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Managing excess emissions

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30 March 2023

Safeguard Mechanism reforms passed by Parliament

The Australian Government's Safeguard Mechanism (Crediting) Amendment Bill 2023 has been passed by Parliament, with the new arrangements taking effect from 1 July 2023.

The reformed Safeguard Mechanism will ensure Australia's largest emitters are contributing towards Australia's emissions reductions task.

The Department of Climate Change, Energy, the Environment and Water (DCCEEW) is in the process of finalising amendments to the Safeguard Rule that will provide detail on how the reformed Safeguard Mechanism will be implemented.

Visit DCCEEW's consultation hub for more information on these reforms and the consultation activities.

We will make updates to our website as more information is available.

Activities for the 2022-23 compliance period, including applications for baselines commencing 1 July 2022 and reporting of 2022-23 production quantities by 31 October 2023, will operate under the pre-reform scheme arrangements.

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

If a facility's emissions exceed or are expected to exceed its baseline, the facility operator has several options available to manage the excess emissions, including:

There is a range of enforcement options available to the Clean Energy Regulator where a responsible emitter fails to take one of the above actions. These options include entering an enforceable undertaking, issuing an infringement notice, or initiating court proceedings to seek an injunction or civil penalties.

Applying for a calculated baseline or a production adjusted baseline

Calculated baselines allow facilities to establish production variables and emissions intensity values that can then be used in production adjusted baselines.

Production adjusted baselines typically follow on from a calculated or benchmark baseline and allow facilities to update the baseline for actual production.

Using ACCUs to offset emissions

Safeguard facilities can surrender ACCUs to offset their emissions and stay below their baseline. Both Kyoto and non-Kyoto ACCUs can be used as offsets under the safeguard mechanism.

The responsible emitter can either purchase ACCUs from other businesses, or generate their own ACCUs for abatement under the Emissions Reduction Fund.

ACCUs will be subtracted from the facility's net emissions number in 2 circumstances:

  • where a person surrenders ACCUs and states that the surrender is to reduce that facility’s net emissions number for a specified monitoring period, or
  • where an Emissions Reduction Fund project is conducted at the facility and:
    • ACCUs attributable to abatement at the facility are issued, and
    • the ACCUs are delivered to the Commonwealth under an Emissions Reduction Fund contract.

In these circumstances, the net emissions number of the person who was the responsible emitter at the time the ACCUs were issued, will be decreased by the number of ACCUs delivered.

To avoid counting offsets twice, a facility that is both covered by safeguard and a participant in the Emissions Reduction Fund will have ACCUs it has generated added to its net emissions number. When the facility surrenders ACCUs, they will be subtracted from its emissions number. This way, each tonne of abatement represented by an ACCU is only counted once.

Surrender of ACCUs for the purpose of reducing a net emissions number can be performed from any Australian National Registry of Emissions Units (ANREU) account. This means that the responsible emitter for the facility does not need their own account – any person with an ANREU account will be able to surrender units on their behalf. Each year, after reports have been submitted under the National Greenhouse and Energy Reporting Act 2007, the Clean Energy Regulator will contact all responsible emitters that are in an excess emissions situation. Those responsible emitters that have their own ANREU account will receive a ‘surrender initiation notification’ in their ANREU account. They can use this notification to start the safeguard surrender process. Those entities that do not have an ANREU account will need to advise the Clean Energy Regulator which ANREU account the ‘surrender initiation notification’ should be sent to. Receipt of a ‘surrender initiation notification’ does not compel the responsible emitter to surrender ACCUs. Surrender of ACCUs is one of several excess emissions management options available under the safeguard mechanism.

Multi-year monitoring period

A multi-year monitoring period allows a facility to exceed its baseline in one year, so long as average net emissions over a 2 or 3 year period are below the average baseline for that period.

The monitoring period can cover 2 to 3 years, giving businesses sufficient time to implement emissions reduction projects, acquire ACCUs or help capture natural peaks and troughs in emissions.

Further details are available on multi-year monitoring periods.

Exceptional circumstances exemption

Facilities whose excess emissions are the direct result of exceptional circumstances, such as a natural disaster or criminal activity, may be exempted from safeguard obligations for a defined period.

We will consider whether reasonable steps were taken to mitigate the risk of excess emissions arising from the exceptional circumstances, both before and after its occurrence.

Exemptions will not apply to events that reflect normal market dynamics or as a mechanism for addressing drivers of emissions variation, such as changes to price, production inputs and outputs, or maintenance.

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