Western Australia (WA) is poised to become a carbon capture and storage (CCS) powerhouse. Its geological basins offer far more CO₂ storage capacity than needed for its own emissions, creating opportunities to store CO₂ from emissions-intensive trading partners. However, as WA opens its reservoirs to global emitters, policymakers should consider a CCS reservation policy – similar to WA’s domestic gas reservation policy – to secure affordable CO₂ storage access for local industry. This forward-looking strategy could protect WA’s manufacturers and miners from being outbid or crowded out by international players in the emerging carbon storage market. It is also the kind of policy that needs to be facilitated at the commencement of a new industry and not retrofitted in the future.
Ensuring local access to CO₂ storage
A CCS reservation policy would operate to reserve a portion of WA’s CO₂ storage capacity for domestic use, ensuring WA companies can decarbonise at a reasonable cost and at a timing that aligns with the anticipated international investment in this space in WA. This is especially critical for trade-exposed heavy industries in WA’s Pilbara and Kwinana hubs, which face pressure to cut emissions. For example, Yara Pilbara – a major ammonia producer – estimates that capturing and storing its CO₂ would add roughly 50% to production costs (boosting cost from about USD300 to 450 per tonne). Such a cost burden is prohibitive without policy support, given competition from regions like the US, where government incentives (for example Inflation Reduction Act subsidies) heavily offset CCS costs.
Without intervention, CCS could remain uneconomic for WA manufacturers, or only viable with extensive subsidies. A reservation policy offers another lever: by guaranteeing local emitters access to storage capacity (and potentially at regulated fees), it can drive economies of scale and lower unit costs. In essence, domestic industries would not have to compete with overseas firms willing to pay premiums for CO₂ storage to meet climate targets imposed in their own sovereign nations.
As we have seen in relation to the East Coast gas shortages, it is very difficult to retrofit a domestic reservation policy into existing projects. Therefore, timely action in this policy space is needed to ensure CCS proponents and gas producers can account for such a policy in their economic models pre-FID.
Risks of an unregulated CCS market
The case for a reservation mechanism grows when considering the risks of an unregulated CCS market. WA’s storage potential is attracting interest from carbon-intensive economies lacking their own storage sites (for example, Singapore, Japan, South Korea). These international players could, in theory, monopolise pipeline networks or storage hubs by booking long-term capacity at high prices, driven by carbon prices or net-zero mandates abroad. Domestic emitters – generally facing lower carbon prices or limited support – could be priced out of decarbonisation.
Foreign investment has been the backbone of Australia’s capital-intensive oil and gas industry. The critical importance of these investment relationships cannot be denied, as such investment will realistically underpin many of Australia’s industrial scale CCS projects. However, while courting these investors and meeting their CO₂ storage needs, we need to be able to satisfy the needs of Australia’s domestic market. These two objectives can be compatible, with the right level of state and federal support and appropriate regulation.
Australia would not be alone in taking such action. In Southeast Asia, host countries are already balancing domestic and foreign access to CO₂ storage. Indonesia’s new CCS regulations cap foreign CO₂ at 30% of any storage site’s capacity, effectively reserving at least 70% for domestic industry. The policy aims to prevent a carbon rush by international emitters and ensure Indonesian industries (and power plants) can utilise affordable CCS for their own net-zero plans. Malaysia’s recent CCS legislation likewise enables imported CO₂ storage under licences, while making domestic decarbonisation a strategic priority. In Europe, regulators are going further by planning open-access rules and tariff regulation for CO₂ pipelines and storage – treating CO₂ infrastructure as essential facilities to prevent monopoly pricing and ensure all industries can access storage on equal terms. These examples highlight a common recognition: without policy guardrails, market forces alone might concentrate CCS access in the hands of a few, or delay investment until it’s too late for 2050 climate goals.
