Statement on making of the Safeguard Rule
The Emissions Reduction Fund is central to the Government’s Direct Action Plan to cut greenhouse gas emissions to five per cent below 2000 levels by 2020 and to 26 to 28 per cent below 2005 levels by 2030. It comprises an element to credit emissions reductions, a fund to purchase emissions reductions, and a safeguard mechanism to ensure that these reductions are not displaced by a significant rise in emissions above business-as-usual levels elsewhere in the economy. Accordingly, the Emissions Reduction Fund, and its associated legislation, is central to Australia’s commitment to meeting its international obligations to reduce greenhouse gas emissions under the United Nations Framework Convention on Climate Change and related agreements.
The safeguard mechanism will commence in the National Greenhouse and Energy Reporting Act 2007 (the Act) on 1 July 2016. The Carbon Farming Initiative Amendment Act 2014 amends the Act to include a second object:
(2) The second object of this Act is to ensure that net covered emissions of greenhouse gases from the operation of a designated large facility do not exceed the baseline applicable to the facility.
The Act includes a duty in section 22XF for responsible emitters of designated large facilities to keep their net emissions number below their baseline emissions number so that an excess emission situation does not exist. Importantly, the level of annual covered emissions that make a facility a designated large facility and the baseline emissions number for a facility is determined in accordance with legislative rules made by the Minister under section 22XS of the Act.
Overview of the Safeguard Rule
The National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 (Safeguard Rule) outlines key elements of a responsible emitter’s duty to avoid an excess emissions situation and provides detail on how a responsible emitter can meet that duty. The policy context and operation of the Safeguard Rule is set out in its accompanying explanatory statement.
Section 8 of the Safeguard Rule establishes that a designated large facility is a facility which, in a single financial year, reports 100,000 tonnes or more of direct emissions under the Act. The Government expects this threshold to result in the coverage of around 140 large businesses—representing around half of Australia’s emissions.
Section 10 and Part 3 of the Safeguard Rule provide for the baseline emissions number for each facility to be set out in a baseline determination made by the Clean Energy Regulator or set at a default level of 100,000 tonnes of covered emissions.
The Safeguard Rule provides for different approaches for making baseline determinations for existing facilities, investments underway and new investments after 2020. New investments after 2020 will be required to meet best practice benchmarks for emissions-intensity of their production. These approaches have been designed to take into account the objective of avoiding the displacement of purchased emissions reductions by a significant rise in emissions above business-as-usual levels elsewhere in the economy.
Once a baseline emissions number is established, the duty in the Act ensures that a responsible emitter must keep their net emissions number (comprising covered emissions less credits surrendered) below that level over a given monitoring period.
The Safeguard Rule sets an appropriate coverage threshold and provides for the establishment of baseline emissions numbers for covered facilities such that it gives effect to the second object of the Act to ensure that net covered emissions of greenhouse gases from the operation of a designated large facility do not exceed the baseline applicable to the facility.
Minister for the Environment
- The Safeguard Mechanism requires Australia’s largest greenhouse gas emitters to keep their net emissions below a baseline.
- The Emissions Reduction Fund incentivises businesses to adopt smarter practices to cut their greenhouse gas emissions.