Analysts revise number of emitters impacted by Australia’s safeguard mechanism to zero

Published 08:11 on October 14, 2015  /  Last updated at 09:13 on October 14, 2015  /  Asia Pacific, Australia  /  No Comments

Given the flexible compliance options in the final version of the safeguard mechanism, not a single one of Australia’s 140 biggest carbon emitters are likely to feel any impact it, market analysts Reputex said Wednesday.

Given the flexible compliance options in the final version of the safeguard mechanism, not a single one of Australia’s 140 biggest carbon emitters are likely to feel any impact it, market analysts Reputex said Wednesday.

Australia last week adopted the final rules of the mechanism, which aims to ensure that greenhouse gas emission cuts achieved under the ERF are not offset by increases elsewhere in the economy.

Reputex has previously estimated that about a fifth of the companies that will be covered by the mechanism are likely to feel an impact from it, but in an analyst update released Wednesday that number was revised to zero.

“While there is potential for up to 150 of approximately 300 facilities to be at risk of breaching their ‘high point’ emissions baseline over the course of the scheme, all entities are now likely to avoid accountability for emission increases by utilising flexible rules to sidestep compliance obligations,” it said.

“With no accountability for emission increases, we forecast that covered emissions will increase by approximately 20 per cent through to 2030 under the current design of the safeguard mechanism.”

FLEXIBLE APPROACH

Companies that emit above their baseline in any given financial year have a number of options to remain in compliance, including applying for a multi-year compliance period where average emissions over that time are counted, applying for the baseline to be adjusted in cases where their emission intensity increases, or applying to increase the baseline due to the introduction of new activities or facilities.

Should they still emit above the baseline, there are a number of make-good provisions, including the option to buy carbon offsets.

Further questions about the effectiveness of the scheme, and the quality of emission cuts achieved by the ERF, were raised earlier this week when online news service Footprint revealed that a company covered by the safeguard mechanism can sell GHG cuts to the government through the ERF, yet still count those cuts towards its own net emissions.

“This is a crazy boondoggle that has taxpayers paying companies which may help them avoid carbon pollution penalties,” John Connor, CEO of the Climate Institute, told Carbon Pulse.

“Given the current ‘light touch’ nature of the safeguard mechanism, and likelihood of emissions increases over the next 12 months, the government is likely to come under pressure to scale up its policy at the 2017 review,” Reputex said.

“As a result, the government’s safeguard scheme may be viewed as a ‘two phase’ mechanism, with an initial trial period to be followed by a more robust second phase after 2017.”

By Stian Reklev – stian@carbon-pulse.com

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