In February 2018, the Australian Government Department of the Environment and Energy released a consultation paper outlining proposed changes to the Safeguard Mechanism. This consultation follows the Australian Government’s review of the Australia’s climate change policies in 2017.
What is the Safeguard Mechanism?
The Safeguard Mechanism establishes emissions baselines for Australia’s largest greenhouse gas emitters. It covers facilities with more than 100,000 tonnes of carbon dioxide equivalent emissions each year and applies to around 200 businesses in the electricity, mining, oil and gas, manufacturing, transport, and waste sectors. Facilities covered by the Safeguard Mechanism must keep their emissions below baseline levels or purchase domestic carbon offsets to make up the difference.
What reforms have been proposed?
The Government’s proposed reforms aim to respond to concerns raised by businesses that the operation of the Safeguard Mechanism arbitrarily constrains business growth in the way baselines are set. The proposed reforms aim to make the Safeguard Mechanism fairer and simpler for liable businesses by transitioning baselines towards a more consistent approach, accounting for growing businesses’ production forecasts.
AGL in principle supports the proposed changes to the operation of the Safeguard Mechanism to facilitate a fairer and simpler approach to compliance.
In the absence of an approach that entails declining baselines across sectors, there remains a serious risk that the emissions trajectory of covered industries will continue to rise.
While we acknowledge the Government’s intention to address emissions from the electricity sector through the proposed National Energy Guarantee (NEG), we consider that the Safeguard Mechanism may also have an important role to play in Australia’s climate and energy policy suite, especially in its potential to address the emissions from other sectors of the Australian economy.
Accordingly, we would urge the Government to consider more carefully ways in which the design of the Safeguard Mechanism could be enhanced (including the trajectory of baseline levels) to facilitate the progressive decarbonisation of the Australian economy.
A copy of AGL’s submission is available here.