Recommendation

Government Position

1

Amend the objects of the National Greenhouse and Energy Reporting Act 2007 to set out key objectives of the Safeguard Mechanism, including:

* that the industrial sector makes a requisite proportional contribution to meeting Australia’s overall emissions reduction targets

* that aggregate net covered emissions from the operation of designated large facilities decline in line with the provisions of the Climate Change Act 2022.

In line with this, the NGER Act should be amended to require that the Minister must be satisfied that the Safeguard Rules are consistent with those objectives when making or amending the Safeguard Rules

Agreed. Total aggregate emissions will reduce over time (measured as a rolling 5-year average). To make the Safeguard Rule, the Minister must be satisfied that the rule will achieve the reduction of absolute emissions.

2

Put a carbon budget of 1,233 million tonnes CO2e emissions between 2020 and 2030 in legislation or regulation as an absolute cap on scheme emissions

Agreed. There is a net cap of 1,233 million tonnes CO2 emissions between 2020 and 2030, and by 2030, net emissions must be 100Mt or less.

3

Require the CCA to report annually on the size and use of the Safeguard Mechanism budget and reserve, including the drawdown of the reserve by category (new entrants, expanded production, and unacquitted exceedance of baselines).

Agreed. The CCA provides annual reports against the safeguard mechanism budget and how emissions are tracking against the budget.

4

New entrants must have a net zero impact on emissions and no access to ACCUs to comply with baselines.

Partially agreed. New LNG fields will be required to comply with international best practice, meaning zero reservoir emissions.

5

Clarify that any facility expansion or extension that will be responsible for over 100,000 tonnes of CO2e a year is classified as a new entrant.

Partially agreed. New LNG fields will be required to comply with international best practice, meaning zero resevoir emissions.

6

Legislate a declining limit on the use of ACCUs by Safeguard Mechanism facilities, reducing to 20 per cent of exceedance above baselines by 2030. If the Government is unwilling to implement a hard cap, there should be a discount on the carbon value of ACCUs over thresholds, with the discount on carbon value escalating in proportion to the use of ACCUs on a sliding scale

Not agreed

7

Ensure that SMCs are used by Safeguard Mechanism facilities to meet compliance requirements in preference to ACCUs

Agreed - in the objects of the bill to for there to be an incentive to invest in reducing emissions rather than offsets

8

Remove the cost containment mechanism. If the government considers the mechanism necessary, it should be implemented as a penalty price, with any revenue directed into the Powering the Regions Fund. The mechanism should be subject to a three-year sunset period.

Not agreed

9

Prevent Safeguard Mechanism facilities from surrendering ACCUs unless there is a high degree of certainty that the abatement that they offer is real, additional and permanent. This starts with full implementation of the Chubb Review as a matter of urgency

Partially agreed. Full implementation of the Chubb Review. In particular, in accordance with Recommendation 8, there will be a review of HIR projects before further credits are issued with additional independent expertise and auditing.

10

Subject ACCUs, SMCs and any future use of international credits to rolling vintage windows of 3-year timeframe

Not agreed

11

Require the publishing of:

Details of ACCUs that are held and that have been surrendered by each facility, including project origin on a yearly basis.

New data on the Carbon Estimation Areas as often as practicable

Partially agreed. A requirement that covered emissions, baselines and use of SMCs and ACCUs, including methodologies. And a commitment to consult on options to publish further details of ACCU unit holdings to enhance transparency and accountability.

12

Amend the Carbon Credits (Carbon Farming Initiative) Act 2011 to provide for extended standing for judicial review.

Not agreed

13

Increase in the funding available through the Safeguard Transformation Stream of the Powering the Regions Fund

Agreed. There will be an additional $400 million provided for strategic industries such as steel, cement and aluminium.

14

Public funding to Safeguard Mechanism facilities should only be provided where it will support genuine business transformation to decarbonise operations. Access to the Safeguard Transformation Stream should be subject to the following restrictions:

1. Fossil fuel producers should be denied access.

2. Companies receiving funds must be prevented from using the funds to purchase ACCUs.

3. Companies receiving funds must have a publicly available Corporate Transition Plan and complete annual reporting on the implementation of the plan. Such plans should include: what measures are being taken to reduce emissions, identification of verifiable and quantifiable KPIs which track the success of transition actions, and measures that will be taken to ensure transparency

Partially agreed. The $600 million Safeguard Transformation Stream of the Powering the Regions Fund will not support new or expanding coal and gas projects. The additional $400 million will be directed at strategic industries.

15

Bring methane emissions reporting and methane intensity targets into line with international best practices.

Partially agreed. Methane emissions will be required to be reported publicly. The Climate Change Authority will consider the best way to update methane measurement, verification and reporting.

16

Methane abatement from Safeguard-covered facilities should only be tradeable with methane emissions of other Safeguard-covered facilities, and should be confined to the Safeguard Mechanism Credit market, not the Australian Carbon Credit Market.

Not agreed