Safeguard Mechanism reforms confirmed as Bill passes Parliament

Australia’s largest greenhouse gas emitters will be made accountable for contributing to the country’s emissions reductions targets, with reforms to the Safeguard Mechanism.

The reformed Safeguard Mechanism imposes emissions limits on Australia’s 215 largest polluters, requiring them to adopt emissions reduction technologies – otherwise, facilities will need to pay for offsets or trade credits – to reduce their emissions by 4.9% each year to 2030.

The 215 facilities covered account for about 28% of Australia’s emissions production across mining, oil and gas exploration, manufacturing, transport and waste facilities.

The Safeguard Mechanism applies to scope 1 covered emissions of more than 100,000 tonnes of carbon dioxide equivalent (CO2-e) per year.

On 30 March 2023, the Safeguard Mechanism (Crediting) Amendment Bill 2023 passed Parliament, which is integral to the success of the Safeguard Mechanism reforms. The changes take effect from 1 July 2023.

The Federal Government needed to negotiate the support of the Greens to pass this Bill, which included, among other things:
  • additional $400 million for industries providing critical inputs to clean energy industries (incl. steel, cement/lime, aluminium/alumina);
  • specific treatment for hard-to-abate, value-added manufacturers (different thresholds and reduced annual baseline decline rates).
  • the National Greenhouse and Energy Reporting Act 2007 (NGER Act) will be updated to include:
    • the policy intent is for aggregate emissions to go down over time – through measurement of a rolling average; and
    • to not exceed the conservatively estimated 1,233 million tonnes of CO2-e to 2030, or 100 million tonnes in 2030.
  • new projects will trigger assessment by the government of that project’s reported emissions against the above;
  • new gas fields supplying existing LNG facilities will be treated as new facilities, and be required to have zero reservoir CO2 emissions; and
  • new public reporting requirements for methane and nitrous oxide gases.

“Passage of this legislation is the culmination of extensive feedback from Safeguard businesses, industry associations, climate and community groups, academics and private individuals,” said the Minister for Climate Change and Energy the Hon. Chris Bowen MP.

“These reforms have been supported across the spectrum – from the Business Council to the Climate Council, Manufacturing Australia to the Australian Conservation Foundation.

“We thank those across the Parliament who engaged in good faith discussions to ensure accountability, transparency and integrity for the scheme, and ensure flexibility and support for industry.”

The Clean Energy Regulator (CER) sets the emissions baselines and is the body facilities report their emissions to.

Safeguard Mechanism data released by CER for 2021-22 shows 219 organisations reported 137.5 million tonnes of covered CO2-e scope 1 emissions. All organisations met their obligations.

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