Under the Safeguard Mechanism, facilities are given a baseline which is the reference point against which net emissions are assessed. Safeguard facilities are required to keep their net emissions at or below their baselines.

Section 88 of the Safeguard Rule provides that the following baseline types (as prescribed by previous Part 3 of the Safeguard Rule) apply to Safeguard facilities when ascertaining the baseline emissions number for financial years ending before 1 July 2023:

• production-adjusted
• calculated
• landfill
• sectoral
• reported baseline (note that reported baselines do not apply from 1 July 2020 for all Safeguard facilities, except grid-connected electricity generators).

How baselines work for financial years ending before 1 July 2023

Production-adjusted baseline

Production-adjusted baselines are determined based on a Safeguard facility's actual production levels. A production-adjusted baseline can be fixed based on the highest year of production during a preceding calculated baseline period, or annually adjusted based on the facility’s actual production for each year.

In broad terms, production-adjusted baselines are determined by multiplying the Safeguard facility’s actual production by an emissions-intensity value. In practice, the calculation of a Safeguard facility’s annual baseline emissions number depends on several factors.

Production variables

Safeguard facilities may produce several different products, each with different emissions sources that can contribute to the facility’s overall emissions-intensity.

Each Safeguard facility with a production-adjusted baseline must identify and measure production for each product that is produced at the facility.

• Previous Schedule 2 of the Safeguard Rule defines a range of products (‘production variables’) applicable to Safeguard facilities when ascertaining the baseline emissions number for financial years ending before 1 July 2023.
• The Department of Climate Change, Energy, the Environment and Water’s (DCCEEW) Safeguard Mechanism document provides additional guidance on how these production variables are to be identified and measured.

Emissions-intensity

The emissions-intensity used for a production-adjusted baselines depends on the Safeguard facility’s particular circumstances.

A facility transitioning from a calculated baseline can choose to either use the emissions-intensity from the previous calculated baseline, or use the default emissions-intensity value listed by previous Schedule 2 of the Safeguard Rule for the relevant production variable.

Facilities that do not have a calculated baseline are required to use the prescribed production variables and emissions-intensity values listed by previous Schedule 2 of the Safeguard Rule.

Production-adjusted baselines that adjust annually

Where a Safeguard facility uses a prescribed production variable that is identified as suitable for annual adjustment, its production-adjusted baseline is set annually based on actual production in each year.

Production-adjusted baselines that are fixed

All other production-adjusted baselines are fixed with actual production derived from the year with the highest level of actual production during the production assessment period. For a Safeguard facility transitioning from a calculated baseline, the production assessment period is the period that the calculated baseline was in force.

Production-adjusted baselines that include both fixed and annually adjusting components

Production-adjusted baselines can be set based on both actual production each year and actual production from the production assessment period.

This occurs when a Safeguard facility has multiple production variables, and one or more are listed in the previous Schedule 2 of the Safeguard Rule, and one or more other production variables are not listed in the previous Schedule 2 of the Safeguard Rule. One portion of the baseline is calculated upon approval of the application (and fixed). The remaining portion of the baseline is calculated each year following the submission of production quantities for the reporting period. The Safeguard facility’s total baseline is the sum of these portions.

Calculated baseline

Calculated baselines are set using an independently audited forecast of production, and either the forecasted emissions-intensity or the default emissions-intensity listed in previous Schedule 2 of the Safeguard Rule. The baseline is calculated by multiplying forecast production by the emissions-intensity of that production per unit of production.

A responsible emitter can apply for a calculated baseline for a facility that meets one or more of the specified eligibility criteria.

Transitional calculated baseline criteria

Facilities with an existing calculated baseline can apply for a transitional calculated baseline if the second calculated baseline used one or more prescribed production variables that were not used in the first application. For baselines commencing from 1 July 2021 onwards, new calculated baselines under this criterion are required to use default production variables, and default emissions intensities.

Applications under this criterion are required to be accompanied by an independent audit report. The audit provides assurance of the forecast production and suitability of the default emissions-intensity, and confirms that all requirements of the transitional criteria are met.

