Decarbonising Infrastructure Delivery in Australia

Achieving value for money is the fundamental tenet of public infrastructure procurement in Australia. To assess this, procuring agencies traditionally need to evaluate the cost, quality and time elements for each proposed project. In New South Wales, Australia's most populous state, a fourth element will soon form a key part of the evaluation process for new public construction projects – carbon.

Historically, measuring the carbon footprint of Australian infrastructure has been limited to the 'operational' emissions produced by a completed project. The conversation has now expanded to include ‘embodied carbon’ which has been described by Infrastructure Australia as the “emissions associated with materials and construction processes throughout the whole lifecycle of an infrastructure or building asset, including material extraction, transportation, manufacturing, construction, use, replacement, demolition and end of life”.

In April 2024, New South Wales released its 'Decarbonising Infrastructure Delivery Policy' (the Policy) and the associated 'Technical Guidance: Embodied Carbon Measurement for Infrastructure' (the Measurement Guidance).

This new Policy focusses on the 'upfront' element of embodied carbon in a project's lifecycle – being the amount of carbon emitted during the construction process. This includes the carbon impact of the materials, plant and equipment used in the build, as well as the production, supply and transportation of construction materials.

NSW's Decarbonising Infrastructure Delivery Policy

The Policy introduces new obligations for NSW government infrastructure delivery agencies to manage and measure the 'Upfront Carbon' impact of new projects where the strategic business case is started after April 2025.

The Policy will apply to:

1. building sector projects valued over AUD50 million; and
2. other infrastructure projects valued over AUD100 million.

It sets a range of carbon-focussed actions for agencies to implement during the procurement lifecycle. Key policy requirements include:

1. Business case stage: challenging the need for new infrastructure against upgrading or repurposing existing infrastructure; considering low carbon design and construction methods; setting out clear reasons for proceeding with a new infrastructure option; estimating the upfront carbon associated with each option using the technical guidance. The final business case must include a Carbon Management Plan.
2. Planning approval, design, and procurement stage: engaging with the market early to invite innovation; where agencies can do so, setting and inviting bidders to compete on carbon. This includes incorporating low carbon design and construction methods into procurement requirements. Agencies with the requisite maturity will need to include an upfront carbon reduction target in the tender documentation.
3. Construction and practical completion stage: reporting carbon management activities and upfront carbon emissions.

The Policy categorises actions as mandatory or optional, depending on the relevant agency's carbon maturity levels. It acknowledges that some agencies will not yet have the capability to quantify carbon emissions. However, they will be expected to grow this capability over time.

'Upfront Carbon' is defined by the Policy as:

“The carbon emissions and removals associated with the creation of an asset, network or system up to practical completion. This includes the emissions associated with the production and transportation of materials and construction related emissions. It excludes emissions generated during the use and end-of-life phase of an asset."

The Policy focusses on embodied carbon impacts prior to practical completion. However, the Policy expressly acknowledges that its intention is to expand its scope to address a whole life carbon approach.

The Policy will apply to all NSW Government infrastructure delivery agencies (for example Sydney Metro, Transport for NSW, Health Infrastructure NSW and EnergyCo) but currently excludes:

• public non-financial corporations (including state owned corporations) (for example, Sydney Trains and Sydney Water Corporation);
• public financial corporations (for example, New South Wales Treasury Corporation and iCare); and
• local government authorities.

The Measurement Guidance

The Measurement Guidance is intended to align inputs and outputs to deliver a consistent measurement approach across asset types. It complements the Policy.

It sets out technical guidelines for when and how upfront carbon is to be measured and reported. It offers detailed guidance on measuring carbon emissions from:

• the manufacture of products and materials used in the building or infrastructure asset.
• the transport of products to site; and
• construction, installation and commissioning processes.

What does this mean for industry participants?

The Policy and Measurement Guidance only apply to NSW government agencies. However, industry participants bidding for government infrastructure projects will need to get ready to respond to the carbon-specific procurement requirements and comply with additional measurement and reporting obligations during the life of a project.

Industry participants who tender for relevant projects should prepare themselves to see:

• invitations for early market engagement to discuss options for embodied carbon reduction;
• low carbon design and construction methods and carbon management requirements being included as tender evaluation criteria;
• invitations to submit bids that reduce carbon beyond the carbon reduction target set by the agency; and
• contractual requirements to provide as-built data to enable reporting on upfront carbon in accordance with the Measurement Guidance.

Industry participants should familiarise themselves with the Policy and the Measurement Guidance. They should start to develop strategies to lower the upfront carbon impact of infrastructure projects. These strategies could include using renewable power sources or alternative fuels, lower carbon transport options, recycled materials, greener construction equipment and more energy efficient construction methods.

Will the rest of Australia follow suit?

Embodied carbon has become a key part of the emissions reduction conversation in Australia. It seems likely that other states and territories will follow NSW in introducing procurement policies which target upfront carbon reduction.

Indeed, the NSW Measurement Guidance has already been adapted for national application. In June 2024, at the meeting of the Commonwealth and State Infrastructure and Transport Ministers, the Ministers approved the 'Embodied Carbon Measurement for Infrastructure: Technical Guidance', which now provides a nationally consistent approach to measuring embodied emissions in infrastructure projects.

This aligns with Infrastructure Australia's July 2024 “Embodied Carbon Projections for Australian Infrastructure and Buildings” report – which recommended the development of a nationally standardised embodied carbon measurement system.

The report also recommends that the Australian Government, working with state and territory governments:

• develops a comprehensive national plan to actively promote the decarbonisation of emissions embodied in Australia’s built environment;
• sets requirements to measure and disclose upfront carbon on projects over a threshold value;
• makes use of collected data for setting best practice targets informed by benchmarks for different asset classes;
• agrees a common national approach to drive market demand for low carbon solutions; and
• develops performance-based, collaborative contract models and business cases. These will assume the use of low carbon materials, early contractor involvement, embodied carbon analysis in pre-tender processes, and clear direction for decarbonisation in tender documentation.

Watch this space.