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Managing excess emissions for financial years commencing on or after 1 July 2023

27 February 2024

Safeguard Mechanism reforms

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:

Safeguard facilities are required to keep their net emissions at or below their emissions baseline.

If a Safeguard facility exceeds their baseline for financial years commencing on or after 1 July 2023, or expect to exceed their baseline, the responsible emitter has several options to manage their excess emissions including:

  • purchasing and surrendering Australian carbon credit units (ACCUs) or Safeguard Mechanism credit units (SMCs)
  • applying to borrow baseline from the following year (to be repaid with interest)
  • applying to become a trade-exposed baseline-adjusted (TEBA) facility and receiving a discounted decline rate (up to 3 years)
  • applying for a multi-year monitoring period (MYMP) to allow more time to reduce emissions.

Anti-avoidance measures have been introduced to prevent a business from defining, or redefining, a facility with the intention of avoiding Safeguard Mechanism obligations.

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.

Online Services is the new front door for scheme participants, replacing the Client Portal (Beta). If you already have a Client Portal account, you can use this to log into Online Services.

Surrendering Australian carbon credit units or Safeguard Mechanism credit units

For financial years commencing on or after 1 July 2023, Safeguard facilities can surrender ACCUs or SMCs to reduce their net emissions number and stay below their baseline.

A responsible emitter does not need to have its own Australian National Registry of Emissions Units (ANREU) account in order to surrender ACCUs and/or SMCs to meet their Safeguard obligations. Responsible emitters can either:

  • surrender ACCUs and/or SMCs held within their own ANREU account
  • arrange for the surrender of ACCUs and/or SMCs from the ANREU account of another person.

Information about Buying ACCUs will be updated as an SMC market emerges.

Surrender of ACCUs or SMCs is one of several excess emissions management options available under the Safeguard Mechanism.

Cost-containment

In limited circumstances, Safeguard facilities that exceed their baseline for financial years commencing on or after 1 July 2023 can apply to the CER to purchase ACCUs. The price for any ACCUs sold 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.

Further information about the cost-containment process is under development. The requirement for the sales process to be limited to those requiring ACCUs for surrender to avoid an excess emissions situation may mean that the sales process will not open until the February prior to the 1 April compliance deadline.

Any ACCUs purchased under the cost-containment mechanism must be surrendered to reduce the net emissions of the Safeguard facility. These ACCUs will not be made available to the broader carbon market.

Apply to borrow from a future baseline

For financial years commencing on or after 1 July 2023, 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:

  • 2% interest for the 2024-25 and 2025-26 financial years
  • 10% interest for financial years beginning from 2026–27 onwards.

Borrowing applications must be received by the CER no later than 28 February immediately following the financial year that is proposed to have its baseline increased. See Key dates for more information.

Borrowing applications must:

  • specify a number no greater than 10% of the baseline emissions number as the proposed borrowing adjustment number for the facility for the financial year
  • demonstrate that the facility is likely to be a Safeguard facility in the next financial year.

Applications for borrowing will not be approved if the Safeguard facility has a MYMP in place in the relevant financial year, or if the Safeguard facility has been issued with SMCs in the relevant financial year.

If a MYMP declaration is made, and the extended monitoring period includes a year where a borrowing adjustment determination has also been made, the CER is required to revoke the borrowing adjustment determination.

The borrowing adjustment determination form is available in Online Services.

Apply to become a TEBA facility

For financial years commencing on or after 1 July 2023, emissions-intensive trade-exposed Safeguard facilities may apply to become a trade-exposed baseline-adjusted (TEBA) facility and receive a discounted decline rate for up to 3 years:

  • non-manufacturing Safeguard facilities must demonstrate that they meet the lower threshold of a cost impact metric based on revenue, and may be eligible to receive a decline rate as low as 2%
  • manufacturing Safeguard facilities must demonstrate that they meet the lower threshold of a cost impact metric based ‘earnings before interest and taxation’ (EBIT) and may be eligible to receive a decline rate as low as 1%.