Inherent emissions variability criteria

Facilities in the natural resources sectors can apply to have their emissions-intensity value increased to account for inherent emissions variability associated with the extraction of a natural resource or reserve.

For example, some operations in the mining, oil and gas sectors can have highly variable emissions-intensity, particularly the fugitive emissions associated with resource extraction. Further, resource grades are highly variable. Mines tend to move from higher to lower grade ores in the natural progression of operations, so that emissions may rise even while production remains constant.

To accommodate variability, affected Safeguard facilities can apply for a calculated baseline under the inherent emissions variability criteria.

To be eligible under these criteria a Safeguard facility cannot have had more than one previous calculated baseline.

Calculated baselines under these criteria are required to use default production variables but can choose to use either site-specific or default emissions intensities.

Applications are required to be accompanied by an independent audit report providing assurance of the forecasted production and emissions-intensity, and that the inherent emissions variability criterion has been met.

Landfill baseline

Landfill facilities have different coverage and baseline setting arrangements to other Safeguard facilities. The landfill baseline recognises that waste facilities do not have an identifiable production variable. Only emissions from waste deposited after scheme commencement on 1 July 2016 (known as ‘non-legacy waste emissions’) are covered under the scheme.

The landfill baseline calculates emissions based on:

• non-legacy waste emissions produced in the financial year
• a default methane capture efficiency rate of 37.2%
• the near-surface methane oxidisation factor prescribed by section 5.4(1) of the National Greenhouse and Energy Reporting (Measurement) Determination 2008.

The landfill baseline is calculated each financial year based on information reported annually under the National Greenhouse and Energy Reporting Act 2008.

Sectoral baseline

A single sectoral baseline of 198 million tCO₂-e applies collectively to grid-connected electricity generators, unless the sector collectively exceeds the baseline in a financial year. If the sectoral baseline is exceeded, individual facility baselines will apply to each generator.

A sectoral approach is taken to grid-connected electricity generators because the electricity sector behaves more like a single entity, where the output produced is centrally coordinated to meet demand in real time. The sectoral baseline is based on the electricity sector’s emissions from the 2009–10 to 2013–14 financial years.

The sectoral baseline only applies to electricity generators connected to designated electricity networks, which comprise Australia’s 5 main electricity grids: the National Electricity Market, the South West interconnected system, the North West interconnected system, the Darwin to Katherine network and the Mount Isa-Cloncurry supply network.

Reported baseline

Reported baselines expired as of 1 July 2021, except for grid-connected electricity generators.

Reported baselines were based on the historical high point of emissions reported under the National Greenhouse and Energy Reporting scheme between 2009–10 and 2013–14.

Facilities that had a reported baseline and still exceeded the 100,000 tCO₂-e threshold after 1 July 2021 were able to apply for a new baseline (either production-adjusted or calculated) or receive the default baseline of 100,000 tCO₂-e.

Facilities that had a reported baseline but no longer exceeded the 100,000 tCO₂-e threshold after 1 July 2021 were not required to take any further action.

Applying for a baseline

If a Safeguard facility requires a new baseline determination for the 2022–23 financial year, the application must be received by the Clean Energy Regulator (CER) no later than 31 October 2023. See Key dates for more information.

Applications for baselines must:

• meet the eligibility criteria previous Part 3 of the Safeguard Rule for the relevant baseline type
• be accompanied by an independent audit report that meets the requirements prescribed by the previous Safeguard Rule.

See forms and resources for the baseline application forms and associated guidance documents.

Facilities with an existing production-adjusted baseline may apply to the CER to vary a baseline for the 2022–23 financial year if they produce a new prescribed (annually adjusted) production variable that was not included in the original production-adjusted baseline. Please contact us to discuss applying to vary a production-adjusted baseline.

The CER may also notify and seek comment from the responsible emitter about varying a baseline for the 2022–23 financial year if:

• a calculated or production-adjusted baseline includes emissions attributable to activities that no longer occur at the facility
• a facility that splits into multiple facilities or multiple facilities that merge to form a single facility
• there are updates to Global Warming Potentials or default emissions-intensity values
• an error has been identified.