International Council on Clean Transportation comments on Australia’s Guarantee of

Origin Scheme and Emissions Accounting Approach

November 13, 2023

This consultation response is submitted by the International Council on Clean Transportation

(ICCT). ICCT welcomes the opportunity to comment on the Australian Department of Climate
Change, Energy, the Environment and Water Guarantee of Origin (GO) Scheme. The ICCT is
an independent non-profit organization founded to provide first-rate, unbiased research and
technical and scientific analysis to environmental regulators. Our mission is to improve the
environmental performance and energy efficiency of road, marine, and air transportation, in
order to benefit public health and mitigate climate change. We promote best practices and
comprehensive solutions to increase vehicle efficiency, increase the sustainability of alternative
fuels, reduce pollution from the in-use fleet, and curtail emissions of local air pollutants and
greenhouse gases (GHG) from international goods movement.

The comments below offer a number of technical observations and recommendations for the
Department of Climate Change, Energy, the Environment and Water to consider in its efforts to
strengthen the emissions accounting methodology under the GO scheme, particularly to help
maximize the climate mitigation potential of hydrogen. Staff may contact Nikita Pavlenko
(n.pavlenko@theicct.org) and Yuanrong Zhou (y.zhou@theicct.org) with any questions.

Nikita Pavlenko
Fuels Program Lead
International Council on Clean Transportation
Electrolysis hydrogen and the treatment of renewable electricity
Though the direct supply chain greenhouse gas emissions attributable to electrolysis hydrogen
derived from renewable electricity are low, the de facto emissions will vary considerably based
on how the renewable electricity is sourced. That is, an important factor influencing the climate
impact of electrolysis hydrogen is whether the renewable electricity used to produce hydrogen is
additional to what would have been produced in the absence of the demand from hydrogen
production; this is known as additionality. Renewable energy will be needed to decarbonize the
power sector, given Australia has a national renewable electricity goal of 82% by 2030.
Renewable electricity used to produce hydrogen could displace others uses, such as
decarbonizing the power sector, indirectly leading to the increased use of fossil electricity
elsewhere and resulting in significant greenhouse gas (GHG) emissions, as high as over 420
gCO2e/MJ (50 kgCO2e/kg H2) in regions with high fossil share in the grid.1 Therefore,
additionality is an important safeguard to ensure the climate integrity of electrolysis hydrogen,
particularly in the near term before the electricity grid is decarbonized.

The current Australia’s Guarantee of Origin (GO) scheme, including its emissions accounting
approach methodology, does not provide sufficient safeguards to ensure the additionality of
renewable electricity. The methodology states that hydrogen producers could use large-scale
generation certificate (LGC) or a renewable electricity guarantee of origin (REGO) to
demonstrate the consumption of renewable electricity. While the intent of this guidance is to
reduce the direct GHG emissions of electrolysis hydrogen, these certificates are insufficient
alone to mitigate against renewable electricity displacement. Hydrogen producers are likely to
source electricity from the regional grid rather than through a direct, off-grid renewable
connection. The renewable electricity credited by the LGCs or REGOs for use by hydrogen
producers might have been used instead to decarbonize Australia’s power sector instead.
Therefore, it is necessary to require the retirement of LGCs and REGOs by the hydrogen
producers.

Using power purchase agreement (PPAs) to demonstrate renewability of the electricity used for
hydrogen production would be an even better means to ensure electrolysis hydrogen production
is connected to renewable electricity over the grid. A PPA is a signed contract between
renewable energy developers and electricity customers to agree upon a fixed price over a set
time period from a designated electricity source, e.g., renewables. A PPA provides long-term
financial support to the renewable energy facility.2

Further, we recommend that Australia introduce a vintage requirement to more closely ensure
that renewable electricity used to produce hydrogen is new capacity. In this case, it would be
less likely that the renewable energy facility would be diverted from a more efficient end use

1
Yuanrong Zhou et al., “Life-Cycle Greenhouse Gas Emissions of Biomethane and Hydrogen Pathways in the
European Union” (Washington, D.C.: International Council on Clean Transportation, October 10, 2021),
https://theicct.org/publication/life-cycle-greenhouse-gas-emissions-of-biomethane-and-hydrogen-pathways-in-
the-european-union/; Yuanrong Zhou, Zhen Zhang, and Yan Li, “Life-Cycle Analysis of Greenhouse Gas Emissions of
Hydrogen, and Recommendations for China” (Washington, D.C.: International Council on Clean Transportation,
October 19, 2022), https://theicct.org/publication/china-fuels-lca-ghgs-hydrogen-oct22/.
2
Chris Malins, “What Does It Mean to Be a Renewable Electron?” (Washington, D.C.: International Council on
Clean Transportation, December 9, 2019), https://theicct.org/publication/what-does-it-mean-to-be-a-renewable-
electron/.
than hydrogen production, compared to the case where the renewable energy facility long
predates the electroylzer. The European Commission recently finalized their own rules on how
to best guarantee renewable electricity is used in the production of green hydrogen, and one of
the rules is that the renewable electricity facility does not come into operation longer than 36
months before the hydrogen facility begins operating, which Australia could consider as well.3

