Safeguard Mechanism credit units (SMCs) are tradable credits that provide financial incentives to Safeguard facilities to reduce their emissions beyond their baselines. SMCs can be sold, surrendered to meet compliance obligations, or banked through to 2030.

Safeguard facilities with ‘standard’ baselines may be issued SMCs on application if, in a particular financial year, their emissions are below their baseline. SMCs may also be issued following conclusion a multi-year monitoring period (MYMP) that commences after 30 June 2023 if the Safeguard facility’s net emissions are below its net baseline at the end of the extended monitoring period.

SMCs will be issued to responsible emitters. However, anyone with an Australian National Registry of Emissions Unit (ANREU) account can acquire and sell SMCs. It is expected that, like Australian carbon credit units (ACCUs), a market for SMCs will emerge.

SMCs are not offsets. An SMC represents one tonne equivalent emissions within the Safeguard Mechanism’s regulated emissions limit. The regulated emissions limit ensures that, in aggregate, Safeguard facilities will stay within the overall Safeguard emissions budget. SMCs issued to a Safeguard facility that emits less than its baseline can be used by another Safeguard facility that emits more than its baseline.

Eligibility

The responsible emitter for a ‘standard’ baseline Safeguard facility may apply for SMCs if the facility’s emissions are below its baseline emissions in a particular financial year. They may also apply if the Safeguard facility’s net emissions are below its net baseline following the conclusion of a MYMP that commences 1 July 2024 or later.

SMCs will not be issued if:

• the Safeguard facility has a borrowing adjustment determination place in the relevant financial year
• the responsible emitter for the Safeguard facility does not have an ANREU account into which the SMC issuance can be made.

Safeguard facilities that fall below the Safeguard threshold may be eligible to be issued SMCs in limited circumstances.

Applying for Safeguard Mechanism credit units

While there is no statutory deadline for applications for SMCs, responsible emitters are encouraged to submit SMC applications as soon as possible after the submission of the NGER report for the facility for the relevant financial year. See Key dates for more information.

A relinquishment of SMCs may be required if they were issued on false or misleading information or as a result of fraudulent conduct.

The SMC application is currently in development. Information will be published on Forms and guidance when available.