Questions over effectiveness of Safeguard Mechanism

The Clean Energy Regulator has reported that all 154 'responsible emitters' under the Safeguard Mechanism of the National Greenhouse and Energy Reporting scheme met their requirements in the first full year of the safeguard mechanism, although 16 industrial sites breached their emissions limits and had to buy carbon credits to cover them. This is despite the fact that 48 companies had been allowed to increase their emissions baselines.

The Safeguard Mechanism commenced on 1 July 2016, and applies to all facilities that emit more than 100,000 tonnes carbon dioxide equivalent (CO2-e) emissions in a financial year, with the first reporting period ending 30 June 2017. These facilities are in the electricity, mining, oil and gas, manufacturing, transport, and waste sectors and are jointly responsible for around half of Australia’s annual emissions.

Emissions were reported to the Clean Energy Regulator on 31 October 2017, and responsible emitters had until 28 February 2018 to surrender Australian carbon credit units (ACCUs) if their emissions were above their baseline.

As at 31 October 2017, there were 154 responsible emitters identified with one or more large facilities, resulting in 203 facilities having legislated obligations under the safeguard mechanism for the 2016–17 reporting year.

Facilities who reported emissions above their baseline had a range of options to meet their obligations under the safeguard mechanism including applying for a calculated baseline, baseline variation or multi-year monitoring period, or surrendering ACCUs to offset their emissions.

The biggest purchasers of credits were miners Anglo Coal (133,104 tonnes worth at the Capcoal mine in Queensland), Glencore (81,851 tonnes at the Tahmoor coalmine in NSW) and Rio Tinto (68,305 at the Alcan Gove bauxite mine in Arnhem Land).

Energy energy and emissions advisory firm, RepuTex, last month reported that 57 industrial facilities, across 48 companies, had been given permission to increase their emissions baselines under the Safeguard Mechanism, potentially allowing an additional 22 million tonnes of carbon dioxide equivalent (Mt CO2/e) increases per annum.

“Reported baselines therefore act as a limit in name only, with companies largely free to ‘choose their own cap’, with no penalty or requirement to offset emissions increases.”

Following last year's Climate Change Policy Review, the Federal Government is proposing changes to the Safeguard Mechanism, in particular changes to the current baseline setting arrangements to allow for business growth.

A consultation paper was released last month outlining the changes, and submissions are due by March 30.

Reputex estimates that emissions from facilities covered by the mechanism will reach 30 per cent above 2005 levels by 2030 – an increase of 16 per cent since the scheme began in July 2016.

Reputex Executive Director, Hugh Grossman said the government was giving more flexibility for large emitting companies rather than tighter compliance.

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