how much CO₂ is pumped out for every good produced – to encourage companies to clean up their practices, and not just meet targets by cutting production. It means a site can increase its pollution without penalty if it becomes more environmentally efficient.

Because Gorgon emitted well below its baseline last year it received 388,803 credits from the government. It can sell the credits to companies that failed to meet their baseline. While the price is not known, the price of an Australian carbon credit is generally a little more than $30 a tonne.

The Australian Conservation Foundation said it suggested Gorgon’s operators could receive more than $10m for emitting less than its baseline.

The foundation’s Annika Reynolds said Gorgon had delivered a fraction of the expected emissions reductions from a carbon capture and storage (CCS) project that takes gas that would otherwise leak from a reservoir and injects it under Barrow Island, off the Pilbara coast.

The CCS project received $60m in federal funding and was due to start in 2016, but was delayed for several years due to technical problems. It still operates at about only a third of its promised capacity.

Reynolds said the Gorgon development receiving a climate windfall after increasing its emissions was an “appalling example of a gas giant being able to game the system and financially benefit from its climate-heating emissions”.

A Chevron Australia spokesperson said the company was focused on “taking action to help lower the carbon intensity of our operations while continuing to meet the world’s demand for energy”.

“We’re complying with the Australian government’s safeguard mechanism as it was designed to operate,” they said.

“While some use the challenges at Gorgon to discredit CCS, we have shown that we can capture and safely store CO₂ at a globally significant scale.”

Paying penalties

Some major polluters had to pay for carbon credits after emitting more than their baselines.

Woodside Energy’s North West Shelf gas processing plant on WA’s Burrup Peninsula – currently the subject of a political fight over whether it should be granted a life extension to keep operating until 2070 – released 6.1m tonnes of CO₂. Its baseline was 5.5m tonnes.

It meant Woodside and its partners had to submit about 608,000 carbon credits at a likely total cost of about $21m.

Glencore’s Hail Creek coalmine, in Queensland’s Bowen Basin, reported that it emitted 1.38m tonnes, above its baseline of 1.19m tonnes. It may have had to pay about $6.5m for carbon credits.

Notably, the estimate of Hail Creek’s emissions nearly tripled from the previous year. This is likely to reflect that satellite data has shown that the emissions of methane – a potent greenhouse gas – from some coalmines has previously been substantially under-reported.

Reynolds said the figures from Hail Creek coalmine were “bleak”. But they said “any scheme to reduce emissions can only work if reporting is accurate” and the change in what was reported was a “step in the right direction”.

‘Training wheels’ period

The climate change and energy minister, Chris Bowen, said the emissions reduction from across industrial sites showed the government was delivering “real action on climate change”. “Industry finally has a clear pathway for decarbonisation and the investment certainty it needs,” he said.

Official projections say Australia is nearly on track to meet Labor’s legislated 2030 emissions target of a 43% cut compared with 2005 level. Scientists say deeper rapid cuts are needed.

John Connor, the chief executive of the Carbon Market Institute, which represents businesses that generate and invest in carbon offsets, said the safeguard had made a “good start”, but the first year should be seen as a “training wheels” period and industry would need to increase investment to make cuts in the years ahead.

Reynolds said while the data showed the 2023 reform of the scheme had improved the scheme, more changes were needed, including restrictions on the use of offsets. Peer-reviewed academic studies have suggested some popular methods used to create offsets were not reducing atmospheric CO₂ on the scale that was claimed.

The Coalition opposed Labor’s changes to the safeguard and has promised a review if elected, possibly to make it less onerous on business.