Two other conditions are also important for ensuring renewable electricity is used in electrolysis
hydrogen: temporal matching and geographic matching. These conditions ensure hydrogen
electrolysis occurs at the same time and place, respectively, as the renewable electricity
generation. The current GO scheme in Australia does not include requirements for temporal or
geographic matching of renewables with hydrogen production, but defers it to future rulemaking
when the scheme is expanded. We recommend the Australian government to develop relevant
rules as soon as possible to avoid potentially significant GHG emissions. This is also necessary
for Australia’s hydrogen to be compliant with international requirements for exporting purposes.

The granularity of temporal matching matters: a recent study indicates that annual matching of
renewables with hydrogen production has almost the same emissions as no temporal matching
at all, whereas a stringent hourly matching requirement can lead to near-zero emissions from
electrolysis hydrogen and could be done at low administrative cost burden.4 In the EU rules on
renewable electricity for hydrogen production, hourly matching is required beginning in 2030. To
help transition into this requirement, EU officials require only monthly matching until the end of
2029. Australia could consider similar rules.

The same study also found that absent geographic matching, the mismatch between electricity
demand for hydrogen and where it is produced can still lead to significant indirect emissions
even when hourly matching is guaranteed. This is because electrolysis hydrogen production can
create a significant burden on the transmission grid, and transmission constraints can prevent
the delivery of renewable electricity. In the EU, the geographic matching rules require that the
electrolysis occurs in the same or neighboring interconnected “bidding zone.” In Australia
geographic matching can be implemented by matching renewable electricity production to
electrolyzer use within the same grid region. Here, renewable electricity supply can matched to
consumption within the five interconnected regions of the National Electricity Market (NEM); the
three regions within Western Australia and the network for the Northern Territory.

Comments on emission factors: Issues regarding methane

emissions
Upstream methane emissions from coal and natural gas can have significant impacts on
hydrogen emissions intensity. There is a huge uncertainty of upstream methane leakage rate,
which could vary from less than 1% to as high as 20% based on a literature review of previous

3
European Commission, “Commission Delegated Regulation (EU) 2023/1184 of 10 February 2023 Supplementing
Directive (EU) 2018/2001 of the European Parliament and of the Council by Establishing a Union Methodology
Setting out Detailed Rules for the Production of Renewable Liquid and Gaseous Transport Fuels of Non-Biological
Origin,” 157 OJ L § (2023), http://data.europa.eu/eli/reg_del/2023/1184/oj/eng.
4
Wilson Ricks, Qingyu Xu, and Jesse D. Jenkins, “Minimizing Emissions from Grid-Based Hydrogen Production in the
United States,” Environmental Research Letters 18, no. 1 (January 2023): 014025, https://doi.org/10.1088/1748-
9326/acacb5.
studies. Taking hydrogen made from natural gas reforming combined with carbon capture and
storage (CCS) as an example, a 20% leakage rate (a high, possible rate in real world) can lead
to higher than 11 kgCO2e of emissions per kg of hydrogen (based on 100-year global warming
potential); higher emissions than combusting fossil fuels directly.5 Since methane is a potent
GHG with a relatively short life-span, its climate impact in the near term is more significant. If
using a 20-year global warming potential, the GHG emissions would increase to 23 kgCO2e of
emissions per kg of hydrogen.

A review of the literature on hydrogen production underscores the importance of consistent and
thorough life-cycle methodology to estimate the emissions from hydrogen production. Different
methodologies, i.e., bottom-up or top-down, for measuring the GHG impact of hydrogen can
lead to very different leakage estimates. In particular, the emission factors used in national
inventories have been found to underestimate the real methane emissions from oil and gas
infrastructure; particularly, the national inventories usually assume typical behavior and fail to
take into account leakage from unplanned events and operations.6

The Australia’s GO hydrogen calculator allows hydrogen producers to use default emission
factors of fuels, including coal and natural gas. These defaults are taken from the National
Greenhouse Account Factors. However, recent studies revealed that energy sectors, including
coal, gas, and oil suppliers, in Australia have significantly underestimated the methane
emissions–the actual methane emissions could be twice as high as the national inventories.7
Therefore, using the default emission factors in the calculator could lead to underreporting of
GHG emissions from hydrogen, especially those produced from fossil fuels.

