Developing carbon capture, utilisation and storage hubs in Australia: CCUSNA Final Report key findings

Carbon Capture Utilisation and Storage Network Australia (CCUSNA) has released its Final Report relating to the future development of carbon capture, utilisation and storage (CCUS) hubs in Australia, with a focus on opportunities in Western Australia. 

The Final Report finds that there are several barriers that remain to the rapid development of CCUS hubs in Australia. However, there are also some key opportunities with the identification of several commercial and regulatory levers which may assist in driving future investment certainty. These levers could ultimately assist with the development of a common user decarbonisation solution for harder-to-abate industry sectors. 

Following our guide to developing CCUS hubs in Australia, this Insight explores the Final Report’s key findings and recommendations.

The policy gap: Australia’s position 

The Final Report identifies the absence of an enabling state and Commonwealth policy framework as the primary obstacle to CCUS hub development in Australia. This stagnation does not appear to be driven by technological or geographical constraints, but rather by policy gaps. Australia’s current policy settings have been described in the Final Report as “among the least enabling in the Organisation for Economic Co-operation and Development”.

The Final Report identifies four foundational policies that Australia currently lacks:

• a national CCUS strategy;
   
• a carbon scheme that is fit-for-purpose for the development of CCUS hubs and which includes predictable carbon pricing;
   
• a government-backed business model, notably a Carbon Contracts for Difference (CCfD) framework; and
   
• a carbon border adjustment mechanism (CBAM) to protect industry competitiveness.

Without the certainty which may be provided through the development of the above policies, the Final Report suggests there is limited incentive for multi-user CCUS hub projects to proceed to a Final Investment Decision. 

National CCUS strategy 

Despite the adoption of dedicated CCUS strategies in many comparable countries, the Commonwealth Government has not yet implemented a national CCUS strategy or roadmap. While the Commonwealth maintains a target of 82% renewable electricity by 2030 and a National Hydrogen Strategy, there is no equivalent milestone for geological carbon storage.

Industry groups have previously called for a coordinated Commonwealth-state approach, clear sequestration targets, and infrastructure planning. The Final Report advances this position by recommending the establishment of binding national targets for CO₂ capture and storage capacity to signal long-term policy direction.

A legislated or formally endorsed strategy could provide the regulatory certainty needed to underpin project finance, especially for multi-user CCUS infrastructure with decades-long lifespans. 

Australia’s carbon market

The Final Report states that Australia’s primary regulatory cap-and-trade scheme, the Safeguard Mechanism, is generally considered “too uncertain to support the 10 to 20-year investment horizon required for CCUS projects”. While often compared to emissions trading schemes, the Safeguard Mechanism is technically a baseline-and-credit system, with emissions limits set at the facility level rather than through an overarching cap on emissions and tradeable allowances.

Although CCUS projects can earn and trade carbon credits (Australian Carbon Credit Units and Safeguard Mechanism Credits (SMCs)), price can be driven by market forces that are not necessarily aligned with the capital and financial costs of hub infrastructure. There is currently the absence of a credible floor price for SMCs. The Cost Containment Measure (fixed price) is also reportedly insufficient for CCUS economics. 

A further uncertainty identified by the Final Report is that it is unclear whether there will be a mechanism to bank and utilise SMCs post the 2030 deadline. This is combined with the risk of penalties for non-compliance, which overall creates a structure which may disincentivise investment. 

The upcoming 2026/27 Safeguard Mechanism Review has been identified as a critical juncture which could address some of these issues. The timing of the review, potentially coinciding with a federal election as early as August 2027, introduces some additional political uncertainty. 

In all reform scenarios, the Final Report concludes that a Carbon Contract for Difference (CCfD) approach will be needed as a bridge to support project investment decisions. This reflects the status of other jurisdictions where governments have intervened to mitigate demand risk until the CCUS market is well established. 

Carbon Contracts for Difference

The Final Report identifies a CCfD framework as “by far the most important policy that can be used to support a large-scale multi-user CCUS project”. A CCfD framework bridges the shortfall between the total CCUS project cost and the revenue available from prevailing carbon market prices.

As an example, the United Kingdom’s approach allows its Government to enter into revenue support arrangements to ‘top up’ shortfalls in demand for transport and storage operators, while separately using CCfDs with emitters to offset higher capture costs. In practice, this takes the form of a hybrid CCfD model that includes capture payments, capital cost recovery, transport and storage charges, as well as protections such as connection delay compensation and availability protections. This approach reflects the United Kingdom’s view that a pure CCfD model would be insufficient to support the first wave of projects, given bankability constraints, carbon market immaturity, and infrastructure coordination challenges.

Australia has already accepted ‘contract for difference’ logic for hydrogen through a 10-year Production Credit program. By adopting a comparable model for carbon storage, Australia could unlock immediate, large-scale abatement in heavy industry.

