The government legislated changes to the Safeguard Mechanism come into effect on 1 July and require Australia's largest emitters of CO2e to follow mandatory rules to reduce their emissions and bring forward industrial decarbonisation.
The changes form the centrepiece of the federal government’s climate reform agenda driving the resources and industrial sector to reduce emissions that are consistent with achieving Australia’s emissions reduction targets of 43% below 2005 levels by 2030 and to achieve zero emissions by 2050.
Industrial facilities that emit more than 100,000 tonnes of carbon dioxide equivalent (CO2e) in a year will be subject to legislated baselines/targets on their net greenhouse gas emissions. There are approximately 215 Safeguard facilities across the mining, manufacturing, transport, oil, gas and waste sectors, now required to keep their net scope 1/‘covered’ emissions below their baseline. These facilities currently produce approximately 30% of Australia’s total greenhouse gas emissions.
The Safeguard Mechanism applies a decline rate to facilities’ baselines which means a gradual and predictable reduction in emissions, on par with achieving Australia’s emission reduction targets.
Facilities using 30% or more from offsets, Australian Carbon Credit Units (ACCUs), to meet their emissions targets, must lodge an explanation with the Clean Energy Regulator (CER) and be held accountable for their efforts to meet their baseline. The explanation will be published on the CER website.
Facilities should consider the impact their explanation will have on the companies’ voluntary and mandatory climate reporting, stakeholder expectations around corporate alignment with the Task Force on Climate-Related Financial Disclosure and the government’s proposed mandatory climate disclosures. Misleading statements or greenwashing resulting in stakeholder backlash or worse - prosecution by regulators, will damage companies’ efforts to maintain their international competitiveness as the world decarbonises.
The Safeguard Mechanism was established under the National Greenhouse and Energy Reporting Act 2007 (Cth) and came into force on 1 July 2016. The amended act was passed by the Australian Federal Parliament on 30 March 2023. The Safeguard Mechanism is administered through the National Greenhouse and Energy Reporting (NGER) scheme.