Petroleum Based Oils and Greases ‘Directly Liable’ Under Carbon Pricing Mechanism

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In some circumstances emissions from petroleum based oils and greases (PBOGs) may be considered ‘covered emissions’ under the Carbon Pricing Mechanism (CPM) attracting the $23 per tonne of carbon dioxide equivalents (tCO2-e) liability.

An example of where PBOGs may be covered emissions is at a ‘directly liable large gas consuming facility’ (covered emissions greater than 25,000 tCO2-e) that also has a vehicle fleet carrying out ancillary activities and consuming PBOGs in the process.

It is assumed that in many circumstances oils and greases used for lubrication purposes (particularly in internal combustion engines) will partially oxidise, or combust, and release CO2-e into the atmosphere. Subdivision 2.40A of the NGER (Measurement) Determination 2008 contains the methodologies for estimating emissions from PBOGs, and there are a couple ways to approach the task. The default method assumes ~40 per cent of the PBOGs will be combusted.

There may be instances where PBOGs are being utilised and do not produce emissions, for example hydraulics etc. Our advice (based on discussions with the Clean Energy Regulator – CER) is if you believe no oxidisation occurs in some or all applications, you should have some supporting evidence or documentation.

We thought it would be pertinent to advise our clients and friends of this issue well before the section 22A reports for covered emissions are due (31 October), as PBOGs are typically small emission sources and usage data can be difficult to obtain.

Remember, this direct ($23/ tCO2-e) liability only applies at facilities captured under the CPM. NGER reporters have always been required to report PBOGs in similar circumstances as described above under the normal section 19 reports, also due 31 October.

We understand the CER is likely to release some explanatory material shortly, and if/when this is published we will notify our clients and friends and provide a link. In the meantime feel free to contact us directly if you would like any further information or clarification.

Disclaimer: this article should be considered general information only and not formal legal advice.

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