Safeguard Mechanism proposed reforms released

The nation’s largest greenhouse gas polluters are one step closer to facing tighter emission baselines after the federal government released its proposed reforms to the Safeguard Mechanism.

Climate Change and Energy Minister Chris Bowen today announced the proposed reforms as a part of the government’s next step in supporting the biggest emitters to reduce their emissions while remaining competitive in the decarbonising global economy.

The Safeguard Mechanism was introduced by the Coalition government and requires the nation’s 215 biggest carbon emitters producing more than 100,000 tonnes annually to keep their net emissions below a baseline.

The reformed Safeguard Mechanism is expected to reduce Australia’s greenhouse gas emissions by a total 205 million tonnes by the end of the decade.

The baselines will gradually be reduced overtime in order to meet the government’s net zero emissions by 2050 target.

An initial $600 million worth of funding out of the $1.9 billion Powering the Regions Fund will be used to support trade-exposed facilities covered by the Safeguard Mechanism with the transition.  

The federal government has also begun consultation for the design and implementation of the broader Powering the Regions Fund.

The fund is intended to ensure the regions benefit from Australia’s net zero transition by supporting decarbonisation, new clean energy industries, workforce development and Commonwealth credit purchase.

Mr Bowen said this was an important next step to ensure the Safeguard Mechanism delivered meaningful outcomes and was fit for purpose.

“These proposed reforms have been carefully calibrated to deliver the policy certainty and support Australian industry needs through decarbonisation,” he said.

“We’ve been extremely encouraged by the level of engagement in the process to date, and look forward to continued constructive engagement as we finalise the design of these critical reforms for Australia’s net zero pathway.

“We know that that 70 per cent of facilities, representing over 80 per cent of scheme emissions, already have corporate commitments to net zero by 2050 , this reform helps deliver the framework to get there.”

Australian Chamber of Commerce and Industry chief of policy and advocacy David Alexander said he welcomed the proposed changes.

“The safeguard mechanism will play an important role in assisting Australia to reach its 2030 emissions reduction target, and net-zero by 2050,” he said.

“The 215 largest facilities covered by the safeguard mechanism should be doing their fair share of the emissions reduction task.”

The proposed package suggests the retention of the intensity baseline framework to help separate emission growth from economic growth. 

It also proposes tailored treatment for emission-intensive trade-exposed facilities to ensure businesses are not competitively disadvantaged and emissions do not “leak” overseas.

The proposed reforms also suggest a hybrid and site-specific approach to setting baselines for existing facilities to give them time to transition to the industry benchmarks by 2030.

Mr Alexander said he supported the move towards production-adjusted baselines set on a facility-by-facility basis.

“This recognises that the emissions reduction effort for some facilities is more difficult than others due to location, the nature of production and the current technologies installed at each site,” he said.

“The safeguard mechanism needs to be structured so that facilities are encouraged to lower their emissions intensity, not simply cut production in order to meet targets.”

The proposed reforms come after six months of industry and public consultation and are now out for further comment until February 24.