Guest Post: The unsafe Safeguard Mechanism: how carbon credits could blow up Australia’s main climate policy

 

James Adams/Unsplash

Andrew Macintosh, Australian National University and Don Butler, Australian National University

This article is part of a series by The Conversation, Getting to Zero, examining Australia’s energy transition.

A time bomb is ticking inside the Albanese government’s climate policy. When it explodes, Australia will fall short of its climate targets and leave a gaggle of investors shirtless.

The problem arises from a poorly understood aspect of the net zero transition: carbon credits or offsets.

The centrepiece of Australia’s climate policy is a carbon pricing scheme known as the Safeguard Mechanism. It places caps on the emissions of around 220 of the country’s largest mining, gas and industrial facilities, based on the emissions intensity of their operations. Every year through to 2030 these caps will decline by between 1% and nearly 5%.

The facilities have two ways to keep their emissions within the caps. They can reduce them, or they can buy and surrender one of two forms of credits, the most significant being Australian carbon credit units (ACCUs) issued under Australia’s carbon offset scheme.

Guest Post: Labor’s scheme to cut industrial emissions is worryingly flexible

 

BHP steelworks at Port Kembla Phto: John Englart

Rebecca Pearse, Australian National University

The federal government today proposed new rules to regulate greenhouse gas emissions from Australia’s polluting industrial sector. The rule changes apply to a measure known as the “safeguard mechanism”, and are supposed to stop Australia’s top 215 emitters, such as new coal, oil and gas projects, from emitting over certain thresholds, or “baselines”.

The safeguard mechanism was established by the Abbott Coalition government in 2016. It’s been widely criticised for lacking teeth – indeed, industrial emissions have actually increased since the mechanism began.

The safeguard mechanism was reviewed last year and Labor had promised a revamp. The fine detail of the changes is crucial, because it will determine how well Australia brings down its emissions on the path to net zero.

So would Labor’s proposed reforms, if implemented, be effective and equitable? Unfortunately, it appears no. They involve only very modest changes to a very flexible regime, and many issues plaguing the safeguard mechanism under the previous government continue.