Hydrogen producers have the option to use their own emissions factors of the energy
consumed, but there is no clear requirements or guidelines regarding how to obtain the
upstream emissions that genuinely reflect the real-world cases. Moreover, should the producers
end up getting the real-world emission factors that are likely to be higher than the default values,
they probably would still choose to use the defaults as it would make their hydrogen products
“cleaner”.

For the above stated reasons, we provide following recommendations to avoid the misreporting
of GHG emissions from fossil-derived hydrogen:

1. Revise the default emission factors to better reflect real-world emissions. The
default emissions factors in the calculator could be updated by referring to real-world
emissions studies.

5
Zhou et al., “Life-Cycle Greenhouse Gas Emissions of Biomethane and Hydrogen Pathways in the European
Union.”
6
Ramón A. Alvarez et al., “Assessment of Methane Emissions from the U.S. Oil and Gas Supply Chain,” Science 361,
no. 6398 (July 13, 2018): 186–88, https://doi.org/10.1126/science.aar7204; Jeffrey S. Rutherford et al., “Closing
the Methane Gap in US Oil and Natural Gas Production Emissions Inventories,” Nature Communications 12, no. 1
(August 5, 2021): 4715, https://doi.org/10.1038/s41467-021-25017-4.
7
Sabina Assan, “Tackling Australia’s Coal Mine Methane Problem,” Ember, 2022, https://ember-
climate.org/insights/research/tackling-australias-coal-mine-methane-problem/; Institute for Energy Economics and
Financial Analysis, “Gross Under-Reporting of Fugitive Methane Emissions Has Big Implications for Industry,” 2023,
https://ieefa.org/resources/gross-under-reporting-fugitive-methane-emissions-has-big-implications-industry.
 2. Provide clear and stringent requirements for upstream methane emission
measuring, monitoring, reporting, and verification. For example, the GO scheme
could require hydrogen producers to source fossil fuels only from suppliers following a
stringent international methane measuring and reporting standard, such as the Oil and
Gas Methane Partnership (OGMP) 2.0 framework. The level 4 and level 5 reporting
under the OGMP 2.0 framework requires source-level and site-level measurement
throughout the fuel’s value chain. More importantly, this framework provides detailed
guidelines on how to measure methane emissions, including leakage, and the reporting
of methane emissions on an intensity basis. The Australia’s GO scheme could provide
similar requirements and guidelines. For instance, the proposed Regulation on methane
emissions reduction in the energy sector by the European Commission is built on level 4
and level 5 reporting requirements under the OGMP 2.0 framework. Besides having
robust measuring and reporting requirements on methane emissions, an independent,
third-party organization could verify the measurements.

Issues regarding carbon capture and storage (CCS)

The climate benefits of utilizing CCS largely depends on how secure the stored CO2 is; it could
leak in various ways and can be significant and long-term.8 We support that the GO scheme
requires the reporting of fugitive CO2 emissions from transportation, injection, and storage.
However, the methodology paper notes that the potential future loss events are outside of the
scheme.

We recommend the Australia’s GO to set clear and stringent requirements for the permanence of
carbon storage. The methodology could be strengthened with adequate requirements to ensure
the risk management and long-term liability of carbon storage. For example, it could refer to the
Carbon Capture and Sequestration Protocol developed by the California Air Resources Board
under its Low Carbon Fuel Standard program. This protocol has explicit requirements for
permanence certification of CCS projects including third-party review. In particular, project
developers are required to conduct a site-based risk assessment on CO2 leakage over 100 years
after the injection with an emergency and remediation plan. The protocol also specifies the
techniques for CO2 monitoring.9

Comments on material definitions and emissions allocation

The emissions accounting methodology provides guidelines for allocating emissions to co-
products. However, it misses an important preliminary guideline regarding how to define and
differentiate the primary and co-products from by-products, wastes, and residues. A common
practice is to evaluate what is the intended end-product and the economic value. Particularly,
some studies define primary and co-products as those are elastic with demand and have high
economic value. For example, if it is more than 15% of the total value of the product system, it is

8
Yuanrong Zhou, “Carbon Capture and Storage: A Lot of Eggs in a Potentially Leaky Basket,” ICCT Staff Blog (blog),
January 17, 2020, https://theicct.org/carbon-capture-and-storage-a-lot-of-eggs-in-a-potentially-leaky-basket/.
9
California Air Resources Board, “Carbon Capture and Sequestration Protocol Under the Low Carbon Fuel
Standard,” 2018, https://ww2.arb.ca.gov/resources/documents/carbon-capture-and-sequestration-protocol-
under-low-carbon-fuel-standard.
likely a co-product.10 In contrast, by-products are inelastic and are available in lower quantities
than primary and co-products, even though they still have some economic value. Wastes and
residues are low-value that are usually disposed or used for energy recovery.11 We suggest
adding such definitions and clarifications, including language addressing how to treat co-
products, such as oxygen, which are not sold to the market. For example, if the oxygen is not in
fact sold into the market and is just emitted into the atmosphere, the emissions shouldn’t be
allocated. Lacking clear definitions of materials can lead to very different emissions estimates
and past studies found that the difference could be as high as twice.12

