Safeguard Mechanism briefing paper | Local weather Council

Precedence coverage settings to ship real emissions discount for Australia

Australia can’t meet our legislated emissions discount targets and make actual progress on tackling dangerous local weather change if we don’t get the Safeguard Mechanism proper. 

If polluters inside the Safeguard Mechanism don’t pull their weight, each different a part of our financial system and group must do extra – households and companies alike. 

Australia wants to chop our emissions by way over 43% to keep away from the worst impacts of dangerous local weather change. How we arrange the Safeguard Mechanism will decide whether or not this goal finally ends up being a flooring or a ceiling. 

The Safeguard Mechanism is a fancy coverage and there are a lot of levers for which the federal authorities should decide settings. Nonetheless, there are 4 key areas which are important to get proper to make sure the Safeguard Mechanism turns into a instrument for genuinely decreasing industrial emissions. 

Key concern #1 – Australia’s greatest polluters should pull their weight 

Greater than half of all emissions produced inside the Safeguard Mechanism since its institution in 2016 have been produced by simply 10 corporations. Collectively, the businesses inside the scheme account for 28% of Australia’s nationwide emissions.     

What’s it about?

In reforming the Safeguard Mechanism in order that corporations inside it cut back their emissions over time, will probably be mandatory to find out what share of the whole nationwide emissions discount effort these corporations are required to contribute. Some regulated entities have already argued that corporations inside the scheme shouldn’t be required to account for a proportional share of the nationwide emissions discount process – i.e. do much less – as a result of they’re in ‘onerous to abate’ sectors.     

Why does it matter?

If corporations inside the Safeguard Mechanism don’t pull their weight in decreasing emissions, both Australia merely is not going to attain its legislated 43% emissions discount goal OR different elements of our financial system and group must do extra. This coverage regulates among the largest and most worthwhile corporations in our financial system, lots of that are overseas entities that pay no tax in Australia. Households, small enterprise and different sectors like agriculture are stepping as much as do their bit; our largest corporations should do likewise. 

Key concern #2 – Don’t open the door to new, excessive emitting tasks

Each new excessive polluting venture that enters the Safeguard Mechanism will add to its general emissions burden and the problem of attaining Australia’s nationwide emissions discount targets. Australia at the moment has greater than 100 proposed coal, oil and gasoline tasks within the pipeline that might doubtless be coated by the Safeguard Mechanism in the event that they had been already working as we speak.

With no strict restrict on coated emissions, achievement of the Safeguard Mechanism emissions discount process and Australia’s legislated 43% emissions discount goal could be put in danger.  

What’s it about?

Services that exceed 100,000 tonnes of CO2-e emissions yearly are coated by the Safeguard Mechanism. There are at the moment round 215 coated services, however this quantity is prone to rise as extra services set off the 100,000 tonnes of CO2-e threshold.

New excessive emitting tasks would both place a better emissions discount burden on different services, spill over and burden different sectors of the financial system, or threaten achievement of Australia’s emissions discount targets.

A ‘reserve’ has been proposed, which might imply setting apart among the emissions allowable below the Safeguard Mechanism for brand spanking new entrants. This reserve would probably be constructed into baseline decline charges for different services, requiring them to be greater to make room for emissions from new entrants. 

Particulars about what this might imply for baseline decline charges aren’t but accessible. Nonetheless, within the absence of a tough cap on cumulative emissions below the Safeguard Mechanism – making use of each to present and new entrants – Australia’s pipeline of latest excessive emitting coal, oil and gasoline tasks could possibly be a significant issue.

New coal, oil and gasoline developments not solely threaten to burden different sectors and the achievement of Australia’s local weather targets, they’re additionally incompatible with efforts to deal with local weather change and Australia’s worldwide commitments. To maintain world warming as near a 1.5 diploma threshold as attainable, there isn’t any room for any new or expanded coal, oil or gasoline developments.  

Why does it matter?

Labor’s 43% emissions discount goal was the results of modelling performed by RepuTex, which added up emissions discount from a set of insurance policies and decided what could possibly be achieved by 2030. New entrants weren’t thought-about by the RepuTex modelling and due to this fact weren’t included within the general emissions discount process assigned to the reformed Safeguard Mechanism. 