Other insights and opportunities

Pore space access and mandates

The Final Report suggests pore space mandates could be utilised to aid the development of CCUS hubs. Similar to the approach taken by the European Union, this would require companies to contribute to CO₂ storage capacity based on past production. Western Australia’s Domestic Gas Policy provides a relevant precedent, with a comparable storage capacity reservation scheme potentially able to be adopted. 

Mandates could be calibrated so that, for example, 30% is allocated to the storage operator's own emissions, 50% is allocated on a commercial basis (including international CO₂ imports), and 20% is allocated to domestic hard-to-abate emitters.

However, the experience of the European Union illustrates the potential downsides of such a policy. This includes limited access to storage, regulatory bottlenecks, and unintended market distortions.

Transboundary CO₂ storage competition 

The Asia-Pacific lacks sufficient CO₂ storage, which creates a major opportunity for Australia to act as a regional storage hub. While future demand for CO₂ storage is expected to be high, Australia’s ability to capture this opportunity is limited by the absence of bilateral agreements needed to allow CO₂ to be transported across borders. These agreements can only be established by the Commonwealth Government.

As a result, Australia risks missing this time-sensitive opportunity. Without timely government action, long-term storage contracts may be secured by competing countries before Australian projects are ready.

Dedicated active government body

The Final Report calls for a shift from passive policy to active government coordination of CCUS infrastructure. It recommends creating a dedicated body to coordinate between government, industry, and international partners, similar to models used in Japan and Norway. This can be contrasted with Australia’s current ‘first come, first served’ approach, which could allow projects to develop in an unstructured way that limits access and oversight. 

Streamlined environmental approvals

The environmental approvals framework for CCUS projects is complex. The complexity increases where a CCUS project has both onshore and offshore components, as this can require multiple state and Commonwealth approvals and may result in project scoping issues. The Final Report refers to this duplication and the delay that can arise as a result. The Final Report identifies the need to further streamline the state and Commonwealth approvals processes to avoid CCUS projects facing significant delays. 

The Commonwealth Government’s reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act), will substantively commence later this year and will introduce new environmental assessment pathways and approval requirements, including a potential streamlined assessment pathway. However, the reforms pose both opportunities and challenges for the approval of CCUS projects. The negotiation of bilateral agreements with the state and territory governments remains outstanding, and this will be critical to enable the transfer of Federal assessment and approval directly to those governments.

There are other potentially duplicative regimes which remain in place. For example, while the EPBC Act reforms allow the Minister for the Environment and Water to address regulatory overlap with the offshore energy regulator, the National Offshore Petroleum Safety and Environmental Management Authority, the reforms potentially create more duplication by moving administration of the Environment Protection (Sea Dumping) Act 1981 (Cth) to the newly established National Environmental Protection Agency.

There are other duplicative regulatory processes between the Commonwealth and States. In Western Australia, the regulatory framework for CCUS projects has only recently come into force, and forms part of the existing framework for petroleum and pipeline activities. The new Western Australian framework, while similar, has some differences from the equivalent Commonwealth framework. This poses further challenges to the efficient assessment and approval of CCUS projects.

Financing exclusions

Another key barrier to CCUS development is that Australia’s main federal funding bodies, the CEFC and ARENA, are legally restricted from investing in CCS projects. While the new $5 billion Net Zero Fund could potentially support some CCUS-related technologies, its restrictions on fossil fuel investments make its role unclear, particularly for shared hubs linked to gas processing.

Public perception and community support 

Community support is a final key issue, and bipartisan political backing will be essential to avoid policy uncertainty that undermines investor confidence. Past issues with current CCUS projects have led to perceptions that CCUS does not work or simply supports the oil and gas sector. However, large, shared hubs can help shift this perception by showing broader benefits, including job creation and supporting other industry sectors.

Looking ahead

The CCUSNA Final Report is one of the most comprehensive stakeholder assessments of the obstacles to and opportunities arising from CCUS hub development in Australia published to date. Its central conclusion, that policy failure rather than technological limitation is holding back deployment, reinforces and significantly extends the position outlined in previous industry insights.

The Final Report's recommendations for a national CCUS strategy, reformed carbon pricing, CCfD mechanisms, and active government coordination are consistent with the direction of international best practice and the models present in comparable jurisdictions. If commenced in 2026, the parallel initiatives recommended by the Final Report could facilitate Final Investment Decisions by the early 2030s, in turn positioning Western Australia as a cornerstone contributor to Australia's 2035 emissions reduction targets.

For industry participants, the findings highlight several practical priorities: engaging in the 2026–27 Safeguard Mechanism Review, developing financial models that account for both government support and market risk, pursuing time-sensitive international CO₂ opportunities, and preparing for the legal and commercial complexity of shared infrastructure models. Industry participants should also consider how recent reforms to the environmental approvals framework for CCUS projects may impact the timing and certainty for obtaining approvals.