The Safeguard Rule provides that the EBIT guidelines may be published on the Department of Climate Change, Energy, the Environment and Water’s (DCCEEW) website. The CER will have regard to these guidelines when assessing TEBA applications.

TEBA facility applications must be received by the CER no later than 31 October immediately following the first financial year that is proposed to have its baseline decline rate decreased. See Key dates for more information.

TEBA facility applications must:

  • demonstrate that the Safeguard facility is an emissions-intensive trade-exposed facility listed by Schedule 2 of the Safeguard Rule
  • demonstrate that the Safeguard facility meets the lower threshold of the relevant cost impact metric
  • be accompanied by an independent audit report.

The TEBA application form is available in Online Services.

Apply for a multi-year monitoring period

Where Safeguard facilities are in an excess emissions situation after 1 July 2023 and they have a credible plan to reduce their emissions, they may apply for a MYMP of up to 5 years in length.

MYMPs provides responsible emitters with more time to implement emissions reduction projects so that, by the end of the extended monitoring period, the Safeguard facility’s emissions will be at or below its extended baseline.

Applications for MYMPs must be received by the CER no later than 15 November immediately following the first financial year of the proposed MYMP. See Key dates for more information.

Applications for MYMPs must:

  • specify the multi-year period for which the declaration is sought
  • specify the amount of covered emissions emitted (or reasonably likely to be emitted) for the proposed first financial year of the declared multi-year period
  • outline how the facility plans to reduce its emissions such, that by the end of the extended monitoring period, the facility’s emissions will be at or below its extended baseline. A summary of this plan must also be provided for publication on the CER’s website
  • provide an explanation of any known risks that might lead to the facility exceeding its extended baseline
  • be signed by a responsible financial officer for the responsible emitter of the Safeguard facility, or a person authorised by the responsible officer.

While the reformed scheme rules allow MYMPs to be for a 5-year period, it limits the end dates of such periods to be 30 June 2030.

Where a MYMP is in place at a Safeguard facility, the responsible emitter may also apply to the CER to:

  • vary a MYMP to reduce its length by one or more years, down to a minimum of 2 years
  • vary a MYMP to extend its length by one or more years, up to a maximum of 5 years
  • revoke the multi-year period declaration.

The Safeguard Rule provides that the CER may reduce the length of a MYMP where emissions are not being reduced.

If a MYMP declaration is made, and the extended monitoring period includes a year where a borrowing adjustment determination has been made, the CER is required to revoke the borrowing adjustment determination.

At the conclusion of a MYMP, the responsible emitter is required to submit an explanation of how the facility performed against the emissions reduction plan submitted as part of the MYMP application. The explanation must be submitted to the CER by 31 October following the conclusion of the MYMP and will be published on the CER’s website.

The MYMP application form is available in Online Services.

Apply for an exemption

In limited circumstances, Safeguard facilities that are likely to exceed their baselines due to the direct result of a natural disaster or criminal activity may apply to be exempted from their Safeguard obligations.

Applications for exemptions must be received by the CER no later than 31 October immediately following the financial year the Safeguard facility is seeking exemption for. See Key dates for more information.

Applications for exemptions must:

  • specify the monitoring period for which an exemption declaration is sought
  • specify the natural disaster or criminal activity that impacted the facility, and demonstrate how it directly resulted in the facility’s excess emissions situation
  • substantiate the reasonableness of:
    • steps taken before the event to mitigate risks that criminal activity or natural disaster could result in an excess (such as industrial design aimed at improving resilience to extreme weather conditions, procedures for greenhouse gas management during natural disasters, security arrangements or emergency shut-down procedures)
    • steps taken after the event to mitigate risks that the criminal activity or natural disaster could result in an excess (such as promptly acting to replace damaged emissions reduction equipment, low emissions fuel sources or taking reasonable actions to limit emissions in the remaining part of the applicable monitoring period).

Applications for exemptions will not be approved if the excess emissions situation is an indirect result of the natural disaster or criminal activity (such as where the responsible emitters response to market dynamics caused by the natural disaster or criminal activity results in the excess).

The CER may revoke an exemption declaration if the application is found to contain false or misleading information in relation to a material particular.

See Forms and guidance for more information.


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