Australia seeks views on emission reduction plan

The Australian government is inviting industry to have a say on the design of a new Safeguard Crediting Mechanism that will help the country’s largest energy-using businesses adopt new technologies that will reduce energy costs and emissions, it said on August 23

The existing Safeguard Mechanism provides a framework for Australia’s largest emitters to measure, report and manage their emissions. It applies to more than 150 businesses across the industrial, manufacturing, mining, transport and oil and gas sectors. The Safeguard Mechanism applies to facilities with direct greenhouse gas (GHG) emissions of more than 100,000 metric tons/year.

The new Safeguard Crediting Mechanism would provide an incentive to businesses to reduce their energy costs and emissions by undertaking "transformative" projects. The policy was a recommendation by the 2020 expert panel review, led by Grant King, the chairman of Australia's Climate Change Authority. This review looked at ways to unlock low-cost abatement across the economy.

Minister for energy and emissions reduction Angus Taylor said the government’s technology-over-taxation approach meant reducing emissions without imposing new costs on households, businesses, or the economy.

“Many of the businesses covered by the Safeguard Mechanism produce goods for export or compete with products imported from overseas. They operate in a highly competitive international trade environment and are critical to our economy,” Taylor said.

“That’s why our approach is focused on building voluntary markets and incentives to accelerate the adoption of new technologies,” he added.

The 2021-22 federal budget committed A$280mn over 10 years to allow the Clean Energy Regulator to purchase abatement from businesses under the new Safeguard Crediting Mechanism.

The King Review

The 2020 expert panel was tasked with providing advice to the minister for energy and emissions reduction on how to incentivise low-cost abatement opportunities from across the economy, with a focus on the industrial, manufacturing, transport and agriculture sectors, and energy efficiency.  

Targeted consultation was undertaken with these sectors and submissions were received from across the industry, research organisations and non-government organisations.

The King Review, published in February 2020, recommended that the government establish a below-baseline crediting arrangement to access emissions reductions at large facilities covered by the safeguard mechanism. The recommendations covered three main themes.

In the first part, the panel recommended actions that could drive increased emissions reduction through the Emissions Reduction Fund (ERF). This includes allowing ERF methods to award Australian Carbon Credit Units (ACCUs) over a shorter, compressed timeframe and ahead of when abatement is achieved.

This would better align the timing of the ERF incentive with project costs that are often incurred upfront and will help to overcome key barriers to firms engaging with the scheme. Alongside other proposed operational changes to the ERF, such as a streamlined purchasing mechanism for small projects and a standardised framework for risk-sharing, this change would encourage and enable increased participation in the scheme.

In the second part, the panel recommended measures aimed at incentivising voluntary action on a broader scale. In particular, the panel said there is an opportunity to leverage the architecture of the Safeguard Mechanism to accelerate the adoption of low emission technology by Australia’s largest facilities, improving the productivity of these facilities and delivering genuine abatement.

This could be achieved by crediting emissions reductions below baselines and providing for the sale and purchase of these Safeguard Mechanism Credits by the federal, state, or territory governments or through voluntary transactions in carbon markets, it said.

In the third part, the panel outlined that these new technologies across the economy will be needed to position Australia for its long-term goals. A goal-oriented technology co-investment programme is recommended to help bring down the costs of transformative, high abatement potential technologies, the panel said.

Its objective would be to drive down the costs of transformative technologies and help facilitate their deployment and commercialisation, including by reducing the risks faced by early movers and increasing specialised skills and capacity in local markets. To maximise the effectiveness of this programme, existing institutions such as Arena and the CEFC should be provided with an expanded, technology-neutral remit so they can support key technologies across all sectors, it said.

The Australian government said that the proposed Safeguard Crediting Mechanism would aim to unlock below-baseline abatement opportunities not currently being realised under the Safeguard Mechanism or the ERF.