The methodology paper gives an overview of different methodologies of allocating emissions to

co-products, following the order of energy allocation, system expansion, and economic
allocation. However, it is not clear how emissions allocation is conducted in the calculator in
practice. Particularly, the calculator automatically provides an estimate of the allocated
emissions once users input the quantity of co-products, such as steam and oxygen. However,
there is no clarification in terms of which allocation methodology is being adopted and there are
also no underlying data assumptions being presented. We recommend providing more
transparency in the calculation processes and the underlying data assumptions for emissions
allocation.

Comments on loss measurement of hydrogen

We commend the Department of Climate Change, Energy, the Environment and Water for
requiring the reporting of hydrogen loss during transportation and storage in the GO scheme, as
well as the plan to include the global warming potential (GWP) of hydrogen to account for the
indirect global warming impacts from hydrogen leakage, which a recent study found to be
significant.13 However, reporting hydrogen loss at the production site is currently not included,
which some studies found could reach 4%.14

We support the idea to provide default loss rates when direct measurement from the supply
chain is not available. Hydrogen leakage detection can be challenging and is not yet
commercially available. Providing default loss rates can help avoid the risk that leakage is not
reported or under-reported. We caution that many studies on hydrogen loss are based on
natural gas systems, since measurement on hydrogen leakage is not common yet. However, as
hydrogen is a smaller molecule than natural gas, it would be easier for it to escape some
materials and could have a higher loss rate.15

10
ICF International, “Waste, Residue and By-product Definitions for the California Low Carbon Fuel Standard,”
2015, https://theicct.org/publication/waste-residue-and-by-product-definitions-for-the-california-low-carbon-fuel-
standard/.
11
National Academies of Sciences, Engineering, and Medicine, “Current Methods for Life Cycle Analyses of Low
Carbon Transportation Fuels in the United States,” The National Academies Press, 2022,
https://doi.org/10.17226/26402.
12
National Academies of Sciences, Engineering, and Medicine.
13
Ilissa B. Ocko and Steven P. Hamburg, “Climate Consequences of Hydrogen Emissions,” Atmospheric Chemistry
and Physics 22, no. 14 (July 20, 2022): 9349–68, https://doi.org/10.5194/acp-22-9349-2022.
14
Zhiyuan Fan et al., “Hydrogen Leakage: A Potential Risk for the Hydrogen Economy,” Center on Global Energy
Policy at Columbia University SIPA | CGEP, July 5, 2022,
https://www.energypolicy.columbia.edu/publications/hydrogen-leakage-potential-risk-hydrogen-economy/.
15
Fan et al.; Ocko and Hamburg, “Climate Consequences of Hydrogen Emissions.”
Therefore, when determining the default loss assumptions, we recommend using a conservative
loss rate assumption, such as 10% based on previous studies,16 to take into account adverse
climate impacts from hydrogen leakage and to serve as an incentive for developing and
improving direct measurement. The direct measurement reported by producers could be verified
by third-party auditors to ensure credibility.

General comments on the hydrogen calculator

The GO Scheme’s requirement to report fugitive emissions, such as gas venting, at the
hydrogen production site is useful for tracking production practices and estimating the potential
climate impacts from those fugitive emissions on hydrogen. We commend the government
providing default values to account for fugitive emissions when such a measurement is lacking.
However, it is not clear how the calculator estimates the default fugitive emissions. For example,
the calculator automatically provides fugitive emissions estimates in the “Production Summary”
tab. However, the “Key Values” tab does not provide default fugitive emissions at natural gas
reforming or coal gasification plants; or if it does provide the default values, it’s hard to draw the
connection. On the other hand, the “Key Values” tab gives defaults of gas flaring, while the
process inputs tabs, i.e., in natural gas reforming and coal gasification, do not allow the entry of
flaring. We recommend providing more transparent calculations and data assumptions for
fugitive emissions in the calculator.

The hydrogen calculator assumes that hydrogen storage is located in the same region as the
hydrogen production site, leading to the same default emissions factors of electricity and fuels.
However, it is possible that hydrogen storage locates in a different region from the production
site, meaning the emission factors could be different as they vary by regions. We encourage the
government to evaluate the possibility of siting in different regions and provide such flexibility in
the calculator.

In the transportation emissions tab, the vehicle fuel efficiency for the load distance method is not
retrieving default values (cell H28:31), leading to no transportation emissions being calculated if
these cells are left blank.

16
Ocko and Hamburg, “Climate Consequences of Hydrogen Emissions.”