Learning from international CCS policy models
WA’s deliberations occur against a backdrop of global experiments in CCS policy and partnerships. A survey of international approaches reveals diverse mechanisms to share cost and access, which WA can draw on:
Domestic capacity reservations: As noted, Indonesia has legislated a domestic-first principle by limiting storage for imported CO₂ to 30%. This protects local industries (for example Indonesian power plants, cement and fertiliser makers) from being crowded out, while still allowing some revenue from international storage services. WA could adopt a similar quota or threshold ensuring capacity is available to WA companies, or that local needs have first priority in multi-user storage facilities (or if not first, then proportionally).
Cross-border access agreements: Singapore, which lacks viable CO₂ sinks, has signed a bilateral collaboration agreement with Indonesia to secure access to Indonesian storage for Singaporean emissions. In effect, Singapore is reserving future storage capacity abroad through diplomacy. Demand for CO₂ storage transcends borders despite the hurdles posed by the rules under the London Protocol. If WA becomes an open storage hub for Asia-Pacific, it may see long-term capacity bookings by foreign governments or consortia. Any WA reservation policy would need to align with such deals by protecting those foundation CCS service contracts which underpin FID on the project, but requiring foreign-funded projects to build excess capacity that WA industry can use.
Cost and capex sharing: Large-scale CCS is capital-intensive, so governments are finding ways to share or reduce the upfront cost burden on individual firms. Norway’s Longship project (which includes the Northern Lights CO₂ storage venture) is a good example of government-industry cost-sharing: the Norwegian state heavily subsidised the transport and storage infrastructure, on condition that it be open-access for third parties and charge uniform storage fees. This model jump-started the world’s first open CO₂ storage-as-a-service business, now taking CO₂ from multiple industrial clients across Europe. Likewise, in Southeast Asia, Japan and South Korea are financing CCS projects in Malaysia and Indonesia, covering much of the cost in exchange for future storage rights. WA could consider co-investment in CCS hubs or credit support to lower prices for local users – for example, funding common-user pipelines or monitoring systems that multiple companies can share. If overseas emitters contribute capital (for instance, Japanese firms investing in a Pilbara CO₂ hub), contracts or permits could ensure a portion of the resulting capacity is reserved for WA usage or that fees are cross-subsidised.
Regulated access and pricing: The European Union, anticipating a network of shared CO₂ pipelines and reservoirs, has embedded fair access requirements in its CCS legal framework. The EU CCS Directive requires member states to ensure third-party access on non-discriminatory terms to CO₂ transport and storage facilities, with an eye to preventing monopoly rents and excessive tariffs for industries needing to decarbonise. This recognises CO₂ storage as a natural monopoly infrastructure. WA could implement analogous measures: for instance, mandating that any open CO₂ pipeline or storage site in WA must accept CO₂ from local third parties at transparent, regulated rates, if capacity allows. Such rules would encourage hub models – where multiple emitters share one storage site – by providing confidence that access will be available when needed, not controlled by the largest participant.
Bundling CO₂ storage with energy supply
WA can also explore innovative commercial arrangements to align incentives for decarbonisation. One idea is to bundle carbon storage rights with gas supply agreements. For instance, future domestic gas contracts from the North West Shelf extension or Browse fields could be conditioned on the supplier providing CO₂ storage capacity for the buyer’s emissions. Such a clause would mean that when an industrial customer (like a petrochemical plant or alumina refinery) buys natural gas, they also secure the means to dispose of the resulting CO₂ via an agreed CCS facility. This concept mirrors ‘extended producer responsibility’ – gas producers effectively take back the carbon from their product.
In practice, this could involve large gas joint ventures in WA dedicating depleted gas fields as shared CO₂ reservoirs for their customers. The WA government could facilitate this by making CO₂ storage commitments a condition of gas project approvals or renewals – similar to how LNG exporters must supply 15% of gas to the domestic market under WA’s existing policy. However, not all depleted gas fields are suitable for CCS and this policy idea is predicated on the notion that suppliers have access to such fields within their portfolio. This may not be the case, particularly on an equity aligned basis with their joint venture partners.
