The safeguard mechanism proposed by Australia’s government will fail to impact more than half of the CO2 emissions it aims to regulate and cover none of the nation’s 20 biggest-emitting facilities, according to a report by analysts Reputex.

The government will shortly finalise the mechanism, which is intended to ensure that emission reductions achieved through the A$2.55 billion ($1.85 bln) ERF aren’t neutralised by an increase in CO2 output elsewhere in the economy.

The safeguard mechanism sets emission baselines for Australia’s 150 biggest emitters and will include make-good provisions for those which emit over their baselines.

But the baselines outlined in the government’s draft are set so that only 30 of the 150 targeted companies would be impacted by them and emissions are likely to increase by 20% unless rules are tightened up, Reputex said.

“Under the scheme, the government proposes to set historic baselines at the ‘high point’ of each existing facility’s emissions over the past 5 years. Given industry emissions have generally fallen over the last 5 years, this approach will allow companies to increase their emissions from current levels without facing a liability,” Reputex explained.

At the same time, new LNG and coal facilities are to be granted concessions that will allow them to increase their emissions as they expand operations.

TOP 20

The analysis showed that none of Australia’s 20 biggest-emitting facilities – including coal plants Loy Yang A and B and Hazelwood and the nation’s biggest LNG export facilities – will be affected by the safeguards, even though they are all expected to increase CO2 output in the next decade.

“Combined, RepuTex forecasts these largest facilities will account for over 50% of all emissions covered by the safeguard mechanism by 2020, yet not be liable for emissions increases,” it said.

Metals manufacturing, coal mining, oil & gas and transport facilities are the sectors most likely to be caught by the regulations, the report said.

POST-2020 TARGET

The report comes just over a week before Australia is expected to announce the post-2020 emissions target it will bring to the crucial UN climate negotiations in Paris in November and December.

Environment Minister Greg Hunt has said Australia’s target will be ambitious and credible, and primarily met through its ERF.

But observers remain unconvinced due to the government’s record on climate change policies since it took office two years ago. It has repealed the carbon pricing mechanism, scaled back the renewable energy target, cut funding for climate research and shut down or attempted to shut down key climate change government bodies.

Last week, Prime Minister Tony Abbott raised eyebrows when he commented that 23% renewables in the energy mix is “more than enough” for the coal-dependent economy.

“It is counterintuitive to let emissions grow while at the same time implementing a more ambitious post-2020 emissions target. This approach will simply impose a far greater cost at a later time,” said Hugh Grossman, Reputex managing director.

“It is inevitable that tighter baselines, or a cap on emissions, will ultimately be set, particularly given the significant abatement task we are likely to face to meet our new emissions target.”

“Should even minor adjustments be made to current policy, we anticipate the safeguard compliance market may abate emissions by up to 500 million tonnes through to 2025, covering around 100 companies” he said.

By Stian Reklev – stian@carbon-pulse.com

Not yet signed up to CP Daily? Subscribe to our free newsletter here