The Safeguard Mechanism has been reformed following a
consultation process undertaken by the Department of Climate Change, Energy, the Environment and Water.
New obligations and reporting requirements apply to Safeguard facility financial years commencing on or after 1 July 2023:
The Safeguard Mechanism has been reformed following a consultation process.
To determine Safeguard facility
Baselines for financial years commencing on or after 1 July 2023:
NGER reports must be accompanied by an audit report if a Safeguard facility has covered emissions of more than 1,000,000 tonnes of carbon dioxide equivalent (tCO2-e) in the relevant financial year.
Safeguard facilities that do not exceed their baselines for financial years commencing on or after 1 July 2023 may be eligible to apply for
Safeguard Mechanism credit units (SMCs).
Safeguard facilities that exceed their baseline for a financial year commencing on or after 1 July 2023 have several options to
manage their excess emissions, including:
There are a range of
enforcement powers available to the Clean Energy Regulator (CER) where a Safeguard facility’s responsible emitter fails to take one of the above actions by the
1 April compliance deadline.
Safeguard data will be published following the compliance deadline. See
Key dates for more information.
policy intent of the Safeguard Mechanism is available on the Department of Climate Change, Energy, the Environment and Water’s (DCCEEW) website.
Key aspects of the Safeguard Mechanism for financial years commencing on or after 1 July 2023 include:
A default decline rate of 4.9% p.a. applies to ’standard and landfill baselines. If the Safeguard facility is a TEBA facility, the decline rate could be reduced on application to as low as 1% p.a. for the manufacturing sector, or 2% p.a. for other sectors.
Grid-connected electricity generation facilities are not subject to an annual baseline decline. This is because a single sectoral baseline of 198 million tCO2-e applies collectively to grid-connected electricity generators. If the sectoral baseline is exceeded, individual ‘standard’ baselines will apply to each generator.
‘Standard’ baselines are calculated by multiplying the quantity of product that a Safeguard facility makes, by the defined emissions budget per unit of production (emissions-intensity). For financial years commencing on or after 1 July 2023 the emissions-intensity of:
If the Safeguard Rule does not include a best-practice emissions-intensity value for a production variable, the industry-average value applies until the best-practice value becomes available. The facility-specific emissions-intensity for each product produced at a facility will be published on the CER’s website.
In addition to the above, the reformed scheme also introduces ‘zero’ baselines for shale gas extraction facilities, and ‘zero’ emission intensities for the ‘reservoir carbon dioxide from new gas fields’ production variable.
SMCs are tradable credits that provide financial incentives to Safeguard facilities to reduce their emissions beyond their baselines. SMCs can be sold to other Safeguard facilities or banked for future use.
’Standard’ baseline Safeguard facilities may be issued SMCs if, in a particular financial year, their emissions are below their baseline. SMCs may also be issued following the conclusion of a MYMP that commences after 30 June 2023 if the Safeguard facility’s net emissions are below its baseline at the end of the extended compliance period.
In addition to purchasing and surrendering ACCUs, all Safeguard facilities that exceed their baselines may purchase and surrender SMCs.
Once SMCs have been issued and are in circulation, supply and demand dynamics will result in the market creating a price for these units.
The reformed scheme includes flexibility measures to help Safeguard facilities manage their compliance obligations for financial years commencing on or after 1 July 2023:
Safeguard facilities that exceed their baseline may apply to the CER to purchase the required number of ACCUs at a fixed price. The price of these ACCUs is set at $75 in 2023-24 and will be indexed in future financial years by the Consumer Price Index (CPI) plus an additional 2% per annum.
This measure is intended to provide certainty to Safeguard facilities about the maximum compliance costs they will face under the reformed scheme.
Safeguard facilities may apply to borrow baseline from the following compliance year. The Safeguard facility’s baseline would then decrease by a corresponding amount the following year, plus:
Safeguard facilities cannot apply to borrow baseline if it they have a MYMP in place, or if they have been issued with SMCs in the relevant financial year.
If a Safeguard facility’s net emissions have or are likely to exceed its baseline, and it has a plan to reduce its cumulative emissions before the end of a maximum 5-year period, it may apply for a MYMP of up to 5 years in length. A summary of the Safeguard facility’s emissions reduction plan will be published on the CER’s website.
Safeguard facilities with a MYMP may be eligible to apply for SMCs following conclusion of the MYMP if the facility’s net emissions are below its net baseline amount.
Emissions-intensive trade-exposed Safeguard facilities may apply to become TEBA facilities and receive a discounted decline rate for up to 3 years:
In addition to the information that is
already published for Safeguard facilities, the reformed scheme requires the CER to publish additional information for financial years commencing on or after 1 July 2023, including:
The Safeguard Mechanism’s scheme settings will be reviewed in the 2026-27 financial year. See DCCEEW’s
fact sheet for more information.
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