Following the update of Australia’s greenhouse gas emissions targets as a reduction of 43% by 2030 and net-zero by 2050, the federal government announced that it is reforming the Safeguard Mechanism with the aim to bring the policy in line with these targets. The reformed Safeguard Mechanism will require the country's largest emitters to keep emissions below a baseline that will decline over time in line with Australia's updated climate targets. The reform also proposes to introduce credits for facilities that emit less than their baseline, while recognizing the need to provide tailored treatment to trade-exposed facilities.
The consultation on the Safeguard Mechanism Reforms, which was released in August 2022, proposed a range of reforms to raise the ambition of the policy, including resetting baselines, introducing declining baselines and the formation of new ‘cap-and-trade’ credits, called Safeguard Mechanism Credits (SMC’s), which would be accredited to facilities that emit below their baseline and sold to facilities that have exceeded theirs.
Following the consultation on the Safeguard Mechanism Reforms, the government released its consultation on the draft Safeguard Mechanism (Crediting) Amendment Bill 2022, which took place in October 2022. In this consultation, the government asked for feedback on the creation of Safeguard Mechanism Credits (SMCs) and use of Australian Carbon Credit’s (ACCU’s) for reducing direct emissions.
In January 2023, the government released its proposed design of the policy, which is under consultation until the 24th February. It includes ‘cost containment measures’ in the form of a price cap of $75 per ton on Australian Carbon Credit Units (ACCU’s) which can be used to meet Safeguard obligations, despite the original consultation paper stating that ‘there may not be a need at this stage for further price stability measures’. Various forms of price containment measures have been advocated for by industry across both consultations to date, therefore it appears the measure has now been included in the proposed design in response to the positions held by industry.
InfluenceMap will continue to track the development of the reforms in 2023 and will update this page to reflect any policy developments.