Australia: Safeguarding emissions reductions

Key Points:

Australia's cap on emissions, the Safeguard Mechanism, will commence on 1 July 2016, but it will need to demand more of large emitters to meet likely increases in Australia's international obligations.

The Paris Agreement, with its long-term goal to keep global temperature rise beneath 2 C° of pre-industrial levels and a mechanism for strengthening parties' nationally determined contributions every five years, was signed by 175 countries in New York last Friday 22 April 2016. Under this agreement, Australia has committed to reducing its emissions by 26-28% from 2005 levels by 2030.

The Safeguard Mechanism, due to commence on 1 July 2016, will complement the Emissions Reduction Fund (ERF) to require responsible entities to keep emissions below set baselines.

So, what is the Safeguard Mechanism, will it achieve emissions reductions over and above business as usual scenarios and what flexibility does it contain to respond to potentially more onerous future international emissions reductions obligations?

Background to the Safeguard Mechanism

Under the ERF the Government purchases Australian Carbon Credit Units (ACCUs) through a reverse auction process, from proponents of projects approved under a methodology under the Carbon Farming Initiative. The proponents offer to supply emissions reductions in the form of ACCUs.

The aim of the Safeguard Mechanism is to limit emissions in the economy by keeping emissions at or below business as usual scenarios, so that any emissions reductions purchased as part of the ERF are not undermined.

Amendments to the National Greenhouse and Energy Reporting Act 2007 (NGER) will operate from 1 July 2016, to implement the Safeguard Mechanism. In preparation for its commencement, the Government has developed the National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 (Cth) and is developing a suite of accompanying guidelines.

Facilities, responsible emitters and their baselines

Facilities with direct, scope 1 emissions that exceed the 100,000 t CO2-e threshold, are covered by the Safeguard Mechanism. The Clean Energy Regulator (CER) will make determinations to set baselines for these facilities using the Safeguard Rule. Responsible emitters are accountable for adhering to their set baseline and reporting on their emissions to the CER. Baseline determinations are reviewable in the Administrative Appeals Tribunal.

The baseline set for a particular facility will depend on the individual circumstances of that facility, for example, whether there is NGERs data for the facility, whether it is a new facility, or whether the facility will undergo expansion. The categories of baselines that will operate from 1 July 2016 are:

  • Reported: NGERs facilities with five years of data, based on the historic high point.
  • Calculated: New facilities, facilities that have significantly expanded or have emissions variability can apply to the CER for a baseline to be calculated on an independent assessment approach. Calculated baselines expire after three years, or five years for larger projects, and on expiry, these baselines will be adjusted to reflect actual production.
  • Default: Designated large facilities that are not eligible to apply for a calculated baseline and do not have the required NGERs data to obtain a reported baseline will be assigned the default baseline of 100,000 t CO2-e.

Two further baselines will operate from 2020, for new or significantly expanded facilities being benchmark and landfill-benchmark baselines determined by best practice guidelines. The CER is currently seeking submissions on the draft Emissions Intensity Benchmark Guidelines, for setting emissions intensity benchmarks for facilities that are new or will be expanded after 2020. Consultation closes on 6 May 2016.

Options for complying with set baselines

Under the Safeguard Rule, responsible emitters can manage the compliance of a facility with its baseline using a range of flexible tools. Responsible emitters can:

  • apply to have their baseline adjusted, provided they meet the eligibility criteria. This may assist certain facilities attain a less onerous baseline;
  • apply for a multi-year baseline. This can enable a responsible emitter to spread a baseline exceedance over two or three years, but will not be made if an application for a baseline adjustment has been made and refused;
  • apply for an exception to complying with their baseline, in circumstances where the excess emissions were the result of a natural disaster or criminal activity. Reasonable steps must have been taken to mitigate the risk of increased emissions arising from the event and
  • surrender "prescribed carbon units" or eligible carbon offsets to "pay" for the emissions exceedance. The Safeguard Rule does not presently provide for the use of international credits to offset emissions exceedances, however, the NGER Act keeps that option available to the Government by providing that the Safeguard Rule can prescribe other types of carbon units.

Consequences for failing to meet baselines

The enforcement powers of the CER are varied, and include:

  • enforceable undertakings and injunctions to require a responsible emitter to surrender eligible carbon units to bring net emissions back to baseline levels;
  • infringement notices; or
  • civil penalties, with maximum penalties of $1.8 million.

Safeguarding emissions reductions

Industry commentators predict that the Safeguard Mechanism will not affect the business as usual practices for many large emitters. That baselines are calculated on historical emissions highpoints means that many large emitters may not exceed the baselines set under the Safeguard Mechanism.

At the signing of the Paris Agreement, Greg Hunt indicated that Australia will "meet and beat" its 2020 targets and that Australia is on track to reduce its emissions by 26% by 2030. However, it is currently unclear how the ERF and the Safeguard Mechanism will contribute to Australia's emissions reductions post-2020. Given that the Paris Agreement provides for signatories to increase their level of ambition every five years, Australia may need more onerous Safeguard Mechanism baselines to meet any intensification of its international obligations.

The ERF and Safeguard Mechanism are up for review in mid-2017, with a final report due by 15 November 2017. Internationally, Australia is also obliged to participate in a global stocktake of ambition pledges under the Paris Agreement in 2018, and to submit a revised Nationally Determined Contribution prior to its commencement in 2020. These review processes could provide an opportunity for the Government to demand more of Australia's heavy emitters. For example, the Safeguard Mechanism could have broader application and impose more stringent baselines over time, to match the anticipated intensification of ambition under the Paris Agreement. Whether the Government takes this opportunity remains to be seen.

This review will include an investigation into the options and circumstances under which Australia might adopt an emissions trading scheme. For example, the Safeguard Mechanism could operate as a baseline-credit trading scheme in the future, if baselines are set at a level that creates a demand for the credits required to offset emissions exceedances.


You might also be interested in...

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.