The Australian Government has opened consultation on draft legislation to reward industrial facilities that stay below their emissions baselines, and give other facilities a new, low-cost way of reducing net emissions.
The draft Safeguard Mechanism (Crediting) Amendment Bill 2022 provides a legal architecture for new Safeguard Mechanism Credits. This allows for tradeable credits which facilities with relatively low-cost abatement can sell to others that currently have more costly or limited options.
These new credits were promised but never delivered by the former Government.
Under the Albanese Government, the new credits will be one part of broader reforms to ensure the Safeguard Mechanism delivers real emissions reductions and provides policy certainty for Australia’s biggest industrial emitters.
Consultation on these broader reforms is ongoing, and this draft bill does not determine or pre-empt key design decisions that were discussed in an August consultation paper. This includes ongoing consideration of a legislative framework for the possible inclusion of international credits, which would need to be of the highest integrity and count towards Australia’s Paris targets.
Minister for Climate Change and Energy Chris Bowen said the crediting element of the reforms will help Australian industry cut emissions and remain competitive in a rapidly decarbonising global economy.
“Tradeable Safeguard Mechanism Credits will enable the lowest-cost abatement to occur for facilities under the Safeguard Mechanism,” Minister Bowen said.
“It’s vital the reforms underway are efficient for Australian industry, and this draft legislation helps to do just that.
“Feedback on the consultation paper we released in August highlighted the importance of these credits to help facilities meet their obligations, and of appropriate compliance and implementation arrangements for the credits.”
The draft bill also provides a framework to address incentive overlaps from declining Safeguard Mechanism baselines, Safeguard crediting and opportunities to create Australian Carbon Credit Units.
Increased transparency of emissions accounting and consistent frameworks for information have also been factored into the draft legislation.
The Albanese Government encourages industry and all stakeholders to have their say on the proposed legislation.
Around 215 facilities that produce more than 100,000 tonnes of greenhouse gases a year are subject to the Safeguard Mechanism and accounted for 28 per cent of Australia’s total emissions in 2020-21.
Australian industry will play a crucial role in reducing emissions by 43 per cent by 2030, based on 2005 levels, and reaching net zero by 2050, as legislated last month.
Further consultation on the detail of the reforms and regulatory arrangements is expected later in 2022.
Consultation on the draft Safeguard Mechanism (Crediting) Amendment Bill 2022 (https://consult.industry.gov.au/safeguard-mechanism-reform-consultation) is open until Friday 28 October 2022.
