Formal consultation on safeguard mechanism reform opens

Today the Australian Government is releasing the consultation paper on the design of its safeguard mechanism reforms. This is the next step in delivering certainty for Australia’s biggest emitters on their pathway to net zero emissions by 2050.

The majority of companies controlling or operating Safeguard facilities have medium and long term climate targets, including net zero goals, and are factoring Australian and global decarbonisation into their decisions. Australian heavy industry and our largest exporters know that global markets are moving to a low-carbon future, with more than 80% of Australian trade now covered by other countries’ net zero commitments.

That’s why Australian industry, including the Business Council of Australia, the Australian Industry Group and the Australian Chamber of Commerce and Industry have all been advocating for a robust policy framework to maximise future competitiveness, invest in the regions and ensure a sustainable future for heavy industry. 

The Albanese Government encourages industry and all stakeholders to have their say on options for changes to the Safeguard Mechanism which will deliver emissions reductions and strengthen Australia’s competitiveness in a decarbonising global economy. 

As is currently the case, the Safeguard Mechanism applies to ‘designated large facilities’ - those that produce more than 100,000 tons of greenhouse gases a year. 

But under previous implementation – emissions under the mechanism weren’t ‘safeguarded’ at all – they were going up.  

Emissions from around 215 facilities that are currently covered by the Safeguard Mechanism were 28 per cent of the nation’s total emissions in 2020-21.

The role of Australian industry will be crucial in ensuring the nation reduces emissions by 43 per cent by 2030, based on 2005 levels, and to reach net zero emissions by 2050.

Minister for Climate Change and Energy Chris Bowen said he was confident that genuine consultation would deliver a mechanism that was fit for purpose and delivers both economic growth and emission reduction targets.

“We went to the election saying we would reform the Safeguard Mechanism by working in partnership with industry and key stakeholders and that is exactly what we are doing,” he said.

“We are building on the existing architecture of the Safeguard Mechanism but getting the settings right to get emissions heading downwards while supporting industry competitiveness.

“I have often said that the world’s climate emergency is Australia’s jobs opportunity, and a revamped Safeguard Mechanism will help Australian industry cut emissions and remain competitive in a decarbonising global economy. 

The consultation paper is seeking views from industry and other interested stakeholders on issues including:

•    setting baselines for existing and new facilities;
•    setting indicative rates for baseline decline;
•    lowering costs through crediting over performance and the use of offsets; 
•    identifying options for tailored treatment for emissions-intensive, trade-exposed businesses; and
•    taking account of available and emerging technologies.

The Safeguard Mechanism reforms are scheduled to take effect from 1 July 2023.

The consultation paper is available at https://consult.industry.gov.au/safeguard-mechanism-reform-consultation-paper and submissions can be made from now until 20 September 2022.