The influence of latest and increasing fossil gasoline tasks on Australia’s home emissions could possibly be huge. It’s estimated that deliberate new gasoline and coal tasks might lead to nearly 1.7 billion tonnes of CO2-e emissions yearly, greater than 3 instances Australia’s annual emissions if all of them proceeded. Though a big portion of those emissions could be launched abroad (nonetheless producing local weather harm), every venture would even be accountable for a rise in home emissions. The rise is estimated at round 146 million tonnes of CO2-e yearly, which is greater than the whole emissions coated below the Safeguard Mechanism in 2020-21.

If Australia is severe about our worldwide local weather commitments and doing our half to maintain world warming as near 1.5 levels as attainable, we might want to cease opening new coal, oil and gasoline tasks and require local weather insurance policies such because the Safeguard Mechanism to play a limiting function. 

Key concern #3 – The Safeguard Mechanism should obtain real emissions discount

Firms regulated by the Safeguard Mechanism are at the moment required to buy and give up Australian Carbon Credit score Items (ACCUs) in the event that they exceed their emissions baseline. The federal government is proposing to determine a second set of credit to function alongside ACCUs as accessible offsets, referred to as Safeguard Mechanism Credit (SMCs). However the design of the Safeguard Mechanism should prioritise real emissions discount, not notional cuts on paper.  

What’s it about?

Carbon credit – similar to ACCUs – characterize an quantity of emissions which were diminished, eliminated or prevented. Firms can buy these credit to offset emissions produced by their operations the place they can’t keep away from these. SMCs are meant to function in the same method; they are going to be created when corporations inside the Safeguard Mechanism reduce emissions under their assessed baseline. Firms which have emissions greater than their baseline are proposed to have the ability to buy SMCs to offset this extra air pollution.        

Why does it matter?

If corporations regulated by the Safeguard Mechanism have quick access to a number of varieties of credit as offsets, they are going to be a lot much less prone to undertake the know-how adjustments and different investments wanted to genuinely and completely cut back their emissions. It is because it’ll proceed to be cheaper and simpler to offset emissions on paper than to make real cuts to emissions. There are additionally sturdy considerations concerning the integrity of many varieties of carbon credit, and that is at the moment the topic of a government-initiated inquiry led by Professor Ian Chubb.       

Key concern #4 – No particular offers for some sectors on the expense of everybody else 

Carve-outs or caps on ambition for entire classes of services below the Safeguard Mechanism would unfairly pressure different services and sectors to select up the slack.  This contains so referred to as ‘emissions-intensive commerce uncovered’ industries (EITEs), which make up a good portion of coated services and for which particular remedy has been thought-about.

What’s it about?

Particular remedy for EITEs has been justified primarily based on what’s referred to as ‘leakage,’ the concept that additional restrictions or prices positioned on emissions might drawback Australia’s trade-exposed services and probably transfer commerce to markets that don’t impose such restrictions or prices.

This argument made sense a decade in the past, however world efforts to decarbonise have elevated considerably in recent times together with emissions discount targets and insurance policies.  As of 2021, greater than 68 regional, nationwide, or subnational carbon costs had been in impact overlaying most of the world’s largest economies, key nations in our area and markets that compete with Australia. World commitments will proceed to develop in coming years with markets going through better climate-related necessities.

To make sure that the Safeguard Mechanism achieves real emissions discount as a precedence, EITEs shouldn’t be given particular remedy inside the Safeguard framework, notably help that would scale back their emissions discount obligations.

Why does it matter?

The EITE actions and services that could be eligible for particular remedy make up over 78% of coated emissions below the Safeguard Mechanism, and 56% of all services. They make a major contribution to coated emissions, and meaning loosening emissions constraints for these industries (similar to slower baseline decline charges) might play a job in undermining Australia’s transition to a internet zero financial system, whereas putting a heavier burden on home, non-trade uncovered industries, together with some which are thought-about ‘hard-to-abate’ industries.

This briefing paper is written in partnership with the ACF.

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