Compliance with the Safeguard Mechanism for financial years ending before 1 July 2023

The 2022-23 financial year is the last financial year where Safeguard facilities must comply with pre-reformed Safeguard Mechanism arrangements.

To determine Safeguard facility Baselines for financial years ending before 1 July 2023:

• Safeguard facilities must apply for new baselines for the 2022-23 financial year (if applicable) by 31 October 2023
• emissions and production data reported for Safeguard facilities as part of the National Greenhouse and Energy Reporting (NGER) reporting cycle (NGER reports) will be used to determine each facility’s emissions and baseline numbers (NGER reports are due by 31 October after the end of each financial year).

Safeguard facilities that exceed their baselines for a financial year ending before 1 July 2023 must manage their excess emissions before 1 March 2024 by either:

• acquiring and surrendering Australian carbon credit units (ACCUs)
• applying for a multi-year monitoring period (MYMP) to allow more time to reduce emissions.
  

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 March 2024 compliance deadline.

Safeguard data will be published following the compliance deadline. See Key dates for more information.

The Safeguard Mechanism for financial years ending before 1 July 2023

Overview of the scheme for financial years ending before 1 July 2023

The Safeguard Mechanism commenced on 1 July 2016 and was designed to complement the ACCU Scheme (formerly known as the Emissions Reduction Fund) by sending a signal to businesses to avoid increases in emissions beyond business-as-usual levels. It achieved this by placing a legislated obligation on Safeguard facilities to keep net emissions below their baseline.

Safeguard facilities that exceeded their baselines were required to manage their excess emissions by either:

• acquiring and surrendering ACCUs
• applying for a MYMP to allow more time (up to 3 years) to either purchase ACCUs or reduce emissions.
  

Under the original Safeguard Mechanism, all Safeguard facilities had either a:

• reported baseline
• calculated baseline
• default baseline of 100,000 tonnes of carbon dioxide equivalent (tCO₂)-e.

Reported baselines were made based on the historical high point of emissions reported under the NGER Scheme between the 2009–10 and 2013–14 financial years.

Calculated baselines were based on a facility’s forecast emissions for the year of highest production over a forward, 3-year period.

In 2017, the Australian Government reviewed Australia’s climate change policies, including the ACCU Scheme and Safeguard Mechanism. As an outcome of the review, the Australian Government committed to simplifying the Safeguard Mechanism.

Following the 2017 review, the Safeguard Mechanism was amended in March 2019 to:

• simplify calculated baseline applications by giving businesses the option to use Australian Government-determined prescribed production variables and default emissions-intensity values for calculating baselines
• allow for facilities to move to production-adjusted baselines so that baselines adjusted annually for actual production where facilities use eligible production variables. This required businesses to report production.

The March 2019 amendments established a transition period that covered the 2018-19 and 2019-20 financial years. All Safeguard facilities could apply for a transitional calculated baseline during this period, and use either:

• default values: Government-determined prescribed production variables and default emissions-intensity values (collectively referred to as ‘default values’)
• estimated (facility-specific) values: which took account of individual facility circumstances, either as a site-specific production variable or a site-specific ‘estimated’ emissions-intensity value.

The March 2019 amendments provided that reported baselines would expire on 1 July 2021 for all Safeguard facilities except grid-connected electricity generators:

• if a facility with a reported baseline did not apply for a new baseline, it would receive a default baseline of 100,000 (tCO₂)-e from 2020-21
• if a facility applied for a transitional calculated baseline from 2020-21, they would be required to use Australian Government-determined prescribed production variables and default emissions-intensity values.

In September 2019, the Safeguard Rule was amended to extend the application deadline for calculated-emissions baselines starting in the 2018-19 financial year in certain circumstances, and provide facilities with greater access to the new framework established in the March 2019 amendment.

Due to the impacts of the COVID-19 pandemic, the Safeguard Mechanism was further amended in May 2020 to extend the transition period by one year to include the 2020-21 financial year.

Across March and October 2020, July 2021, and August 2022 the Safeguard Rule was amended to insert the Australian Government-determined prescribed production variables and corresponding default emissions-intensity values into Schedules 2 and 3 to give effect to the amendments.

In October 2021, the Safeguard Rule was amended to insert a prescribed capture efficiency rate and finalise the implementation of the landfill baseline approach.

For more information on the previously available reported baselines, production adjusted baselines, calculated baselines, transitional calculated baselines, and landfill baselines, see Baselines for financial years ending before 1 July 2023.

For information on Safeguard facilities that has been published each year since the scheme commenced 1 July 2016, see Safeguard data.