Support for major safeguard mechanism reforms agreed

The Government has secured support to amend safeguard mechanism provisions to manage and reduce cardon emissions.
Australia Environment
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The Federal Government has secured support from the Greens Party on its push to amend safeguard mechanism provisions to further manage emissions reported by the nation's largest emitters as well as improve transparency regarding the impact of new projects, expected to take effect 1 July 2023.

The safeguard mechanism currently operates to mandate that facilities in Australia whose yearly carbon emissions exceed 100,000 tonnes measure, report and manage their carbon emissions with a view to reduce Australia's carbon emissions by 43% by 2030. These measures work in tandem with reporting obligations under the National Greenhouse Energy and Reporting Act 2007 (Cth) to require these large emitters to keep their emissions at or below baseline levels set by the Clean Energy Regulator.

The Safeguard Mechanism (Crediting) Amendment Bill 2022 currently before Parliament seeks to reduce the emissions output of large emitters by reducing emissions baselines and incentivising the generation of carbon offset credits by emitters that keep their emissions consistently below baseline levels.

The additional reforms to the Bill negotiated by the Greens mean that once the Bill is passed, the Safeguard Mechanism will impose firmer emissions caps on large emitters. The Greens' negotiations have resulted in the Government agreeing to a 'hard cap' of 140 million tonnes in gross emissions per annum, with that cap to be gradually decreased.

The Government has also agreed for a process to be implemented whereby any new or expanding projects will be subject to an assessment of their likely impact on the gross emissions cap and their ability to meet emissions reduction targets. Projects found to be likely to exceed their own emissions baselines or contribute disproportionately to the gross emissions cap will trigger Ministerial intervention to ensure projects satisfy the safeguard mechanism, or otherwise to cancel infringing projects altogether.

Changes to day-to-day reporting obligations have also been negotiated. Under the changes, companies will be required to publicly justify to the Clean Energy Regulator any excessive use of carbon credits to offset emissions of more than 30% above baseline levels. Importantly, however, the reforms contained in the Bill do not mean that large polluters will be made to simply cease operations if they surpass their emissions caps. Most of the existing reporting protocols will remain in place, and emissions above baseline levels will not by default result in adverse consequences against emitters.

The Bill is now expected to pass in the Senate, allowing the revised scheme to take effect from 1 July 2023. Moving forward, project proponents should be mindful of additional accountability and transparency requirements that these changes may impose, particularly with regard to any use of carbon credits to offset excess emissions.

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