Belinda Robinson, Chief of the Australian Petroleum Production & Exploration Association (APPEA) said that a well-designed emissions trading scheme could encourage greater penetration of Australian natural gas into the domestic and international energy market.

APPEA said that the benefits to Australia from the use of gas as a lower greenhouse gas-emitting energy source are considerable. The upstream oil and gas industry believes that, with the right policy settings, by 2017:

- 70 per cent of all new electricity generation capacity installed in Australia will be gas fired; - Exports of LNG will almost quadruple to 50 million tonnes per year (Mtpa), up from 13.9 Mtpa currently; and, - Gas used in resources processing will double.

Chief Executive of the Australian Pipeline Industry Association Cheryl Cartwright has agreed, saying “Natural gas has lower greenhouse gas emissions and uses less water in energy generation than does coal, it is less expensive than renewable energy and it’s available now.”

While announcing his climate change policy, Prime Minister John Howard said “Australia has the physical resources, the human capital and the technological strengths to be a global leader in key low emissions technologies. We can be an energy superpower in a carbon constrained future, but only with the right policy settings and only if we draw on all our national capabilities and resource advantages.”

In early July, major energy players Origin Energy and AGL Energy both made moves that will underpin further growth in their gas-fired power generation interests, with a view to cutting greenhouse gas emissions.

Origin Energy has entered into a Gas Supply Agreement with Rio Tinto Aluminium, which will see 470 PJ of coal seam gas delivered to Rio Tinto’s Yarwun alumina refinery at Gladstone, commencing between March and July 2010.

Origin Energy Chief Operating Officer Karen Moses said Origin will spend an estimated $260 million to further develop its Walloon coal seam gas fields to supply this contract.

Ms Moses said Rio Tinto Aluminium’s decision to enter into a long term gas contract was welcome news for the environment.

“Gas used to produce electricity in a co-generation facility creates about half the greenhouse gas emissions of an equivalent coal-fired power station, delivering a more environmentally sustainable fuel source for the expansion of the Yarwun refinery. This project shows how Origin, working together with our business partners, can make a difference,” she said.

A scheme reported by the Prime Minister’s emissions trading task group outlines an open-ended scheme for emissions trading which has been applauded by industry and business for encouraging ease of investment and an economically viable approach.

Released in early June, the report says that Australia’s natural resource endowments are likely to continue to play an important role in our prosperity into the future.

“Australia possesses large reserves of energy resources, including abundant and inexpensive supplies of coal and extensive gas and uranium reserves. Given this economic structure and resource endowment, Australia will be adversely affected by any action to restrain emissions, whether domestic or international,” says the report.

“Australia possesses large reserves of energy resources, including abundant and inexpensive supplies of coal and extensive gas and uranium reserves. Given this economic structure and resource endowment, Australia will be adversely affected by any action to restrain emissions, whether domestic or international.”

“However, Australia will also bear increasing economic costs from the impacts of climate change and measures to adapt to climate change if global emissions are not constrained.

“A key goal should be to ensure a smooth transition in the economic structure in response to the introduction of policies that constrain emissions… There should also be maximum reliance on market mechanisms to reallocate resources. This will minimise the costs of adjustment and encourage the emergence of new sources of growth, employment and prosperity.”

On a global scale, the emissions trading report highlights the potential of Australia’s interests in developments – such as liquefied natural gas (LNG) – which “have the potential to make a major contribution to global efforts to reduce greenhouse gas emissions if they are used to power electricity generation instead of coal.

“For example, if Australia’s LNG exports were used to replace an importing country’s domestic coal-based electricity generation, they could reduce global emissions by around 94 Mt by 2010,” the report said.