While these bundled supply arrangements will give customers peace of mind that they do not need to separately source a CCS service for their emissions, they will not avoid paying their share of the cost of such CCS infrastructure as this will be passed through to them through the CCS premium attached to purchasing a net zero gas product.
While this policy ensures that Scope 3 emissions are addressed from the outset, gas suppliers need flexibility about how they achieve this. Whether it be via CCS at their own CCS facilities, contracting CCS capacity from a third-party CCS Hub or acquiring carbon offsets to make up any shortfall in the ability to store emissions. Further, it won’t necessarily be technically or logistically possible for the buyer to capture their CO₂ emissions and transport them to the gas supplier for storage. Therefore, in many cases a carbon offset regime will still be required.
Legal pathways for a WA CCS reservation policy
Implementing a CCS reservation in WA would require careful legal design, but there are precedents to build on. WA’s long-standing Domestic Gas Reservation Policy (which reserves 15% of LNG project gas for local consumers) is not a statute but a condition of project approvals and licensing. Similarly, a CCS reservation could be enacted through government policy coupled with license conditions on CO₂ injection licences or through provisions in State Agreements with resource project proponents. The WA government has already moved to establish the legal framework for CCS: the Petroleum Legislation Amendment Act 2023 (WA), passed in May 2024. The Act amends WA’s petroleum laws to allow for greenhouse gas transport and storage and creates a licensing regime for CO₂ injection sites. This new framework (once in force) gives the Mines and Petroleum Minister levers to shape CCS projects via licences, leases and regulations. Reservations or priority access requirements could be integrated into this regime – for example, by stipulating in a greenhouse gas storage licence that a certain percentage of capacity is reserved for use by certain domestic industries, or by requiring licensees to publish tariffs and offer access to third parties on fair terms (mirroring pipeline access rules in the gas sector).
There is growing federal-state alignment on CCS: WA’s CCUS Action Plan 2024 (Action Plan) explicitly envisions the Pilbara and Kwinana as CCS hubs for industry, supported by both state policy and Commonwealth funding initiatives. The Action Plan and a recent WA CCUS Hubs Study both confirm that significant government support and clear regulation are required to get CCS projects into operation. A CCS reservation policy could be part of this toolkit of support measures – complementing grants, carbon credits and stricter emissions caps – to ensure WA’s industries are not left waiting for decarbonisation infrastructure.
A coherent approach must be taken to ensure this fledgling industry, which is critical to WA and Australia’s decarbonisation and energy security, is not hindered by additional regulatory hurdles and overlays which deter investment and further delay the commercial operation of such facilities. Making the numbers stack up for these projects is a delicate task and many are only viable with significant foreign investment and by securing long-term CCS service contracts at favourable prices. Therefore, any discounted pricing model offered to domestic customers would need to be met with equal measures of domestic government support, through cross-subsidisation or regulatory support via grants, fast tracked approval pathways and land access arrangements.
Conclusion
As WA positions itself as a regional CCS leader, policy foresight is needed to balance export opportunities with domestic needs. A carbon capture reservation policy – effectively a ‘CO₂ storage for WA first' principle – could guarantee that local businesses have access to the affordable, secure CO₂ storage they need to remain competitive in a net-zero future. By learning from international models (Indonesia’s capacity allocation, Europe’s access rules, Norway’s cost-sharing and more) and leveraging WA’s own policy DNA (like gas reservation and state agreement making), WA can craft a CCS regime that attracts investment and foreign CO₂ contracts while safeguarding local decarbonisation. This kind of legal innovation would send a strong signal: WA is open for CCS business, but not at the expense of its own emissions goals or its industrial base. In practical terms, such a policy offers WA emitters like Yara a fighting chance to decarbonise via CCS – turning global climate pressures into an opportunity for local industry, rather than a zero-sum competition for underground pore space. It is a simple and prudent step to ensure that WA’s world-class CO₂ reservoirs fuel local economic prosperity and climate action, even as they serve a broader international purpose.