“These proposed reforms have been carefully calibrated to deliver the policy certainty and support Australian industry needs through decarbonisation,” Bowen said. “Reforms to the safeguard will help create an effective,equitable and efficient trajectory to net zero.”
About 70 per cent of facilities captured by the safeguard mechanism,which together generate about 80 per cent of the emissions,have already committed to shareholders to reach net zero by 2050 and Bowen said on Tuesday the tightened pollution caps would help them reach these goals.
What is the safeguard mechanism?
The mechanism is one of Labor’s key policies to help achieve its emissions reduction targets,with the aim of lowering industrial emissions.
It will impose pollution limits on Australia’s 215 biggest carbon emitters,and those limits will be lowered through the years to achieve greater reductions.
The companies captured by the mechanism would have to cut their pollution by investing in clean technology – such as replacing gas inputs with renewable energy – or capturing their emissions.
If they don’t,or if their emissions still exceed their limit,they will be forced to buy carbon offset credits equivalent to the volume of carbon emissions that exceeded their cap.
The credits could be generated by other companies that overachieve on their targets or by carbon projects like tree planting.
Bowen will consult industry until February,but the rules kick in on July 1,leaving little scope for changes.
If companies do not meet their emission reduction target and fail to buy offsets,they face fines of $275 a tonne – which the government argues is priced above the maximum cost of carbon credits to ensure it is cheaper for businesses to comply.
The Minerals Council of Australia chief executive Tania Constable praised the government for including a cost-containment measure,capping the price of Australian carbon credits at $75 a tonne initially,but said industry needed to work through crucial detail for exporters.
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“We need to keep our trade-exposed export industries strong and competitive – that’s going to be a very important part of the consultation.”
Export businesses and the regional communities where they are located can apply for grants totalling $600 million to help cover decarbonising costs.
Australian Industry Group chief executive Innes Willox welcomed the government’s reform,which he said provided valuable policy certainty for industry.
“The evolutionary approach to strengthening the safeguard is vastly preferable to further rounds of policy whiplash,” Willox said.
On top of the existing carbon trading scheme in which polluters pay for credits generated by projects such as tree planting,the government will allow companies to sell credits if their emissions fall below their safeguard caps.
This move requires new legislation that would likely need support in the Senate from the Greens and David Pocock.
However,the Greens said on Tuesday the safeguard reforms are too soft on fossil fuel companies.
“Labor’s safeguard mechanism is giving coal and gas a green light to keep expanding as long as they buy enough offsets,” said Greens acting leader Mehreen Faruqi.
“Buying offsets is just coins down the back of the couch for them,” she said. “Coal and gas can’t be allowed to just buy their way out of real pollution cuts with dodgy offsetting.”
Qenos’ manufacturing plant in Altona,Melbourne,is one of the 215 industrial polluters that must reduce its emissions under the beefed-up regulations.Credit:Scott McNaughton
The Australian Conservation Foundation said the government should have imposed limits on the volume of carbon credits a company can use to offset their emissions,arguing that the global economy needs to decarbonise as quickly as possible.
Any new coal mines and gas processing facilities that are approved would be subject to the new regulations and would be required to meet “best practice” emissions targets. But the safeguard mechanism does not make it impossible for new gas or coal projects to proceed.